Jim Rogers was recently interviewed by The Economic Times. Among the topics covered include the recent rally in stocks, the widening deficit and his recent comments on Sri Lanka. In this interview, Jim Rogers touches on a couple of commodities that he believes will do well in this economy. As investors push oil and gold, Jim Rogers is looking at other commodities such as Silver, Cotton and Natural Gas.
If US unemployment touches the 10%-mark, it would further impact retail sales. How bad could this be for Asia?
“Let’s pick on China for a minute. If you sell to Wal-Mart in the US and if you are a Chinese supplier you know there is a problem. And you are going to be suffering. Any company that deals with the West is going to have problems. On the other hand, companies that are in the water-treatment business in Asia will care less if the West disappears. They are too busy making money, too busy going to work everyday. “
At one stage we were inundated with gloomy forecasts, which were further reinforced by the IMF and World Bank. And then suddenly stocks surged — something most were not prepared for. How risky is the market today?
Central banks all over the world have printed huge amounts of money, and the real economy is not strong enough for all this money to be absorbed… so, it’s going into stocks and real assets such as commodities. It’s a mistake what they are doing. It’s giving short-term pleasure, but there’s long-term pain as we are going to have much higher inflation, much higher interest rates and a worse economy down the road.
The American bond market is already beginning to go down dramatically as people realise that the American government has to sell huge amount of bonds, and secondly, there is going to be inflation, serious inflation, as it was always in the past when you had governments printing huge amounts of money.
Stocks are rising even as fiscal deficit is widening. Somewhere it has to snap…
It’s going to snap. Later this year, next year, we are going to have currency problems, maybe even a currency crisis. I don’t know with which currency — maybe with the pound sterling, maybe with the US dollar, who knows. It maybe with something none of us have at the moment. When you have a currency crisis, stocks will be affected, many things will be affected. It is not sound, what’s happening out there in the world.
In the 1930s, we had a huge stock market bubble which popped. And then politicians started making many mistakes. They became protectionist. They made solvent banks take over insolvent banks and then both banks failed in the end.
They are doing many of the same mistakes now. What’s different this time is that we are printing huge amounts of money which they did not print at that time. So, we are going to have inflation this time.
What do you do? No politically-elected government can afford so much pain, unemployment and hardships…
America could have. America just had an election. The guy was elected in November and he could have come in the beginning of a four-year term and said the guys before me were hopeless idiots. They ruined things. We have to solve this problem. We have to take some pains now. But don’t worry, we will get through this pain, and in two to three years or four years, things would be fine. And he could have been re-elected.
If the pain comes in 2010, 2011 or 2012, there will be nobody he can blame. Especially, if things go bad later, the opposition will say, wait a minute, 2009 looked good. The next guy is going to say you did it… But you are right. It’s very difficult for an elected government. You have a newly-elected government in India. Whenever you have a new government they can take some of the pain.
You recently said that you would invest in China and Sri Lanka but not in India. Aren’t you betting on the new government in India?
I was trying to make a point that if anyone wants to invest in this particular part of the world, the best place would be Sri Lanka. Because it looks like the 30-year war is coming to an end.
Throughout history, if you go to a place after the war ends you usually find everything as very cheap, everyone is demoralised, people are just depressed and there are enormous opportunities if you have energy.
In my view, investing in Sri Lanka in May 2009 is probably a better bet than Pakistan, Bangladesh, India or some of the other countries nearby. Let’s hope the new Indian government does something. I have heard wonderful things from Indian politicians for 40 years.
And rarely do they produce. It’s not the first time that the Congress party has been in the power. If they mean it, India’s going to be one of the greatest development stories in the next 20 years. But I don’t know if they mean it.
Click here for the complete Jim Rogers Economic Times interview
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June 9th, 2009 at 2:17 am
One particularly interesting comment in this interview is : “Central banks all over the world have printed huge amounts of money, and the real economy is not strong enough for all this money to be absorbed… so, it’s going into stocks and real assets such as commodities. It’s a mistake what they are doing. It’s giving short-term pleasure, but there’s long-term pain as we are going to have much higher inflation, much higher interest rates and a worse economy down the road. ”
We are seeing this happen in China, as well as the US. I have no real evidence, of course, but i suspect that these market rallies we are seeing around the world is being driven by “bailout” funds given to banks by their respective governments. I am not sure how long this can last, and when the SHTF, all of these asset classes, including commodities, are going to get hammered.
I most definitely like commodities as a long-term hold, but I am not buying any right now. The runup has been quite high, especially in copper. I may be wrong here, but i am going to have to sit on the sidelines and wait for a market collapse before buying commodities and then holding for the long term. I am especially looking into dividend paying energy stocks, but also like big players like RTP and BHP in the mining sector, and MOO / POTASH and agrifarmers in China.
Still, I feel like prices are too high and a re-collapse will occur before inflation really takes hold.
Mac
June 15th, 2009 at 5:49 pm
Well, we are seeing a bit of a pullback in commodities today.
I’m holding onto my precious metals stocks and nibbling a bit onto more as they go down.
If they retrace a majority of the gains since the Nov 08 bottom I will be buying more.
In the meantime I have about 50% of my money in cash.
Inflation is coming, but I do not believe it will hit suddenly, I believe we will be seeing 10-12% annual inflation year after year.
No big deal if you hold cash and it loses 10% per year of the rest of your investments are gaining enough to compensate.
The other thing is: I sincerely believe inflation is not going to be broad based. It will hit some things but not others. I want to hold lots of cash because I believe I will be able to buy a house here in the US far cheaper in 3 years than I could today.
Real estate will not go up for a long time simply because of supply and demand. In order for people to afford higher home prices, their wages have to go up.
If we have inflation for several years, then most likely we will see wage inflation, but with hundreds of thousands of Americans losing their jobs every month, wages are not going up any time soon. Even if banana republic union elections (EFCA) get enacted, it will simply mean more unemployment, it will not lead to higher wages.
I don’t mind holding cash in the face of high inflation if I know that what I intend to use that cash for will not be inflating. And I need the cash to buy a house and home prices will be going down for several more years.
So with all the money printing, where WILL we see that reflected in higher prices? Certainly commodities, precious metals, and probably stocks as well.