I am off to this conference this weekend — one of the other keynoter speakers will be Jim Rogers. Last month, Joe Dedona, head trader at our Institutional Desk, sat down with Jim for this interview:

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Fusion MarketSite was fortunate to interview Jim Rogers, co-founder of the Quantum Fund with George Soros. Legendary investor, author and world traveler, Jim is one of the world’s most admired and respected investors in the agriculture, metals and mining, and energy sectors.

Rogers and Soros founded the Quantum Fund in 1973; the portfolio gained 4200% over the following 10 years. In 1980, Rogers decided to “retire” and spent some time traveling on a motorcycle around the world, the first of many sabbaticals. From 1990 – 1992, Rogers traveled over 100,000 miles on his motorcycle across six continents, a trip which ended up in the Guinness Book of World Records. Rogers presciently launched the Rogers International Commodities Index in 1998, in advance of the decade-long rally in commodities. He and his wife Paige Parker left on another journey, in a custom-made Mercedes, January 1, 1999, covering 245,000 kilometers and 116 countries over the ensuing 3 years.

In December 2007, Rogers moved to Singapore and famously declared, “If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia.” In February 2011, Rogers started the Rogers Global Resources Equity Index, a new index fund focused on the top companies in agriculture, mining, metals, energy and alternative sectors.

Jim has written 6 books on investing and his world travels, including his latest, Street Smarts: Adventures on the Road and in the Markets, published this year. His macro views on global economic issues, and commodities, are widely sought.

Fusion: I just finished reading your new book Street Smarts, and I wish I had the book when I first started in the industry in the 90’s. It provides a great trading lesson of doing your own research – and not going with the crowd.  You point out in the early 70’s nobody liked energy and defense stocks. But you did your work and realized that both sectors were ripe for fundamental positive changes. When you told people you liked them, many were skeptical and said you were crazy. We know how that turned out.

Rogers: Shouldn’t follow the crowd – I’m sure you know that by now !

Fusion: China’s growth is slowing down, and many believe the reported numbers are overstating the actual growth. Wall Street has turned bearish on China and has cut GDP estimates. They are saying China cannot stimulate due to its property bubble. What are your current thoughts on China?

Rogers: I don’t trust numbers from any government, as most are made up, as you probably know. China has had astonishing growth, but they have problems with housing and inflation. We had the same problems in the 19th century when we were growing rapidly. Every country that rises rapidly has problems. China can see a recession, but the US saw recessions and 13 depressions in the 19th century, and was still the greatest nation in the 20th century. They are trying to slow down, which is the right thing to do. It’s natural they slow down from these growth rates. They are preparing the economy for long term sustainable growth.  The only way the China story runs into big problems is if they run out of water. China has a major water problem. They are working hard to solve it. I believe they will solve it. If you want to make a lot of money find companies that are working to fix that problem. As for their stock market, it’s getting closer to a buy. I bought a few shares on Friday. Their market is getting to the point it should be bought.

Fusion: Is their housing bubble worse due to the currency being blocked ?

Rogers: Good insight. It’s trapped. One of the few things I disagree with on China is their having a blocked currency. It creates imbalances, like you see in housing, as people need to put their money somewhere.  China has made strides in recent years to open up their currency and they will continue to do so.

Fusion: You have warned for some time that governments and central banks are refusing to make the tough decisions, having chosen instead to print their way out of problems. That leads to deteriorating national finances and sovereign debt issues that could lead to a rise in interest rates. The bulls counter that central banks can keep interest rates down through infinite bond buying, and expanding their balance sheets. What are the consequences to the ever-expanding balance sheets of central banks ?

Rogers: Yes. Mr. Bernanke believes you can expand the central bank balance sheet infinitely, and suffer no ill effects. Anything you do to diminish demand for the thing will cause the price to drop. Same thing here. Bond prices will drop, which causes interest rates to rise.  We are in a global bond bubble. When it pops is anyone’s guess. I have tried to short bonds a few times. The French tried money printing in the 50’s, the Italians in the ‘60s. At some point, the market won’t take it, and bond prices will go down and rates will rise. We have more money than Bernanke and the central banks do. So at some point this will happen.

Fusion: Over the last six weeks, the action in the emerging markets fixed income market has been scary. Many believe this started when the Fed hinted at tapering QE. Up until now, the Fed’s ZIRP and infinite QE policies have investors chasing higher overseas yields.  But that seems to be reversing, and liquidity is coming out of emerging markets the last 4 weeks. What is your take on this ?

Rogers: As I said, bond markets worldwide are in a bubble for the reasons you just stated. Bubbles can go on and on. Hard to tell when it pops. But at some point markets won’t take central bank policies anymore, and interest rates go up regardless of how much bond buying they do. Market timing is tough. As for the fix income market, I’m short  junk bonds. In any market, the marginal stuff goes first. This could precede problems with sovereign debt.

Fusion: When the bond market starts to collapse and rates rise, what happens to gold? You did call for a correction last year when it was a lot higher.

Rogers: It’s gone up 12 years in a row. I don’t know of any asset that goes up 12 years in a row. So just from a technical point of view, maybe it needs to go down some more. But from a fundamental point of view it will be a buy. There are some short-term factors hurting gold. The Indians are trying to restrict the purchase of gold, as it’s the source (along with oil) of their trade deficit. I have not sold my gold and plan to buy more if it keeps dropping. And yes, I did call for a correction a while back, and sometimes I do get it right !

Fusion: Many believe the US shale revolution is going to solve our energy problems? Is it over-hyped ?

Rogers: Yes, I believe it is.  Regarding natural gas, the fundamentals on the ground are not nearly as good as the hype. The number of rigs on the ground has gone down 75% the last couple of years, as the wells are very short-lived, and it takes an enormous amount of money to keep them up. A number of companies have had to lower estimates of their reserves. As for oil shale, typical wells deplete at 38 percent the first year. Thus you need a lot of drilling, money, and a high price to keep up production rates.  All you have to do is go out in the oil patch. I believe the investment world will be disappointed with the notion that supply is so great that oil will collapse.

Fusion: As for other commodities, are there any you see as a buy ? IWe know you like agriculture.

Rogers: Before we talk agriculture, I would look at natural gas, as any commodity that has that big a collapse should be looked at.  Agriculture is a great long-term story. We have been consuming more than we’re producing over the last 10 years, so the inventories are near historic lows. Agriculture has been a terrible business for many years. We’re running out of farmers. The average age of farmers is 58 in the US, 66 in Japan. Young people are not going into the ag business. Unless something dramatic happens, we will have a crisis, as we need people to go into the fields to produce this stuff. Everything cannot happen with automation.

Fusion: What about Ag productivity ?

Rogers: Most of Asia is not productive. Mao ruined China’s agriculture with his polices. India should be productive, but they have absurd regulations, as they restrict the size of farms. These are terrible policies, and make it very tough on farmers to make money. The suicide rate of Indian farmers has risen dramatically over the last few years.

Fusion: Any thoughts on cotton ?

Rogers: Cotton is doing well because farmers planted less last year as corn and grain prices spiked. It’s simple supply and demand.

Fusion: How does it end in Japan – in tears ?

Rogers: Of course it does. Japan has a very serious problem. When we look back, Mr. Abe will have ruined Japan. Huge debt levels, horrible demographics, they won’t let in foreigners, the population is declining. Mr. Abe comes along and says he’ll ruin the currency. It is a disaster in the long term, and not guaranteed to work in the short term, either.

Fusion: Will PIIGS nations have to leave the Euro in order to devalue their currencies and improve their competitiveness ?

Rogers: The Euro will look very different in a number of years. Devaluing is a temporary solution. Europe has been doing that for decades with no success. They can continue to do what they’ve been doing, but they’ll get poorer and poorer. Only real structural change to improve their economies will work. I do not blame the hard working Germans for not wanting to keep bailing out the wine sipping, beach loving Spaniards, Italians and Greeks.

Fusion: How much of the sovereign debt can the ECB own, if others don’t want to buy it ?

Rogers: You can play this game for a while, but eventually the currency collapses and the market won’t take it anymore. Again, the markets have more money than the central banks do.

Fusion: Will China suffer due the problems in the West and with Japan ?

Rogers: China is the largest creditor nation in the world, they save a lot of money, and they’re building their internal economy. They are in better shape than the others. Of course, they will have problems if the rest of the world has problems, as they did during the financial crisis. US and Europe are two big end markets.  But I would rather be a creditor than debtor in these situations.

Fusion: Druckenmiller is warning about a rise in US rates, due to uncontrollable entitlements here in the US. Will China reduce their holdings of US Treasuries? What is your take ?

Rogers: If you keep giving stuff away, your debt goes higher and higher, and there is no one to pay the debt. The US is the largest debtor nation in the history of the world. Only half pay taxes – this is an absurd situation.  All the debt is in the west while all the credit is in the east. Regarding China, yes, I wish they had already started reducing their exposure to Treasuries.

Fusion: Bright spots ?  Is Singapore moving in the right direction ?

Rogers: I hope so, as I moved here. Singapore is doing a good job. Income taxes are low, incentives to save are high, savings rates are high, and they do their best to attract capital and labor. There is a bit of a backlash now, with some of the problems immigrants are bringing here, but that has happened to all nations at some point in history. Overall, Singapore is doing well. Singapore is becoming the new Switzerland as its sits right next to China and has been helped by problems with offshore havens like Switzerland and Cyprus. It will be the fastest growing money center in the next 10 years.

Thanks for a great interview.

Category: Hedge Funds, Investing, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Interview with Jim Rogers”

  1. Orange14 says:

    Rogers is a pretty smart guy which is why it’s surprising to hear him say that in the US “Only half pay taxes – this is an absurd situation.” Why is he drinking from the poisoned Republican well. We all know or should that income taxes (which Rogers refers to) is only part of the story. There are lots of other taxes that everybody pays.

    • DeDude says:

      Exactly, if you can buy into that crap then you are either stupid, shallow or disingenuous – maybe all of it. Taking advise from such a person would be risky.

      In this case he is probably quite intelligent, so either this slipped past him because he didn’t pay attention, or he is ready to peddle whatever BS he think will make his audience happy and willing to give him more money.

  2. Willy2 says:

    “I do not blame the hard working Germans for not wanting to keep bailing out the wine sipping, beach loving Spaniards, Italians and Greeks.”

    O.M.G. Jim Rogers has his own set of “confirmation biasses”.

  3. [...] Temmuz tarihinde Fusion MarketSite’da yayımlanan Jim Rogers röportajını kendimce Türkçe’ye çevirdiğim halidir, soruları [...]

  4. [...] are a disaster in the long term and not guaranteed to work in the short term. He spoke in an interview with Fusion MarketSite. He is beginning to dip into Chinese stocks but is concerned about water infrastructure. He likes [...]

  5. [...] are a disaster in the long term and not guaranteed to work in the short term. He spoke in an interview with Fusion MarketSite. He is beginning to dip into Chinese stocks but is concerned about water infrastructure. He likes [...]

  6. catman says:

    He’s interesting, he’s quotable, he’s a rich expat. Thanks for the interview.

  7. catman says:

    Mulligan: Credit where credit is due. Water is seriously underpriced, and not just in China. Second point – natural gas pricing is going international which should make for some opportunities.

  8. RW says:

    What Willy2 said pretty much: Rogers was delivering cliches and CW at nearly triple the rate of insight in this one but after years of observing him I’ve learned that this is his pattern. He’s a mean card player and whether he’s talking his book, bullshitting you or just head faking the only real certainty is that improving your wealth picture ain’t his reason for being at the table.

  9. Sharkbite says:

    Since 2010 it feels like Jim Rogers has been wrong. A lot.

  10. sellstop says:

    “The United States is the largest debtor nation in history”. Yet our currency is the reserve currency of the world. How is that?
    Is it because we are/were the richest nation in history and we are being scammed out of our wealth by the gaming of interest rates and currency values by mercantilist policies of the emerging markets, namely China?
    Are we the worlds largest debtor because of our “conservative” beliefs in a “strong dollar” and our resistance to our central banks policies that tend to weaken our currency?
    Why do we consider a strong dollar a patriotic duty?
    Have we been brainwashed by our corporate overlords who make their immense profits by way of our consumer debt and our low interest rates and strong dollar?
    Are we sitting at a poker table and still trying to figure out who the sucker is?????

    gh

  11. theexpertisin says:

    Rogers is one very smart man. He walks his walk, moving to Singapore, invests where he preaches and plays hard. He is also a father who is concerned with his family living and experiencing a broad based, disciplined education and lifestyle.

    Sure, Jimmy never met a reporter (especially one with a camera) he didn’t like, but one has to admire his living life to the fullest.

  12. woolybear1 says:

    smart? Maybe, but, he gave his commodity fund to Refco right before they went under. Doesn’t sound like he did much due diligence. He has been spouting the same lines for years, sort of a refined Peter Schiff.

  13. rick111 says:

    “I do not blame the hard working Germans for not wanting to keep bailing out the wine sipping, beach loving Spaniards, Italians and Greeks.”

    When the guy says things like that it is evident he has no credibility. The beaches of the south of Europe are populated this time by Germans sipping beer and wine while the natives work 16 hours a day to serve them. This is because of the euro the Germans invented to make them slaves.

  14. victor says:

    Rogers: “I would rather be a creditor than debtor “. No, Mr. Rogers you should know better, especially you as one who likes one liners: “The debtor ALWAYS has the upper hand”.

  15. louiswi says:

    Lots of good comments here but RW seems to nail it the best! Having roamed the world at least as much as Rogers, IMHO, Singapore would hardly make the top 10 for a place to make permanent residency.

  16. [...] Jim Rodgers, the legendary investor tells all about China, Asia and the future of global economy. Must read interview of the week. [...]