Commodities guru Jim Rogers turns Oracle of Doom as he predicts more turmoil in global financial markets. In an exclusive interview with ET NOW's Andy Mukherjee, Mr Rogers predicts currency crises, more national bankruptcies — and he's shorting emerging markets. You have been warning us for quite sometime about the currency crisis. Is that what is finally upon us? The currency crisis has been going on for a while. It did not start this week. It started maybe with Iceland or many other countries that have been having problems. The currency crisis is going to get worse. Over the next year or two, we are going to see more, so prepare yourself. Do you think the Eurozone is going to shrink because of what we are witnessing in Portugal, Greece and Spain? Eventually the euro, unfortunately, is going to break up because it keeps weakening itself from within. If they would let Greece go bankrupt, for instance, it would strengthen the euro, it would strengthen the Eurozone because then people would know you have to maintain a sound economy. You have to maintain a sound currency and everybody would jump in and buy the euro, I would also buy more if that would be the case. Weakening from within and continuing to lend money and paper over problems is not a solution for a sound currency. I do own the euro, but I do not think this is the proper approach. We are also seeing the impact of the crisis on most commodity markets. Do you think that this is just temporary and commodity is still the place for investors to be? Yes, gold is making all-time highs in some currencies. So some currencies are doing well. But if the world economy gets better, then obviously commodities are going to do better because the world will use more and there are shortages developing. But let's assume the worst. Let's assume world economies do not get better, then I would rather be in commodities in most things because governments are going to print even more money, and whenever you have printed money throughout history, it has led to higher prices for real goods whether it is silver or natural gas. So, I would rather own commodities than most things in the world in the next two or three years. Looking at the Rogers International Commodities Index, I find that rubber has done exceptionally well this year and so has lumber. What kind of commodities do you like at the moment for the long term? I prefer agriculture just because it has not moved up as much. Metals have boomed in the past 15-18 months, energy is up a lot in the last 15 or 18 months. Agriculture for the most part is still very depressed. Yes, you are right, rubber has done well, some things have done well but for the most part, agricultural products are still very depressed including sugar. Sugar went up a lot in the past couple of years but it is still very depressed compared to its all-time high. It is a known fact that global markets are really swayed by movements across the globe. Do you expect to see any cataclysmic events in 2010 or do you think it is going to be a largely benign kind of year ? I have no idea. There will be more currency crises, more currency turmoil over the next year or two or three. We have huge imbalances. All the credit to nations in the world or in Asia and all the debt — you know who the debtors are and you know where they are. Those imbalances have not been sorted out yet. Throughout history, most imbalances like this have been sorted out in the currency markets or once upon a time when we were on the gold exchange through the gold markets and so we have more problems coming. You may well see some more countries going bankrupt in this period of time because these imbalances still exist. I would be careful if I were you. I have started selling short in the last month or so. I have had virtually no shorts. In fact, I have had no shorts since the fall of 2008 but in the last month or so, I started adding to my short positions for the first time in 18 months. What are you shorting? I am shorting a stock market index in the US, I am shorting an emerging market index and I am shorting one of the large western international financial institutions. It is an emerging market index; it is not a specific country. It is an index of many emerging markets and that is mainly because the emerging markets have grown the most during the past few months of this big recovery. So that is where some of the excesses are developing. As for the large western bank, it is a bank which people think is extremely sound. If I am right, there are going to be more currency problems and more turmoil in the markets, it will have to come down. Are you bearish on all Asian equity markets or are there any pockets of value that you like? I am not buying any stock markets anywhere in the world. I have not bought any stock markets for the past 18 months. I have been playing the world economy through the commodity markets for those 18 months and the currency markets. And as I said, now I am starting to sell short but I have nothing to do with any Asian market. I have not bought any market anywhere because I have been leery of this big rally in the stock market. It has been caused by a lot of money being pumped into the world economy. If the world economy gets better, commodities will do well and they have. If the world economy does not get better, commodity is going to be a better place to be than stocks, all over the world, not just Asia. You said you are shorting western financial institutions. Now if I am not wrong, you were doing the same thing in the second half of 2008 and we saw what happened back then. Are you concerned or worried that something like that is going to happen again? Do you think another financial crisis is going to be upon us when investors are just going to get scared about banks? Well, I was short on major western financial institutions in 2008, I am delighted and surprised you remember but I was. Then there were great excesses in the western financial community. We do not have that kind of excess now. We have excesses but nothing like we did then. I am just shorting this major western financial institution because it's very highly priced and if the markets are going to consolidate, it will be one of the first to get hit because as there will be consolidation because of currency turmoil and financial market turmoil. I do not see a bubble in finance like we had two or three years ago. I only see two bubbles in the world, one is the Chinese urban to real estate and the other is the United States' government bond market. The latest data indicates that EPFR funds have been pulling out of the emerging markets. But if China does slow down over the next six months and Europe comes out relatively unharmed, what do you think will happen to fund flows to emerging markets over the next six months? Well, I am not quite sure that you would see emerging markets slowing down if Europe did. If Europe and America slow down, that will affect markets everywhere. Europe and America, for instance, are over 10 times as big as the Chinese market. People talk about China, people talk about India, but these are very small markets or economies compared to the major economies in the West and in Japan, so if the West slows down, of course, it is going to affect everybody. I do not see the emerging markets slowing down and the West reviving because the West is so very big and it needs most emerging markets. Most emerging markets are commodity-based economies and if the world economy does well, the commodities are going to do okay, so I do not see the emerging markets slowing down if the West continues to revive. I started selling short in emerging market index but that's just because the emerging markets were the ones which went up the most in the past few months.. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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http://in.groups.yahoo.com/group/investwise/
INVESTMENTS IN INDIA
We are low-risk, long-term investors.
Stocks, mutual funds and the entire investment gamut. Only financing/investment avenues in India will be discussed.
For any assistance, questions or improvement ideas, contact investwise-owner@yahoogroups.co.in
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