American investor and financial commentator, Jim Rogers in an interview to ET Now said that the currency crisis is going to get worse in the next 1-2 years. He said emerging markets can fall in short term and did not see bailout as good option for Greece. Rogers’ prefered agricultural commodities over others. (Watch)
You have been warning us for quite sometime now about our 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 has been happening for a while. It started with, maybe depending on how you want to look at it, with Iceland or Latvia or many other countries who have been having problems, and the currency crisis is continuing and is going to get worse. This is not the end. Over the next year or more, we are going to see more. So prepare yourself. (Watch)
I was reading that you are long on euros. Is that the case?
I have been long on the euros and I am long some euros, I wish I weren’t. I have been going down but I am long some euros. I am long more US dollars for what that is worth but euros are not helping me that these days.
What is your sense? Do you think that 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 I am afraid 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 including I would buy more if that would be 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, do not get me wrong 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 during this period of time. But to your bigger question, if the world economy gets better then obviously commodities are going to do better because the world would use more and there are shortages developing. But let’s assume the worst, let’s assume the world economies does not get better, the things continue to get there, then I would rather be in commodities in most things because governments are going to print even more money and whenever you have had printed money throughout history, it has led to higher prices for real goods whether it is silver or natural gas whatever it happens to be. So I would rather own commodities than most things in the world that we have in the next two or three years.
I am looking at the Rogers International Commodities Index and I see that for this year rubber has done exceptionally well and so has lumber. What kind of commodities do you like at the moment taking a longer term view?
I prefer agriculture just because agriculture has not moved up as much. Metals have boomed in the pasts 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 last couple of years, but sugar 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. Any cataclysmic events that you expect to see in 2010 the rest of the year or do you think it is going to be a largely meandering benign kind of year that we have ahead of us?
I have no idea. As we started the programme I explained to you that there will be more currency crises, more currency turmoil over the next year, 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. It is just one other thing. 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 more than most things here during this big recovery. So that is where some of the excesses are developing. As far as the large western banks is because 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.
A thought prevailing in some people’s mind is that China over the next six months would have to cool down a little bit. There could be rate increases as well that could come in and that will put a stop or a temporary blip in certain usual suspect commodities, the likes of base metals, so on and so forth. Do you think that is a distinct possibility?
There is no question that China is already trying to cool things up and they should. They are doing the right thing. They have raised reserve requirements three times, they have raised interest rates, they are putting out some pretty serious measures, they are cooling off the housing bubble which has developed in urban cost of real estate in China. So yes, China is taking smart measures. It is not just China though. Australia is raising interest rates several times. We do have inflation in the world. Some countries deny it and lie about it, but we do have inflation and so people are trying to cool it off. Will that have an effective course whenever you cool off demand for anything; it has an affect in the market. Because of the commodity markets to collapse, if it does, stock markets are going to go around a whole lot more because the fundamentals are much better for commodities than they are for stocks.
Jim Rogers has taught finance at Columbia University’s business school and is a media commentator worldwide. He is the author of Adventure Capitalist, Investment Biker, Hot Commodities, A Gift to My Children, and A Bull in China. See his website.