Very Worried About 2011

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Jim Rogers, Chairman, Rogers Holdings in an interview with ET Now talks about emerging markets, commodities as a space, Chinese property bubble and the expected economic slowdown. (Watch)

Let’s start of with gold first because gold is back clearly at new highs. Where do you see it moving from here and more importantly, what are the factors right now dominating this move? Do you think it is a safe haven buying or it is the dollar movement or the Eurozone crisis which is still playing out?

It is all of the above. People in times of crisis frequently throughout history have looked for gold, not always but sometimes and that seems to be what is going on now. You have central banks which used to sell gold are now buying gold and you have massive amounts of people around the world clutching for gold, paper money everywhere is suspect, paper money everywhere is being debased.

What is your sense because there seems to be an emerging disconnect between natural gas and crude prices? Indian players like ONGC and Reliance Industries maintain that we will witness an upward bias from the current levels of $4.2 per unit. You have been long on natural gas, how much more of an upside are you foreseeing?

I am long on natural gas as a matter of fact but I have never said that someone should buy natural gas. You might look at it instead of crude. Crude is very very high compared to natural gas. I would think you will probably find opportunities in natural gas. How high will it go, I have no idea. I am not smart enough to know that. You should watch your TV everyday and then you would know. The world is running out of known reserves of oil and over the next decade or so, the surprise is going to be how high the price of energy goes and how high it stays. We are running out of energy whether you like it or not.

But talking about sugar as well, sugar has corrected almost 48% from its highs. One can believe that there is further downside while the others are averaging their stocks because they feel there is a bottom in place, what is your view?

I am not quite sure how you are looking at; sugar is down 75% or 80% from its all time highs. Sugar is up 300% or 400% from its lows of a few years ago. If you are talking about just this year, it has come down dramatically. I would rather be long sugar than short sugar. I have not owned sugar at the moment but I do not know whether one should buy it or not. I am not very good at market timing but sugar is another way to play energy plus sugar is another way to play the emerging prosperity in much of the world.

Several Asian economies including India are currently grappling with high inflation, you think governments could be swift enough to act upon this and will inflation really eat into returns for commodity bulls?

Rising prices is inflation. Inflation does not call prices to go up. Price is going up because of inflation. So I am optimistic about the price of commodities going forward. The governments spend a lot of money, that is going to lead to higher prices at least it always has. Now if governments stop printing money, then we are going to have other things going on in the world.

We have economic decline, continue the economic decline but so far, governments do continue to print money all over the world and many nations in the world acknowledge they have inflation. India happens to be one of the ones that are honest about it. America is dishonest, America lies about inflation. The UK lies about it but many Australia, Norway, China many others tell the truth and we do have inflation in the world and it is going to get worst.

What is your thought on the latest news really coming out of China? There has been a sharp minimum wage hike in the government sector. Do you think that is going to take away from China being the low cost manufacturing hub?

I am sure that China’s wages are going to go up a great deal over the next few years. Look at what happened in Japan, Japan used to be one of the lowest wage countries in the whole world and their wage is now among the highest in the world if not the highest and they are still very efficient in competitive manufacture of many goods.

That sort of thing in my view will happen in China. China’s wages will continue to rise for years to come but at least so far, China is going to be competitive with the rest of the world but do not think wages are not going to go higher in China because they definitely are over the next few years.

With the concerns coming out from China with the property bubble formation that we are seeing with that asset class, is it too premature though to say that China is in a sticky spot and maybe headed for trouble when it comes to their equities?

Most of the world is in a sticky spot with regard to their equities for many many many reasons, the currency turmoil among many other things. China’s bubble does seem to be a bubble in urban cost of real estate in China but there is not much else it is in a bubble in China, the stock market is down 70% or 80% from its all time high. I would hardly call that a bubble.

Most of the Chinese economy is still in better shape than much of the west. Other than real estate, urban cost of real estate, if you go the heartland, the interior of China, not much has happened to real estate at all. It is only in a few places like Shanghai and Hong Kong, Kong, Guangzhou, that is where the bubble is and the Chinese government is trying to stop it. They are trying to pop the bubble as you know and I suspect it will be successful and it will be good for China and for the world.

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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.

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