Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers expects a rough ride ahead for the economy and sees the US as a bigger problem than Europe right now. "You have to own real things if you’re going to survive," he says.
Rogers has been doing his pre-Christmas rounds this week talking to various business media in the US about his investment strategy, commodities, precious metals, the state of the economy, Europe, QE and his distrust of the Fed among other topics.
Speaking to Maria Bartiromo on CNBC‘s Mapping the Market on Wednesday, Rogers reiterated his view on the state of the economy: In 2002 we had a problem, 2008 was worst – debt was higher – in 2013, or whenever the next one is, it will be worse because the debt is going through the roof, he said.
"It’s going to get worse and worse…we’re shooting our bullets, we’re wasting money," Rogers added. The legendary investor argued that while Europe was facing problems with individual countries, "they are solvent." The EU as a whole is not a big debtor nation unlike the US which is the largest debtor nation, he said.
In his usual ‘straight to the point’ style, Rogers told CNBC: "Eventually people will say, wait a minute, we’re back where we were, things are worse than they were before.
"The problem of too much debt is not solved by more debt. This is ludicrous."
So what is his investment strategy in such an environment?
"I’m not doing anything at the moment, I’m sitting and watching," Rogers told Bartiromo. I’m short technology stocks in the US, emerging markets and European stocks and long commodities, Rogers said,
He also owns currencies including the Japanese Yen, the Swiss Franc, the Dollar and some Euros. Rogers, who often called the US dollar a "total disaster in the long term", explained that the US currency was now "beaten down a lot and, as turmoil occurs around the world, some people will flee to the dollar," before stressing that he doesn’t really think the dollar is a safe haven.
As far as the euro is concerned, " They’re [the Europeans] going to make us feel better for a while [reference to the December 9 EU summit], so the euro will rally, but be very careful," he warns.
"It’s not solving the problem, no country has announced we’re going to have less debt in a year or two or three." All are going to have higher debt, the problem is getting worse, he stressed.
"And when things don’t get better, they’re going to print a lot more money. When they print money, you have to own silver, you have to own rice, you have to own real things if you’re going to survive," Rogers argued.
Asked if Gold would break US$2,000 in 2011, he said it might, but he doubted it. "Gold has been up 11 years in a row and that’s very unusual for any asset class," he explained, before adding that it would not surprise him if gold didn’t continue to consolidate for a while.
I hope it continues to consolidate and I hope it goes down so I can buy more, he said. "I want to buy more," Rogers noted.
Gold prices fell back today to this week’s low of US$1,705 per ounce today lunchtime in London. US investors saw the gold price open New York trade 2.1% lower from last Friday’s finish of US$1,745 per ounce.
"Gold prices are still holding fairly well supported," reckons VTB Capital’s Andrey Kryuchenkov in a note, "and any negative reaction to the [European] summit today would only see limited losses in gold as opposed to other…more volatile precious metals, also suffering from growth concerns.
"On the downside [however] a break below US$1,700 would see losses to our key support at US$1,680 and the longer term January uptrend," according to Krychenkov.
QE3 in drag
In an interview with Yahoo Finance’s “Breakout” Tuesday, Rogers argued that the Fed was not telling the truth about quantitative easing.
”The Fed is “lying to us,” he stated, “One reason the markets are holding up so well is that they are printing money as fast as they can.”
Although not officially recognized, "there is QE3, the Fed is pumping money into the system," says Rogers, disputing most Fed statements over the last six months.
He argued that the Fed’s artificially low interest rates are really “something akin to QE3 in drag."
"What the Federal Reserve is doing now is ruining an entire class of investors," Rogers argued.
Prepare yourself for much higher inflation
In an interview with Newsmax.TV Tuesday, Rogers continued with the distrust theme, this time disputing the US government’s unemployment and inflation rates.
"The government lies about the numbers that they put out. Don’t take your advice from any government, or you are going to go bankrupt," Rogers told Newsmax.TV.
US unemployment sank to a 32-month low of 8.6% in November, it was announced last Friday. Official figures showed the jobless rate fell sharply from 9.0% in the previous month, as the economy created 120,000 new jobs.
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.