Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers has been talking about his 2012 predictions.
In a nutshell, he is neither too optimistic about the stock market for 2012 nor about what’s going to happen in the world in the next two or three years.
Speaking to Australia Financial News Network (AFNN) December 23, Rogers said: "The problems are going to continue to get worse until someone solves the basic underlying problem of too much spending and too much debt."
He sees the biggest risk to global growth in 2012 as "too much debt…too much consumption…and the central bank in the US which keeps printing money."
Rogers, seen as one of the world’s most successful investors, highlighted the scale of the problem to his host: The problem is that the measures America needs [to solve the crisis] would cause huge pain for a while, but, if we don’t take our pain now, and we wait until the market forces the pain on us, then it’s going to be systemic collapse."
Refusing to get drawn into US politics, Rogers nevertheless provided a tacit endorsement: "Gary Johnson and Ron Paul seem to understand the problems that are facing America," he said.
So what is his prediction for stock markets in 2012?
"I am short stocks around the world. I’m short American technology stocks, I’m short emerging market stocks, and I’m short European stocks," Rogers told AFNN.
"I’m not optimistic for the most part about stock markets. I don’t own many stocks anywhere in the world. The only offset for the caveat for me is that there is an election in the US, and in France, so wherever there are elections coming, and governments spend spend spend, and throw money out the window to buy votes, so some people are going to be much better off in 2012," he added.
Speaking to the BBC’s Martin Webber December 26, Rogers reiterated his opposition to printing money as a solution to too much spending and too much debt: " You can debase currency, and history is replete with governments that have debased their own currency and ruined their own currency for hundreds of – well for thousands of years."
"You can do that and everything is okay for a while, but eventually you have inflation, you have high interest rates, you have currency turmoil, you have people no longer trusting each other to invest with each other, and then you have the end of the system, and we have chaos, and it starts over again," he added.
Social unrest, civil war and…a huge mess
Asked if it was right that government owned institutions [nationalized banks] were effectively buying government bonds, the investment guru said: "It is a recipe for disaster… It’s a Ponzi scheme, it’s a fraud, it’s a sham and we are all going to have to – we are already starting to pay for it."
"Eventually one of two things has to happen. We have to get together now and ring-fence the problem and figure out how we are going to survive and start over. Or, in a year or two or three, the market is going to say, no more money, we won’t put up any more money. And then the whole system collapses, then you have gigantic chaos, social unrest, governments failing, civil war – huge mess," Rogers predicted.
It’s not the euro
Going against mainstream investment thinking, Rogers denied this was a ‘euro crisis.’
"It’s not the euro. The world needs the euro or something like it to compete with the US dollar. We need another sound currency. The eurozone as a whole is not a big debtor nation. The eurozone has some debtor problems, some debtor nations, debtor states, but it’s not a big, big problem. The euro is good for the world. It needs to work," he told the BBC.
But is it a euro crisis?
Rogers, nonetheless is having "serious questions" on what to do about the Euro. "It certainly won’t continue in its current form in 10 years," he told AFNN.
Monetary unions work by automatic transfers from productive regions to less productive ones. This is true in the US as it is true in every single nation with regional variations. No single currency has ever survived without some form of debt ‘mutualization’. Only Germany can reverse the dynamic of a European decay,” billionaire investor George Soros wrote in August in Handelsblatt, the Dusseldorf-based newspaper. “Germany and other countries with an AAA rating have to approve some sort of Eurobond regime. Otherwise, the euro will implode.”
The eurozone, in its current form, is beyond repair. The euro was an idealistic idea dreamed up by politicians. The idea was flawed and could not have worked without swift fiscal and political union. Even Jacques Delors, the architect of the euro, accepted this fact in a recent interview with the Telegraph.
Bankers keep their Lamborghinis
Rogers also expressed limited sympathy for the Occupy Wall Street movement.
"I do have sympathy with the fact that they are saying, we shouldn’t have bailed out the banks. I would have let all those banks go bankrupt, as you’ve heard me say before, but beyond that, I don’t have too much sympathy with them" he told the BBC’s Webber.
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.