A Bull on China & Commodities, a Bear on the US & UK

by Brett Owens Minyanville      

I’m thrilled to report that while in Singapore last week, I had the great honor of interviewing Jim Rogers in person. He was extremely kind in hosting me and entertaining my questions, and I’m excited to be able to share our fun 45-minute chat with you here.

As you may know, I’m a longtime reader and fan of Jim Rogers, and one of my constant frustrations with mainstream financial outlets is that, while they frequently interview Rogers, they lob too many idiotic questions his way, like “What should the Fed do?”

So I hope that you find our discussion around his current world and financial outlook insightful, especially if you’ve been following his work as closely as I have.

All of his books are excellent, as you probably know – three in particular had quite profound effects on my thinking about investing, the world, and life in general. If you haven’t yet read all of these, I’d highly recommend you pick up a copy of his investing classics:

Still a Bull on China, and the Renminbi Too

Jim Rogers was a bull on China decades before it became fashionable, and he’s still wildly optimistic about China’s future.

“I believe China’s going to become the next great nation in the world,” he says.

“People call the Chinese ‘communist’…California and Massachusetts are more communist than China,” he remarked with a grin.

“The Chinese communist party is very smart – as are the leaders here in Singapore. There is a thorough application process to apply to run for office – all applicants are well vetted.” He says it’s quite rigorous, like “applying to Princeton” and added that “a guy like Obama would never have been able to run here (Singapore).”

Rogers has driven across China three times, and has seen much of the country’s evolution from the ground. He’s been enthusiastic about China for some time now – at least since his Adventure Capitalist trip (circa 2000). Anyone who’s invested alongside his long-time bullish views on China has seen very handsome returns.

He says that according to local legend, Singapore was a role model for China’s development. Singapore has evolved very rapidly over the past four decades, from a Southeast Asia backwater in the 1960s, into one of the most prosperous countries in the world today.

“The rumor is that Deng Xioping visited here (Singapore) in 1978 – when he saw what was going on, he returned to China, and started to open the country up,” Rogers told me. “In fact, if you ask some people here, they’ll say the Chinese are still keeping a close eye on what’s going on here.”

An interesting side play he likes for the years and decades ahead is Chinese tourism.

“The Chinese have not been able to travel for the last 300 years. Now they can – and they are going to flood the world with tourism for years to come,” he says.

Chinese tourists should have a lot of purchasing power from a strong currency, if Rogers is right. He cites the Chinese renminbi as one of his favorite picks right now, and believes it’s about as close to a sure thing as you can get.

“Here in Singapore, they’ve allowed their currency rise to mitigate inflation. I expect the Chinese will eventually have to do the same thing.”

“You’re better off cutting growth in advance, than allowing inflation to get out of control. If growth drops to 3%, who cares? That’s better than letting inflation get out of control, because once it does, it’s very tough to rein in.”

“Then you have to incur a recession or worse to control inflation.”

I asked if inflation is really running around 5% as reported in China and surrounding Asia.

“Who knows – but at least they admit they have inflation! They’re not trying to deny its existence like the US,” he quipped.

He blames the United States, and Japan to a lesser extent, for “printing money like crazy and exporting inflation to the rest of the world.”

Commodities Should Remain Hot

“Most of my portfolio is in commodities, and currencies,” he shared. “I expect to make money in commodities because, if demand continues to rise, that is bullish for commodities.”

But what if we see a repeat of the financial collapse of 2008?

“If demand collapses, I anticipate the central banks of the world will print more money, and that will then cause commodities to rise,” he counters.

Agriculture is still his favorite, thanks to supply constraints that are nowhere close to being solved – including a lack of farmers.

“The average farmer in the United States is 57 years old,” Rogers shared (providing me with yet another “how the heck did he know that offhand?” moment).

“Who’s going to farm the land 10 years from now? These guys will be 67…if they’re still around. And nobody is graduating with farming degrees today.”

“There are just not enough farmers in the world. There are vast stretches of empty land in Japan, believe it or not – with nobody to farm them.”

He thinks this commodity bull market could continue to rock and roll for some time because “little or no supply has come on line yet.” He points out that the commodity sector was starting to attract attention pre-2008, as its bull run began around 1999, but the 2008 financial crisis knocked a lot of potential new supply offline. Which of course sets the stage for further price increases.

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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.