Jim Rogers and Marc Faber See Disaster Looming

Discussion in 'Economics' started by observer67, Dec 22, 2009.

  1. Legendary investors Jim Rogers and Marc Faber have similar outlooks on the financial crisis and the efforts of the Federal Reserve to revive the U.S. economy. What do they think of the Fed's quantitative easing policy? In a word, it is a recipe for disaster.

    According to Rogers, governments have not addressed the underlying problems which triggered the crisis, but instead have "flooded the world with money." He argues that trying to solve the problem of too much consumption and too much debt with more consumption "defies belief," and will result in epic failure.

    Faber's outlook echoes the sentiments of Mr. Rogers. He says, "If we agree that excessive credit and excessive leverage led to the crisis, then what the Federal Reserve is doing is giving a wrong medicine to the patient—they are giving the drug addicts more drug instead of sending them to rehabilitation, which is not good for the economy. So I think that the whole policy will eventually end in another disaster but we don’t know when and many things can happen in between."

    So where do Faber and Rogers see opportunity? Well, both are extremely bullish on agricultural commodities and companies. Rogers says that it will be farmers not bankers driving Ferraris in the coming decades. Faber likens investing in agriculture to investing in oil in 2001 or 2002.

    If you are interested in a fairly simple and straightforward way to act on the advice of Rogers and Faber, the PowerShares DB Agriculture ETF (NYSE: DBA) tracks the price of corn, soybeans, sugar, and wheat. Another way to take advantage of a surge in commodity prices in the coming years is to invest in managed futures or buy currencies such as the Australian and Canadian dollars which are linked to the price of commodities. This can also be done with ETFs. The Australian Dollar Trust ETF is ticker symbol (NYSE: FXA) and the Canadian Dollar Trust ETF is ticker symbol (NYSE: FXC).

  2. S2007S


    What they are doing is printing money to offset and downfall in the economy this WILL lead to greater consequences down the road, yes they are propping up everything to make it look like there is growth when in reality all it is is worthless dollars being pushed through the system. Sad part is all the fools believe this is a recovery in the making, that the latest, greatest bull market is back, the next downfall in this economy will be a 100X worse than what this economy just went through.
  3. bgp


    and it wont take long. there are no jobs. no manufacturing thats the foundation of any sustainable recovery.

  4. The problem was too much leverage.

    Now if you increase the base money supply and decrease the leverage to result in the same net money supply, you are actually fixing the problem without the devastating price collapse.

    That's the game.
  5. sosueme


    No no no.... that is the theory. We don't know how the game will play out just yet
  6. Exactly. And neither do Rogers or Faber, yet they act like they know.
  7. One hole that I see in their theory is that many countries are worse off than the US. As bad as our economy is, as much money as we have printed and as big as our debt is, when other countries like Greece teeter on the verge of bankruptcy, it causes the US dollar to go up. Sure, we are in bad shape, but if the US looks good relative to other countries, we may still prosper.

    In addition, the US may be too big for China and other creditor nations to allow to fail. If our country goes bankrupt and our currency becomes worthless, China will take a huge hit. The situation is analagous to the Fed bailing out banks that were too large to fail, but letting many smaller banks go under.

    I do agree, however, that agricultural commodities are a very good long-term investment right now.
  8. Their error is relating use of credit to opiate addiction. Credit is used to leverage oneself out of one social class into a higher one. It is not an addiction.

    The only problem is that interest rates are not yet low enough in the US to offset the crisis caused by the banks. If rates on consumer credit would just fall another couple basis points, the US economy would boom.