What do you think about what Jim Rogers has to say?

Discussion in 'Wall St. News' started by bluud, Oct 24, 2007.

  1. bluud



    Oct. 24 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

    ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

    Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

    The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

    Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

    ``It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros.

    ``The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange,'' he said. ``That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.''


    The Chinese currency, known as the renminbi, or yuan, is ``the best currency to buy right now,'' Rogers said. ``I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''

    China, growing faster than any other major economy, is ``going to be the most important country in the 21st century,'' he said. China's gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

    Rogers also is buying Swiss francs and Japanese yen, which he said have been ``pounded down'' because of the so-called carry trades.

    Unwinding Carry Trades

    In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand.

    The carry trades in yen and francs will ``unwind someday,'' which will send the currencies ``straight up,'' Rogers said. ``I'm buying the yen.''

    The bull markets in bonds and stocks are ``over,'' he said. ``Bonds will be a terrible place to be for many years and will in fact be going down for many years.''

    Rogers said he remains bullish on commodities because ``that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.''

    Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.

    ``The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,'' Rogers said. ``Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.''

    He added, ``I think I'm going to make more money in agriculture than I make in precious metals.''

    Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,'' he said.

    To contact the reporters on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net ; Danielle Rossingh in London at drossingh@bloomberg.net .
  2. Is that the reason why Soros never let him trade at his fund because he's a hothead? Is he going to change his name to Chinese too?

    `I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''
  3. Easier said than done.. What month and year contract do you buy on wheat? The whole 08 and 09 strip??? Do you buy now, or wait for the H&S to complete? Or do you buy a farm? How often will the banner crop kill your returns versus the more rare supply shortage year? How much do you keep adding to get a good enough cost basis?

    Same goes for cheaper commodities he likes, ie cotton and sugar. How much do you lose carrying these contracts and calendars waiting for the big run? Does the big run pay for the carry and erosion you suffer in the meanwhile?

    And the yuan: When it strengthens, how long does that last? Their strong currency will choke Euro and US consumption and likely be short lived. Will they become the next US? Will China let the yuan appreciate faster than carry losses occur in the trade? And what about the massive inflation eroding the value of the yuan in a free float?

    And with relatively cheap US and euro currencies, will these markets suddenly become the next emerging markets?

    What about JPY -- Can he justify losing 4%+/yr carrying this currency in a country with structural problems (debt obligations, inflation picking up) that may exceed even the US.

    All of his ideas seem very intelligent, but turning them into a trade that profits in the real world is a different story. Much more difficult. You need deep pockets, and even with those, yielding decent returns on capital is still very difficult.

    One thing is certain: He must do very well traveling doing these presentations, and news articles like this keep up the interest in his pre-packaged 'seminar'.

    Good for him.
  4. Sounds like you don't really follow Rogers.

    Rogers for instance was saying to buy Midwestern farmland...a decade ago. He's been talking about grains now for a while. And by the way, all have been very good investments.

    But Rogers is not a short term trader. So if you make trades based on his beliefs but expect them to work next week...you're bound to be disappointed.

    If the Yuan triples or quadruples as he evidently is forecasting, and it takes several years...do you think there's a way to profit?

    I think the point with Rogers is that he is a long term investor. His ideas don't necessarily work the next day, week, or month. Therefore, if you're going to trade based on his idea you wouldn't want to do it in a future expiring next month.

    As an example, I can buy gold without carrying cost by buying coins for example. That might not satisfy you though if you want to lever your trade up via the futures market. But I doubt if Rogers is levered up.

    Rogers is not a technical trader. He will tell you he doesn't know how to read a chart. He's a long term, fundamental type investor. He typically buys when things are cheap. He's usually early. He has deep pockets.

    I've been following Rogers since the 70s. Back then you might only hear his ideas once a year when he appeared on the Barrons panel. But he's had some unbelievable ideas over the last several decades. This commodities thing he was early on...like 10 years ago or so.

    This guy is one of the great investors. But unless you have a long term bent for some of your money, you are bound to be disappointed.

  5. How is he wrong? For fucks sake we cut the shit out of rates when most other countries leave them unchanged. THEN plan on yet another "cutting the shit out of rates epside"....but yet we bitch when this type of shit unfolds?


  6. Daal


    There is carrying cost in the form of lost interest you would have earned on the dollars you used
  7. gkishot


    Plus cost of the insurance you would have to pay.
  8. No I've followed plenty of his presentations and interviews. But my questions are very realistic as *long* term ideas for a trade. A long term investment = long term trade. And carry costs for all of these are very real issues, leveraged or not.

    Its interesting that most of his ideas are in parts where there is a large amount of carry cost (commodities, asian currencies that pay practically zero yield, etc). But it makes for fascination.

    But the reality is simple - if any of these trades don't appreciate by 20% in the next 5 yrs, its a losing trade. (4.5 x 5). That means $912 gold, 95 usdjpy, etc is a target just for breakeven. Look at past performance on gold and you'll see its really a loser in the face of these inflation #s. The ag plays are much more difficult to profit unless we get some serious perpetual food shortage issues in the next few yrs.

    The best investments in the last 30 yrs were buying a few select stocks (ie MSFT) and buying 30-yr T-bonds back in the 16%+ days, and holding. In the same 30 yrs, gold has doubled (in other words, has not even met its inflation adjusted highs).

    Conclusion: His ideas are not easy investments to make or justify just due to interfering factors (mainly carry interest/storage), period.

    The yuan sounds good in concept, but the Chinese govt wants a weak currency to keep its exports alive just as much as the US govt wants a weak currency to devalue its debt. So he is betting a gridlocked US representative democratic govt will do worse for investment vs. the relatively stalemate communist Chinese govt. (although i don't know or entirely think that is an accurate word to represent today's picture)

    Just remember something as well: inflation #s have to be factored into carry costs as well. So 2% inflation vs 6% annual inflation eats at your bottom line another 4%.
  9. He's right about commodities going up in price but its hard to catch the whole spot price move because of carrying costs for most commodities due to a contango market for most of them. You have a negative rolling yield which is a significant drag on the performance of the futures contract that you are long, i.e. sugar, cotton, gold which are all contango markets.
  10. Rogers put up his Manhattan home for sale last year. He says he is going to relocate to Asia and is having his young daughter learn Chinese. Now he is liquidating all of his dollar denominated assets. I guess he isn't too optimistic about America's future,like a rat abandoning a sinking ship. For all of the people like him leaving the country we get 1000 poor Mexicans.
    #10     Oct 24, 2007