Jim Rogers Waits For Gold, Shorts Stocks

July 09, 2012

The commodities investment legend says he’s ready to buy more gold once its correction runs its course, but for now he’s shorting Europe.

 

Jim Rogers, the natural-resources investing guru, says the bull market in commodities he described in his 2004 book “Hot Commodities” is far from over. Speaking on the telephone with IndexUniverse.com Managing Editor Olly Ludwig, Rogers said the bull run in materials is perhaps in the bottom of the fifth inning or the top of the sixth.

Stressing that any bull run will have its setbacks, Rogers said China’s development is likely to re-accelerate, and that gold will resume its more than decade-long climb upward as central banks around the world continue their easy money policies. Rogers said he just hopes he’s smart enough to buy more gold—and a lot of it—when the yellow metal’s current correction is over.

Ludwig: What did you think of the recent central bank actions?

Rogers: I find it absurd. It’s the wrong thing to do. They are just adding to the inflationary pressures that are here, and we’re all going to have more problems down the road.

Ludwig: China’s announcement of a 25 basis point cut is decidedly different than the European central bank cutting by 25 basis points, no?

Rogers: I don’t think either one of them should have cut by 25 basis points–neither the Chinese nor the Europeans.

Ludwig: So how do you contrast the Chinese cutting rates with the excesses you perceive with the loose-money policies of the Federal Reserve or the ECB?

Rogers: China doesn’t have the excesses that we have in the U.S. or even in Europe. China has huge reserves of currency, while America is the largest debtor nation in the history of the world. They are not comparable situations.

But as far as inflation goes, China has inflation and this is just going to make its inflation worse. If I were China—and I’m not, and there’s no reason for it to listen to me—it should keep monetary policy tight until inflation is killed. It’s not killed yet, and this is not going to help kill it.

Ludwig: Let’s talk about China for a moment. There’s a fair amount of talk that the China juggernaut is at a crossroads, that what Deng Xiaoping achieved in the past generation was the easy part, and achieving steady growth is going to be a lot harder going forward. What’s your take on that view?

Rogers: There’s no question that the first 30 years are the easiest 30 years when you’re doing something like Deng Xiaoping did. And, secondly, there will certainly always be setbacks. Any country, any company, any family, any individual that rises has setbacks along the way. That’s the way the world works. It’s normal.

And, as we just discussed, China has been trying to slow its economy for the past three years. Anyone who doesn’t understand that China is slowing down should read the newspapers. And, I as I was just saying, they’re trying to loosen up too soon. But this is part of a plan. They have been successful so far, but whether they will continue to be successful, who knows?

In America, in the 19th century, we had a horrible Civil War; we had many Depressions; we had very little rule of law; we had periodic massacres in the streets; and we had few human rights. And yet we became an extremely successful country in the 20th century.

China is going to have plenty of problems as we go along. What they’re going to be and when and why, I don’t know. But I do know there are going to be plenty of problems.

 

 

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