Jim Rogers Shorting Junk Bonds

When Jim Rogers talks, investors listen. One of the world's most famous investors, Rogers is known for his no-nonsense style and investment wisdom. He is author of several best-selling books, including his latest, "Street Smarts: Adventures on the Road and in the Markets." ETF.com recently spoke with Rogers for his take on the latest financial market developments.

ETF.com: Gold is up significantly this year, from a low of $1,050 to around $1,220 currently. Are you buying?

Rogers: I own gold, but I've not bought gold for several years. I'm expecting a better opportunity to buy gold sometime in the next couple of years.

Gold has had rallies like this a few times in the last few years. I'm very bad at market timing, so I have no idea what will happen with this one, but I am not buying.

ETF.com: How about oil? It bounced off $26 and rallied all the way up to $40. Do you think the lows are in for oil?

Rogers: In my view, oil is making a bottom. What normally happens is you have a big drop, then you have a dead-cat bounce, and then you test the lows.

That's what's happening with oil now; we're in the process of making the bottom.

ETF.com: Generally speaking, when it comes to commodities, do you think the bear market is finally over?

Rogers: Yes―if it was a bear market. Back in 1987, stocks went down 40 to 80%. Many people said the bull market in stocks was over. It turns out, that was nothing more than a correction. They said the same thing in '89, and a few other times during that long bull market.

If this was a bear market for commodities, in my view, it's come to an end. If it was just a long correction in a bull market, it's also come to an end―especially in agriculture.

ETF.com: Chinese stocks and emerging markets in general had a great month in March. Do you like China? Where else do you see opportunity?
Rogers: I own China and I haven't sold any Chinese shares at all. I will probably buy more, given the right opportunities and the right circumstances.

Other things I recently bought are short-term ruble-denominated Russian government bonds. I am also taking a look at shares in Russia, Kazakhstan, Nigeria, Angola and Iran.

But for the most part, I may not buy much of anything these days, because I'm pessimistic about the world. There's going to be serious financial market problems sometime in the next couple of years.

Everybody's going to be affected, including China. When you have Europe and America and Japan and other places with problems, everybody's affected.

ETF.com: What kind of financial problems do you see on the horizon?

Rogers: Japan is already in recession and some parts of Europe are in recession. Many countries in the world are already in recession.

But the problems usually start with a marginal country or company or industry which people aren't paying attention to. Last time around it was Iceland; all of a sudden Iceland went bankrupt, which led to more and more problem areas, including the American housing market.

These things usually start with where we're not looking. Certainly places like Venezuela are a disaster, so something could happen there.

Another culprit is the American government. They're the ones that have printed a staggering amount of money and have run up these huge debts, which are now going to drag us all down.

We're all going to suffer. Very few people will escape the next financial problems or economic problems. It's been seven or eight years since the last economic problem in the world.

In America, we've had recessions every four to seven years since the beginning of the Republic. That doesn't mean we have to have one, but we're overdue, and one is probably coming because of these absurd policies from Washington, D.C.

ETF.com: Is it fair to assume that interest rates on U.S. Treasurys are headed even lower in a scenario like that?

Rogers: Every time we start having problems in the markets, people call the Fed and say, "You must save Western civilization; it's going to end!"

The Fed, which is made up of bureaucrats and academics who don't know what they're doing, then panics. They're going to do whatever they can to save us again, so interest rates might have one more down leg, but it's the end.

The bond market is making a top and has been making a top for a while. The market is just not going to take it too much longer.

You might have a temporary spike down, but don't pay too much attention to it. I'm not short Treasurys, but I am short junk bonds in the U.S.

ETF.com: You talked about the problems that Washington, D.C. has caused. Do you have any thoughts on the U.S. election? Any predictions on what's going to happen?

Rogers: My main prediction is I know I will not vote for the winner. I've never voted for a winner. People who've been elected president in my lifetime are an embarrassment to the American system.

I always vote, so I will find a protest candidate, but they keep sending us turkeys.

ETF.com: Finally, since this is ETF.com, I have to ask you: Have you bought or sold any ETFs recently?
Rogers: Yes; I use ETFs extensively now because I'm lazy and they're simple and efficient in every way. They're great and absolutely one of the best things that's ever happened in the financial world.

I bought the Elements Rogers International Commodity - Agriculture Total Return ETN (RJA | D-34) recently.

Contact Sumit Roy at [email protected].