Thursday, November 17, 2016

Jim Rogers speaks on Gold, Oil. Fed and more Are you a buyer of gold right now near $1,300/oz?

Jim Rogers: No, I’m not a buyer of gold at all. I expect another opportunity to buy gold. If it doesn't happen, that's fine, I already own plenty of gold. If and when it does go down, I hope to buy a lot more. Oil doubled off its lows from earlier this year, but it seems to be having trouble breaking above $50 on a sustained basis. What's your outlook for oil, and should we be paying attention to OPEC's attempts to cut production?

Rogers: I don't pay too much attention to OPEC. They talk a lot, but even when they agree on something, somebody is always doing something else under the table. So I don't pay attention to OPEC.

As far as oil, it's is in the process of making a bottom. In two or three years, we're going to look back and say, "Oh, that's what it was doing: It was basing; it was making a bottom."

Whether that base is between $25 and $60 or between $30 and $50, who knows? But it’s in the process of making a bottom. Two or three years from now, will oil prices be much higher?

Rogers: Perhaps, yes. Since the world will be in chaos with a lot of civil unrest and maybe even military unrest, I suspect that's probably a safe bet. But I'm terrible at market timing and short-term trading, so don't listen to me on something like that. Where do you see the most risk of unrest in the world right now?

Rogers: Clearly, the Middle East is a powder keg; it can erupt at any time. There are all kinds of people making mistakes there. It's not as though it's just the Arabs and Israelis. A dozen different groups are making mistakes in the Middle East.

History also shows these things usually start where we're not looking, where we don't expect something. Who would’ve thought Sarajevo in 1914 [would lead to World War I]? Nobody knew what Sarajevo was, and the next thing you knew, the world was in chaos.

It's probably going to start in the Middle East, but it could be Asia. It could be anywhere. After being in the financial news a lot last year and early this year, China hasn't made any waves recently. Do you foresee another shoe dropping in China, or are you comfortable buying Chinese stocks here?

Rogers: I'm not buying shares anywhere at the moment, including in China. I own Chinese shares; I haven't sold any. The world's going to have serious problems in the next couple years, and it's going to affect everybody. The Chinese are a large trading country, and anybody who trades with the outside world is going to suffer. Many Chinese companies now have debt, which was not usual 10 years ago.

Some Chinese companies are going to go bankrupt. Other parts of the Chinese economy are going to boom no matter what. Pollution cleanup in China, for instance; those guys don't care if America falls into the sea; they're too busy making money. You said the world is going to have serious problems in two to three years. What do you see causing that? Where do you see that emanating from?

Rogers: The main cause is the Federal Reserve, and Washington, D.C., more broadly. They're accumulating gigantic debts and doing huge amounts of money printing. That can’t last; it's going to cause problems for all of us down the road. If you're looking for a single culprit, it's Washington, D.C.

It's already happening. In 2015, for instance, twice as many stocks were down on the New York Stock Exchange as were up. It was disguised by the averages, but the averages are dominated by 15 or 20 big stocks that never go down.

Most stock markets are down around the world. Japan is already in recession. It's just not visible to the press or to the public yet.

Something similar happened in 2007: You had Iceland go bankrupt. People didn't even know where Iceland was or anything about it. But then that led to Ireland, which led to Bear Stearns, which led to Lehman Brothers. Before long, everybody knew something was wrong.

That's the way these things always work. It starts with an outlier or marginal place, working its way through to, "Oh, my god, why didn't they tell us?" My point is, it's already happening; it's just not in the headlines yet. Is there anything anyone can do—the Fed or anyone in Washington—to prevent the collapse you see coming?

Rogers: I don't know. Historically, in America, we've had economic difficulties every four to seven years since the beginning of the Republic. We're overdue for a recession, timewise. You mentioned you're not buying any stocks at all. You don't have a favorite region?

Rogers: No, I'm not buying anything anywhere. I'm looking at places and I have ideas on my list, such as some of the Chinese industries that are going to do well no matter what. But mainly I'm not doing anything. Do you have any opinion on the fixed-income markets? Do you see interest rates going up or down?

Rogers: I'm short junk bonds in the U.S. Interest rates have already started going up a little bit in the U.S. and other places. My view is that I wouldn't buy Treasury bonds with your money. But I know that central banks have more money than I do, so I'm only short junk bonds. Last year you liked sugar, and it's turned out to be the best-performing commodity this year, with gains of nearly 50%. Do you still like sugar, and do you have any other under-the-radar investments people should take a look at?

Rogers: Sugar is going to continue to go higher over the next few years. Sugar—even though it's done well in the last year or so—is still down 70% from its all-time high. Sugar could triple and still not make an all-time high, so you can see how low it still is.

I can’t think of anything else worth buying. Some of the Chinese companies ... like I told you, pollution control: Those companies are going to do extremely well no matter what happens in the world.

I'm just waiting, because I know that when everything collapses, even good, sound companies that are booming usually go down for a while, too.