Jim Rogers, chairman, Rogers Holdings, spoke with ET Now on a range of issues including the global economy, emerging markets, equities and his current contrarian bets Excerpts:
Q: How do you think currently the global economy or especially emerging markets are stacked up?
Some people are getting better, some sectors are getting better. Governments have been pouring gigantic amounts of money into the market and the people who get that money are obviously better off and they think that things are better and they are better. But overall, the situation continues to deteriorate, unemployment goes higher, the debts are staggering in the West anyway. So the whole world is going to have more and more horrible problems in the future.
Q: Talking about the sugar space, stocks in India have started moving up as the government has been trying to allow partial exports in surplus sugar. Do you think there is a medium-term trade in sugar? Where do you see the global prices of sugar heading in the coming few months?
Sugar is going to go much higher over the next few years. I have no idea whether this is a short-term trade or not. I am terrible at it, terrible at short term trading. I am ecstatic to hear that your government is loosening up. Indian government is one of the most restrictive and controlling governments in the world. They should let sugar farmers finally make some money. So I hope that they continue to expand. I hope that the sugar farmers continue to make money and yes the price of sugar is going to be much higher over the next five to 10 years. So there is lots of money to be made in sugar unless your government does something foolish again.
Q: You have always had a contrarian approach. You were buying airline stocks in 2003-2004 when global fund managers were dumping them. You were buying and commodity stocks in 2002 when global fund managers were dumping them. Which is your current big contrarian bet for the year 2010 and beyond?
The way I see the world, there is going to be a lot more currency turmoil in the next few years. So I am mainly playing currencies and commodities going forward. I have a few shorts. I have sold a few things short mainly in the United States, but I do not see a lot of great opportunities in the stock market.
Let’s put it this way: If there are great opportunities in the stock market, the opportunities will be better in commodities because the shortages are worse in commodities. If the world does not get better, which it may not, then you should be better off owning commodities because after all, governments will continue to print money and throughout history when government has printed a lot of money, it has led the higher prices for commodities.
So either way, my way to play this is through commodities. Buy yourself some rice or some natural gas, look at the things that are very cheap and maybe you will do well - no matter what happens to the world economy.
Q: What is the call on then because prices there have been going through the roof? They have already crossed $1300 per ounce mark. What is the way forward for the next five to 10 years and what kind of a trade would you initiate on the precious metal right now?
I just got to say that if I were to go to about precious metals, I would rather look at silver than gold. I own gold and I own silver, but silver is still 60% below its all time high. Gold is making all time highs. So it is usually better to buy low and sell high. I am not selling my gold. Gold will go over $2000 an ounce certainly in the next five to 10 years. But silver - on a percentage basis - will probably go up even more during that period of time.
Q: Gold currently is at about 1,300. If you are talking about a target of about 2,000. It means you automatically expect an upside of about 20%+ in less than 24 months. Is not that sizable?
No, I did not say in 24 months, you said in 24 months. I said in the next five or 10 years. Over the next five or 10 years, gold will go over $2,000 an ounce.
Q: Can you talk about one idea where you think a bubble formation is there or something which you would like to avoid?
I know a bubble is forming in the US Government bonds, long-term bonds. If not there yet, we do not have the end of the bubble yet. That is certainly one of the few bubbles I see forming. We have a bubble forming in Australian real estate and Chinese urban coastal real estate. There are certainly some bubbles forming in the world. I am not short on Australian real estate or nor am I short on Chinese urban real estate, but these are definitely bubbles. It looks like there is always some bubble forming somewhere.
Q: What’s the call in oil prices then? Where do you see the prices heading in the next six-12 months?
The surprise in oil is going to be how high the price of oil stays over the next decade and how high it ultimately goes. Oil reserves around the world are declining at a relatively steady rate and nobody is discovering gigantic reserves to replace them. The IEA is going around begging people to listen. Known oil reserves are going down at a steady rate. Again, I am not buying oil right now, but if I were going to buy energy, I would be looking for something like and some other things that are still depressed.
Q: Talking about alternate energy and things like shale gas, could they be potential threat for long-term oil bulls or long-term oil watchers?
There is enormous potential in alternate energy. The world needs new energy sources. Some day I will come to Mumbai and I am going to see windmills on all the roofs or solar panels on all the roofs, but some day is a long way from now. But if you can find good companies in the shale gas or in the windmill business or in the solar panel business, you will probably make a lot of money because it has a great future. Oil reserves are declining, energy usage is rising. Find somebody who can produce relatively cheaply alternate energy and you will make a fortune.
Q: 2008 was about capital preservation, 2009 was about capital appreciation. 2010 and beyond, do you think you need to sit on some cash, take some chips off the table because all asset classes, equities, commodities, real estate have rallied back?
Not everything has rallied back, rise is still very depressed. Natural gas is still depressed, there are still things that are depressed, but the way to preserve capital is to make money. Sitting around saying I am going to be defensive is not a way to preserve capital.
I know a lot of people who owned Icelandic Krona two years ago. They were all in the cash, it was all in Icelandic Krona. You know the rest of that story. They got wiped out because the Icelandic Krona collapsed. You must always try to make money if you are going to preserve capital because even going into cash can be very destructive. Figure out where the best place is to make money, put your money there and that’s how you will preserve capital.
Q: What is the call on Indian equities at this point of time? We have run up pretty hard valuation-wise in the entire emerging market pack. We are looking slightly rich. Does it seem like this gush of liquidity that we are seeing into the Indian equities would continue for a while to come?
Your government and your central bank are going to tighten things up or they are going to stop having this great gush of liquidity. Several central banks have said that - I wish the Indian Central Bank could be running the American Central Bank. This is a case where your central bank has done a much better job than the Americans or the British or some of the other Central Banks. But you are not the only one. I mean the Australians and Norwegians, many central banks see the problems that are developing and are trying to tighten things up.
Let us hope that your central bank continues to do so. If they do and if others do, then we are going to have much less liquidity in the world and now will slow things down. But remember, starting in the summer - starting in July - the American Central Bank started pumping money out and the Japanese - two weeks ago or three weeks ago - said oh! we are going to do the same thing. So when you got the Japanese Central Bank and the American central bank flooding the world with money - those are two pretty big players - I hope India continues its policy. You have the other two - and perhaps three - pumping money out, but your central bank is doing better.
Q: Exactly one year ago, you had identified Sri Lanka stocks and that trade actually has worked like a charm for you. Do you still like Sri Lankan stocks or Sri Lankan stock market?
Sometimes I get it right, sometimes even I get it wrong. If I were going to invest anywhere in the world, I would rather invest in Asia than in the West for many-many reasons. Sri Lankan stocks have gone through the roof. I do not like to jump on a moving train - certainly a fast moving train.
But if you are going to own shares in the world, I would certainly look at Asia. The largest creditor nations in the world are now in Asia. This is where the assets are, this is where the dynamic is, this is where things are happening, this is where a lot of raw materials are. Great things will continue to happen in Asia or let us put it this way: Less bad things will happen in Asia than in the West.
Q: Would it be a country-specific trade and if so, which one?
I cannot think of any country I would buy right now - any country that has a stock market. Stocks everywhere have run up. You have mentioned before that emerging markets have been going through the roof. I cannot think of any place where I would be buying stocks right now.
Q: What about your favourite country Jim - China?
I would not be buying shares in China right now under any circumstances. I only like to buy in any stock market when it is collapsing. Chinese stock markets are down over the last year or so, but the year before that it was one of the strongest - if not the strongest - stock markets in the world. China has got a horrible inflation problem. They are not handling it very well; they are handling it better than some countries, but now they have got plenty of problems with their inflation. They have been cutting back in the bank reserves and in the housing industry. I would hope they continue to do so. I am not buying shares in China right now.
Q: You like commodities, you like precious metals. But if you really have to keep one trade open for the next 5 years or 10 years, which will be that golden trade?
I would have to say that for five or 10 years, it would probably be rice. I would probably put my money in rice for the next five or 10 years, rice or silver. Buy yourself some silver chopsticks or some silver cutlery, and buy yourself some rice, stock up with rice and you will be very rich in five or 10 years.
