Mumbai: Investment guru, college professor and author Jim Rogers is best known for the Quantum Fund he co-founded with George Soros. A person who doesn’t mince words on the policies of central banks, politicians and the need to invest in commodities, he was in India to inaugurate a commodity-linked equity fund launched by Birla Sun Life Asset Management Co. Ltd.
Cutting quite a flamboyant figure with his blue bow tie with pink stripes and suspenders that have charts of stocks, commodities and currencies etched on them, he spoke on the bull market in commodities, inflation, crude oil and the subprime crisis.
On stocks and bonds
Stock markets around the world are very expensive and can be for some more time. Bonds are terrible places to invest.
Straight talk: Investment guru Rogers says if you are in the water business here, you are going to make a for tune. Ashesh Shah/Mint
We are going to have more inflation. I tell people all the time to sell any bonds if they hold any. Anywhere in the world. I tell people’s bond portfolio managers to get another job because they are in the wrong place at the wrong time.
Most people need a sector in order to make money. We have a sizeable market where things are going up all the time. We have such a market—raw materials, natural resources, commodities—call it what you will.
We have long periods of rise in commodity prices, followed by long periods of decline followed by long rise again. It’s been going on for a long, long, long time.
Commodities are the second largest asset class in the world, second only to foreign currency.
We have a bull market in commodities as we’ve had many times in the past. If you’ve got to own something, you got to be owning commodities because supply-demand imbalances are in commodities and not in stocks.
On oil declining
Oil doubled in the last year. Whenever you have something doubling in a year, its overdue for correction. And we’ve had world economic recession. You put this together… This is the way markets work. There is nothing evil, or nefarious, or dangerous about it.The bull market in oil started in 1999. Oil has gone down 40%, or 50% three times and everytime people said the bull market is over. But it’s not over. There is a correction happening and I’ve no idea how long it will go on. But I do know that nobody’s discovered an major oil fields in the past 40 years. Supply has declined for everything. Short of a perpetual economic collapse, prices of oil will go higher and higher.
On subprime crisis
A lot of mortgages were ill-conceived to say the least. We’ve had the worst credit bubble in world history and it originated from America.
We are now paying the price. Of course, the whole world is paying the price. And it’s not over yet. It’s going to last longer than anyone expected. We are going to have the worst recession in America since the second world war. If they (the US government) keep on propping up failed companies (such as Freddie and Fannie) the situation will get worse and worse. America is the largest economy in the world and it’s going through hard times...so anyone who does business with America will be affected.
In agriculture, you invest in about anything. It has recently come down, but I expect it to much much higher over the next decade, or so.
The world has the lowest inventory of agricultural products for the past 50, or 60 years. The number of acres, or hectares (under cultivation) are declining.
Lots of what we consume—sugar, wheat—we are using it in fuel tanks. In my view, therefore, it is a good place to invest.
Top picks in commodities
Things like sugar and cotton are far, far below their all-time highs. I am not saying these are the best, but I will go and do some homework and some research on coffee, sugar and cotton...maybe silver...maybe Zinc... These are the places I see an opportunity.
Top picks in India
If Asia is going to continue to grow, if India is going to continue to grow, the best way to invest is to buy things that India has to have and has to consume. The best is commodities.
Some (equity) sectors are going to do well whatever the situation. India has a huge water problem. Gigantic. If you are in the water business, you are going to make a fortune. If you are in the agri business, you are going to make a fortune. Indian tourism has a great future.
On the dollar
I’m pessimistic on the US dollar and have been for a long long time. The US dollar is a terribly flawed currency and getting worse.
Many people are worried about paper currency and are looking for something to protect themselves against inflation. The dollar has been going down for the past seven years. Everyone is pessimistic on the dollar.
I still try to get out of all the dollars I have. Some countries are already moving away from the dollar (for merchandise trading). Eventually, everyone will move away from it.
Inflation is going to get worse in the whole world. It is next year’s story, next decade’s story.
Part of is due to money supply (increasing), but supply and demand imbalance too contribute.
Unless they destroy demand, which I don’t think is going to happen, you are going to see worse and worse inflation.
On controls and bans
Controls have always been negative. They have never worked and have only worsened the situation, throughout history.
When things go up, they (politicians) say a temporary ban will save us. They say that inflation in India is because of futures trade.
It’s astonishing anybody can say something like that. If they (politicians) want prices to go down, I suggest they go to the fields and produce some more food.