Jim Rogers On "The Only Emerging Market Worth Talking About"

by Mark Skousen

Jim Rogers On "The Only Emerging Market Worth Talking About": Exclusive Investment U Interview (Part 2)

by Mark Skousen, Chairman, Investment U

Thursday, June 8, 2006: Issue #543

On Monday, we looked at the first part of my interview with famed investor Jim Rogers, where he predicted yet another raging bull market in commodities. Today, we'll see why Jim thinks the Fed will fail, what's in store for emerging markets (including the only one he's currently investing in), and life's most important lessons. Enjoy!

All the best,

Mark

Mark Skousen:  Which are better right now, international stocks, emerging markets or commodities?

Jim Rogers:  Well, I've sold just about every emerging market that I've owned but I've been buying China in the last few months.

Mark Skousen:  Among the big three - Russia, India, China - how do you rank them?

Jim Rogers:  China's the only one worth talking about. If India means what they say, India will be a spectacular opportunity. But I'm skeptical. I don't believe they mean it. And Russia is a disaster, no matter how it pans out.

One reason I'm bullish on commodities is that Russia is in the process of stripping all the assets. They're not reinvesting in Russia. They're stripping all the assets they can and getting them out of Russia. Go to Liechtenstein, or go to Switzerland, you'll see Russians everywhere. Go to the south of France, Panama, England, they're getting their money out. They're not reinvesting in productive capacity, as they are in China.

So, I wouldn't put a nickel in Russia, I wouldn't put a nickel in India, although I could be wrong about India.  My little girl speaks Chinese. She's not learning Hindu.

Mark Skousen:  So you have a personal bias

Jim Rogers:  No, it's not a bias; it's based on analysis.

Mark Skousen:  But there's fear China is communist. Does that make a difference to you? What about geopolitical instability?

Jim Rogers:  Mark, they call themselves communists, but they're among the best capitalists in the world. Their country's opening up, they're becoming more and more right; if you go to the churches, the mosques, the temples, you'll see they're all packed. There's certainly lots of religion going on for a "hard-line communist/atheist state."  They've got scores of periodicals now, whereas 30 years ago, there was maybe one. There are protests all the time in China now, about all sorts of things.

Mark Skousen:  75,000 protests of various types last year

Jim Rogers:  Can you imagine a protest 40 years ago? Or 30 years ago? And even if there had been, we wouldn't know it

If you came to America 125 years ago, we had no human rights, virtually none very few people could even vote. Asians were not allowed to own property. You could still buy and sell congressmen, but in those days they were very cheap. There wasn't much rule of law We'd just had a horrible civil war. We were fixing elections We had several politicians who were assassinated. This was not a great paragon of opportunity, to most people.  Many Europeans were very worried about the U.S.

That's all changed, and it's changing in China.

Ben Bernanke And the "Failing" Fed

Mark Skousen:  The Fed, as we know, is determined to raise rates. Do you look at Fed policy? Is it important?

Jim Rogers:  A little bit. The Fed is overrated as far as I'm concerned. We've had two central banks in America that have failed. This one will fail, too, and Bernanke will probably be its death knell. Between Greenspan and Bernanke, I'm sure the Fed is coming to an end. It's going to fail.

Mark Skousen:  Wow. That's quite a prediction.

Jim Rogers:  I'm bullish on commodities because of supply and demand. War is icing on the cake. Likewise, printing money is icing on the cake. And [the Fed] will print money, if you ask me. Now, perhaps they're slowing down the printing press. But Bernanke has said he's not going to slow down at all. If things get bad, he'll get in helicopters and fly around and drop his money, as you well know.

If you read back to his writings he's always said the Fed has to print money to save [this type of] situation. We could have saved the Depression if we'd printed money.

He misses a few things. He misses the fact that the U.S. is now the largest debtor nation in the history of the world. When they start printing money, the dollar is going to collapse.

Your question is really about a potential slow down. We're probably going to have a recession in the next year or so in the U.S. We're overdue for one. I would expect one. Is that going to be the end of the bull market in commodities? No. In the 1970s, we had huge economic problems around the world, and we had one of history's greatest bull markets in commodities, despite lots of the economic problems.

One of the five largest economies in the world went bankrupt in the 1970s - the U.K. had to be bailed out by the IMF. We still had a huge bull market. One of the five largest economies in the world may go bankrupt in this big commodities bull market. It's not going to end the bull market. It will cause consolidations We've talked before about gold going down 50% in the 1970s. That's the way markets work.

And remember, back then, we didn't have 3 billion people in Asia opening up into a global economy.

Mark Skousen:  From a practical point of view, people reading this may just go hog wild "I'm going to sell all my stocks, and I'm going to put all of my money in commodities." Do you have any recommendations in terms of diversification, what percent of your portfolio should be in commodities, and which ones?

Jim Rogers:  Well, first of all, people should only invest in things they know a lot about. Most people still can't spell "commodities." So I wouldn't urge them to be investing in them. But remember, in 1980, most people couldn't spell "mutual funds," and most people in Europe didn't know they had a stock market they learned, though, when the bull market came.

If you'd come to me in 1982 and I'd said "put all of your money in the S&P Index Fund," I'd have had no credibility, and the interview would have stopped right now, and that would have been the whole discussion. But of course, that's exactly what you should have done.

If you'd come to me in 1989, and I'd said "put all of your money in the S&P Index Fund," you'd have said, "Jim, the S&P has tripled in seven years! Are you nuts? It's tripled!" and I'd say, "That's what you should do." And you know what happened? The S&P went up 700% after that, even though it'd already tripled.

I'm not going to sit here and say you should put all of your money into commodities, because you won't listen to me, and that'll be the end of the conversation, any more than you would have listened to me in 1998 or 1999. But I would suggest to you that the only bull market I know in the world is in real assets, commodities and natural resources.

Life's Biggest Lessons

Mark Skousen:  You've lived a very unusual life compared to others; what is the most important lesson that you've learned?

Jim Rogers:  There are several answers. Whatever the conventional wisdom is, you should question it, because it's probably wrong.

I dedicated Hot Commodities to my little girl, and I said, "I hope that you're always going to question everything around you, that you will be skeptical and questioning. Because that's the only way you're going to figure out what's really going on. And that's the only way you'll be successful. Because the conventional wisdom is never the way to the top."

I also have to say that until now, I never had a child. I used to feel sorry for people who had children. I was dead wrong. I was so, so wrong about that. This little girl is so much fun for me. I cannot get enough of her, 24 hours a day, seven days a week. In fact, anybody reading this, if they haven't done it, I'd encourage them to get home and get on with it.

In having a child, I learned about myself, about my parents, about people and about life. I learned more about my parents now then I ever did. I learned more about you, because you've got five children. There's this whole class of people out there called "parents." I had no concept, no inkling of what that class of people was all about. Now I know I was really wrong. Was I wrong to wait until I was 60? I don't think so, if I'd done it when I was 20, it would have been bad for me, the mother and the child. I don't think it would have been the right time.

Mark Skousen: Thanks, Jim.

Jim Rogers:  My pleasure.

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