Not content with savaging the battered British economy and its floundering pound, investment guru Jim Rogers has now turned his sites on the US, its ailing banks and most of all, AIG (while his attack on the UK drew some acid responses, it’s a fairly safe bet to bash the American Insatiable Group).
In an interview with Bloomberg TV, aired Tuesday, Rogers says the US risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, and urges Washing to let AIG - which notched up the biggest Q4 loss in corporate history - go bankrupt:
“The US is taking assets from competent people and giving them to incompetent people,” said Rogers, chairman of Singapore-based Rogers Holdings and author of books including Investment Biker and Adventure Capitalist. “That’s bad economics”.
In other cheery remarks, there were lots of dire warnings but not many solutions in Rogers’ predictions that the US is repeating the mistakes made by Japan in the 1990s and risks creating “zombie banks” by rescuing failed financial services companies that should have been allowed to go under.
His most useful point is possibly that we should all be buying farms and agricultural producers.
And in a characteristically counter-intuitive tack, Rogers warns that oil prices (now floundering around $47 a barrel after last year’s highs of more than $147), may rise to record levels due to waning reserves and a lack of major field discoveries: “Reserves of oil are going down all over the world…The price of oil has to go much, much higher. I don’t know if the oil price will go up to record level in three years or five years. I don’t know when but I know it is.”
Finally, the spectre of inflation also disturbs Rogers - although he owns gold and silver, he adds, calls to return to the gold standard are “not going to solve our problems”:
“People should be prepared for inflation as governments worldwide are printing money to prop up economies at a time when commodities supply is under pressure…We’re going to have serious, serious inflation down the road… I wish I knew when.”
And here are Rogers’ other main points, courtesy of FirstAdopter:
- This is a bear market rally that can last days, weeks, even months
- He is worried about government debt market. In a few months, they have quintupled government debt
- Massive short squeeze on the U.S. dollar from forced liquidation. It’s an artificial rally
- He owns the yen and the dollar, not sure where to put the money. Maybe real assets
- The only asset class that has fundamentals improving are raw materials and commodities
- He owns some gold, but thinks there is more money to be made in agriculture and silver. IMF is trying to sell their gold, which may hurt it for a while
- Central bank is trying to keep interest rates down, but eventually it will backfire and rate will go through the roof
- If you write-off everything in sight, sure you can show a profit [talking about C, BAC, and JPM saying they are profitable in January and February 2009]
- He is short JPMorgan and covered his Citigroup. He thinks they have gigantic derivatives and off balance sheet exposure, also large credit card division which will be bad
- No position in insurance companies
- Best economic sector in the world next 10-20 years is agriculture and farming. Low inventories and tons of shortages