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Invest in paths that are less trodden, says Jim Rogers
Source: BI-ME , Author: BI-ME staff
Posted: Fri July 31, 2009 5:07 pm

INTERNATIONAL. Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers reiterated  that he sees prolonged economic problems and while he did not see much worth buying, he is not shorting any assets either.

In an interview with Bloomberg TV in Singapore, Rogers said he fails to see that there is anything “in great excess.”  "I have no shorts for one of the first times in my life."

"On the other hand I don't see much to buy," he added.

Nor is Rogers a fan of shorting Treasury bonds because he believes that the Federal Reserve can steer the market for them currently.

Rogers is mostly to be seen being interviewed on business networks in Asia or Europe, since his views are to put it mildly, somewhat negative on the US Dollar and the prospects for green shoots in the US economy.

He says, naturally, that commodities are the best place for investors to place their money due to inflation concerns.

Investors should be prepared for additional inflation down the road, Rogers warned.

"I'd rather be a farmer than a stockbroker for the next couple of years," he said.

A long-term advocate of commodities, Rogers believes that this will be the first sector to rise when the world gets out of the crisis, as investment has been curtailed during the crisis and this will create a shortage.

Rogers said he has not bought or sold mainland China shares recently as the stock market may have got ahead of fundamentals after rallying.

"I haven't bought equities since I last bought Chinese shares in October," Roers said.

The Shanghai Composite Index has risen 80% this year as banks tripled new loans in the first half from a year earlier and the economy rebounded in the second quarter. The gain follows last year's 65% drop.

Hong Kong and China stocks rose on Friday, regaining their composure from Wednesday's steep sell-off, after the central bank reassured investors it would stick to a loose monetary policy and would not curb lending.

Both markets recorded another month of hefty gains in July, the seventh successive monthly gain for Shanghai and the fifth winning month for Hong Kong, fuelled by positive earnings momentum and analyst upgrades.

In a recent exclusive interview with Ramesh Damani on India's CNBC-TV18's show RD 360, Roger discussed his latest book, A Gift to My Children: A Father’s Lesson in life and investing.

Rogers explained his investment strategy saying he looks at countries where valuations are cheap or paths that are less trodden. "I do try to find things that are cheap. Normally if something is cheap, it is because it is in the dustbin. People are not looking at it. If everybody is looking at something or if everybody is investing in something, you know as well as I do that it is not cheap," Rogers said.

"As I look around the world right now, I am not investing in many countries because if I am right about the world economy, we are in for an extended period of difficult times. So, the only place where I bought shares in the past year or so has been China. I have got Sri Lanka on my mind. It is just that I have been busy doing other things that I haven’t been able to get to Sri Lanka. But one of the things that I have learnt is that if you get to a country after a long and bitter war, you usually will find that things are very cheap, you will find a lack of capital, there is low morale, and everything is despondent, and there are usually great opportunities. So, Sri Lanka is on my list as a place where that sort of thing is happening, but there are not many, not these days," Rogers said.

"Frequently, I do try to find things that are cheap. Normally if something is cheap, it is because it is in the dustbin; people are not looking at it. If everybody is looking at something or if everybody is investing in something, you know as well as I do, it is not cheap."

Responding to a question about markets remaining irrational for long periods of time, Rogers said: "It was Keynes who said that, The market can stay irrational longer than you can stay solvent. Well it certainly happened to me at times you know. I would sell something short. No way, it is too high, only to see it go higher and higher. I’ve learned the difficult way. Some of the things right now, right now everybody seems to be convinced that government bonds are going to go through the roof and that government bonds are a safe investment. Everybody seems to be convinced that there is deflation in the world. Long-term government bonds are yielding nothing."

Asked about one lesson he wanted to teach his daughter, namely that economics and markets are two different things, Rogers said: "Let’s look at China. The Chinese economy has boomed for quite some time. But between 2001 and 2005, the Chinese stock market went down every year for four years in a row, even though the economy was going through the roof. So, just because an economy is strong doesn’t mean you can have a good stock market, and just because an economy is weak – they don’t necessarily go together. In the long-term of course there is some correlation. But don’t think that good news means good stock market.

The idea that you can solve a period of excessive borrowing and consumption with more borrowing and more consumption and destroying more balance sheets, to me, is ludicrous on its face," Rogers said.

Underscoring his convictions that future prosperity will come from China , Rogers' two young children speak Mandarin.

Rogers said his elder daughter, who is five years old, is in school in Asia and speaks fluent mandarin thanks to a governess who can speak fluent Chinese.

The other younger daughter was also learning mandarin.

"The single most important advice I can give you is teaching your child mandarin," he said, urging investors to sell US dollars when it peaks in the near term.

Rogers has spent a career being one step ahead of mainstream investment thinking.  Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%.

The Quantum Fund shot to fame after making more than US$1 billion betting against the British Pound in early 1990s.

In 1998, he founded the Rogers International Commodity Index and in 2007, the index and its three sub-indices were linked to exchange-traded notes under the banner ELEMENTS. The notes track the total return of the indices as an accessible way to invest in the index. In 2008, Rogers co-founded the Rogers-Van Eck Hard Assets Producers Index, an equity index focusing on pure play commodity producers.

 

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