INTERNATIONAL. Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers said he is terribly concerned about currency wars and cautions that no one has ever won a trade war. He says China is slowly opening up its currency, he would not invest in the UK neither in the banking sector. He prefers commodities that are still depressed and reiterates that money printing has never worked.
Trade wars could spell the end of the game
Speaking to Andrea Catherwood on Bloomberg Television's "The Pulse" yesterday, Rogers said: "If the trade war gets worst, that's the end of the game. The world economy is going to be in trouble for a long time to come".
"It's a terrible concern for me," he added.
The Group of 20 nations will vow at this weekend's meeting to "refrain from competitive undervaluation" of their currencies, according to an early draft of a statement. The United States and European Union accuse China of keeping its yuan undervalued to benefit exporters, while Beijing says Washington's loose monetary policy is irresponsible.
"If the trade war continues, it's going to be the end of all of us," Rogers told Catherwood.
In the 1930s we had a trade war that led to the Great Depression and ulimately to the second World War, he said, adding "no one has ever won a trade war, everyone loses in a trade war."
Unfortunately, most politicians have not read their History or their Economics and they don't know the dire consequences of a trade war, Rogers opined.
China is gradually opening up the Yuan. The US should stay out of it
China's central bank said Tuesday it would raise its benchmark one-year lending and deposit rates by 25 basic points each, as Beijing ramps up efforts to contain inflation and soaring property prices. The widely anticipated move comes amid growing concerns that the red-hot real estate sector could overheat and derail the Asian powerhouse.
Economic growth for July through September fell to 9.6% in China, down from 10.3% in the second quarter.
Asked whether the Yuan will become a more open currency and be allowed to trade more freely and to appreciate, the legendary investor said China is opening its currency more so than the western press understands. He advises the US to stay out of the way as it's going to make things worse.
"Every time you bash someone in the face, they are going to protect themselves, he says. So sitting here and hitting the chinese on the face isn't going to do any good. It's going to make things worse," Rogers said, adding "I will stay out of it if I was the US".
The chinese know they have to open their currency, "they are opening slower than I would do, but they are opening," he stated.
The chairman of Rogers Holdings pointed out that China has opened up with Malaysia and Russia. "The currency is tradable and you can do business and trade with these currencies," he said.
"They have all that money trapped in china , it can't go out. That's part of the problem. It's got to go somewhere, so it is going into the property market."
"If they open up the currency, it would be good for China and it may prevent the property bubble", Rogers added.
"The chinese know they have an inflation problem, they know they have a real estate bubble in urban and coastal areas and they are dealing with both. I wish in the US and the UK, our governments will acknowledge that inflation is here and do something about it," he told Bloomberg's Catherwood.
UK investments? No thanks
The UK unveiled this week wide-ranging proposals to cut the country's record budget deficit while protecting the economy.
Asked if he had changed his view about investing in the UK, Rogers replied: "The UK has a gigantic debt problem, a gigantic balance of trade....look I love the UK....but it isn't a place for me to invest in 2010."
Invest in depressed commodities
On commodities, Rogers reiterated his stance: Commodities are the place to be and will do well whether the economy improves or not. When he looks at commodities or anything else, he looks at things that are depressed, not things that are skyrocketing up.
"I don't like buying things that are going straight up and making all-time highs. That's were gold is right now," he said.
Referring to a survey that said 95% of people are bullish on gold, Rogers reaffirmed his contrarian view: "Whenever you have 95% of the people in any market, it's the time to wait for a reaction or a correction".
"I'd rather buy commodities that are still depressed. Rice is depressed, even silver is 50% below its all time-high," he noted
Money printing doesn't work
Rogers again reiterated his oppostion to current US monetary and fiscal policies.
"Printing money has never worked. It's never been good for anybody. Many people have tried it through history, it's never worked," he said.
"I hope they don't do it, but unfortunately the head of the central bank in America doesn't know anything else to do and he's done it once, he says he's going to do it again. It didn't work the first time, it's not going to work this time," he predicts.
No bull market in banking sector soon
The famous investor doesn't consider the banking sector as a good investment because the problems with mortgages will take a long time to be solved. Also, bank stocks are not attractive despite the recent drop in price following fears over problems with US foreclosures.
"Usually when you have a huge bubble ant it pops, it usually takes a long time, several years to work themselves up," Rogers said.
" I don't think there's going to be a bull market in banking in our countries for several years, he told Catherwood.
Speaking to CNBC Worlwide Exchange yesterday, Rogers said: "Balance sheets at banks are "full of rotten stuff," they still need to sort out their "gigantic" problems and their stocks will be in a trading range over the next five to six years, Rogers predicted.
"Nobody knows what book value at BofA is, including BofA," he said.
Asked if the Dow could drop to 5000 points, Rogers joked: "If the central bank prints enough money, the [Dow Jones index] could go to 50,000 but we'd all still be losing money in stocks, because the money would be worthless."