INTERNATIONAL. Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers, spoke Monday about the Standard & Poor's credit rating downgrade of US sovereign debt, saying the 'no news' event has nothing to do with the markets plunging and will not affect his investment strategy.
He also discussed the Federal Reserve monetary policy, arguing that further money printing, better known as QE3, will bring more inflation, social unrest and will lead to lost decades for the United States. He urged investors to be prepared as 'more problems are coming'.
The only thing that will work, he said, is to face reality by letting people that are bankrupt go bankrupt.
Speaking in an interview from Singapore with Rishaad Salamat on Bloomberg Television's "On the Move Asia" Monday, Rogers said: "Everyone has known that America is the biggest debtor nation in the world".
Standard & Poor's decision to cut the US's long-term debt rating is "not news, it's not even old news, it's just not news," Rogers said.
The US downgrade will not affect financial markets and has not caused the plunge in markets, he argued.
"Markets are coming down because America has problems, Europe has problems, China is trying to slow down...There's plenty of reasons for markets to come down, but it has nothing to do with S&P," Rogers told Rishaad Salamat.
Anyone who is investing on the downgrade, should not be investing at all, he said, adding that the world had known - about the US's problems - for a long-long time.
"The markets look ahead. No none who invests on the news makes any money. The markets are looking 6-12 months ahead and when you look 6-12 months ahead there are some bad things coming."
Where are markets heading now?
"Normally when you see panic like this it may be getting to building up towards a selling climax. If it gets to a selling climax, I will cover my shorts...because this kind of action usually leads to a reversal at some point," Rogers said.
What is he buying?
Talking about his investment strategy, Rogers, who predicted the start of the global commodities rally in 1999, reiterated he owned commodities, real assets, especially agriculture, gold and silver.
"If equities continue to fall, I will cover my shorts, perhaps all my shorts, and I will look for things to buy. And it looks as commodities are continuing to be beaten down, that's where I will put my money," the legendary investor said.
Gold and silver are going up too high too fast, he said, adding he hoped a correction will take place, "so that I can buy some more".
"Gold and silver, over the next few years, are going to go much higher, as will agricultural commodities," Rogers predicted.
"I hope this will protect me if things go bad," he told Bloomberg.
Gold for December delivery in New York advanced as much as 3.6% to a record US$1,774.80 an ounce today on concern the economic slowdown will worsen. The precious metal has surged 23% this year, heading for an 11th year of gains, as the global sovereign-debt crisis and a faltering economy boost demand for wealth protection.
Gold holdings had their biggest daily advance since May 2010 as of August 8.
Gold also advanced today to a premium over platinum for the first time since December 2008, as demand for a haven outweighed the appeal of platinum used mostly in catalytic converters.
The printing presses will run fast
Discussing the Fed's monetary policies, Rogers reiterated his opposition to further quantitative easing, better known as QE3: "Bernanke doesn't understand economics. He understands printing money and we have given him the printing presses. It is the wrong thing to do, but that's what he knows and that's what he will do."
"He [Dr. Bernanke] has said repeatedly if you want to understand 21st century central banking, you need to understand that we control the printing presses and will run them as fast as we have to," Rogers said.
"He is going to print more money and that's good for real assets."
"We are going to have more inflation in the world because history shows whenever people have printed money, there is more inflation. It's not good for the world, it's going to cause social unrest, more problems are coming."
You just prepare for it, and you'll be OK is Rogers' message to investors.
The Federal Reserve pledged today for the first time to keep its benchmark interest rate at a record low at least through mid-2013.
The Federal Open Market Committee discussed a range of policy tools to bolster the economy and said it is “prepared to employ these tools as appropriate,” it said in a statement.
"The decision represents the biggest effort since November to spark the US economy and revive confidence while stopping short of initiating a third round of large-scale asset purchases," Bloomberg reported.
"The only thing that works is facing reality, let people who are bankrupt go bankrupt. They bite the bullet, take the pain, accept reality, reorganize and start over," Rogers told Salamat.
The Japanese didn't let anyone go bankrupt for 20 years - remember zombie banks, zombie companies. The Japanese stock market is 75% below where it was 21 years ago, he said.
"This system doesn't work. The Americans have already had one lost decade, we are going to have two lost decades or three lost decades, the way things are going."
"Denying reality has never worked and it's not going to work in America this time either, Rogers concluded.
Notes: Jim 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%.
Rogers retired from Quantum in 1980 and became a guest professor of finance at Columbia University Graduate School of Business and in 1989 and 1990, the moderator of The Dreyfus Roundtable and The Profit Motive with Jim Rogers.
Underscoring his convictions that future prosperity will come from China, Rogers' two young children speak Mandarin.