INTERNATIONAL. Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers has been talking about his 2012 predictions.
In a nutshell, he is neither too optimistic about the stock market for 2012 nor about what’s going to happen in the world in the next two or three years.
Speaking to Australia Financial News Network (AFNN) December 23, Rogers said: "The problems are going to continue to get worse until someone solves the basic underlying problem of too much spending and too much debt."
He sees the biggest risk to global growth in 2012 as "too much debt...too much consumption...and the central bank in the US which keeps printing money."
Rogers, seen as one of the world's most successful investors, highlighted the scale of the problem to his host: The problem is that the measures America needs [to solve the crisis] would cause huge pain for a while, but, if we don’t take our pain now, and we wait until the market forces the pain on us, then it’s going to be systemic collapse."
Refusing to get drawn into US politics, Rogers nevertheless provided a tacit endorsement: "Gary Johnson and Ron Paul seem to understand the problems that are facing America," he said.
So what is his prediction for stock markets in 2012?
"I am short stocks around the world. I’m short American technology stocks, I’m short emerging market stocks, and I’m short European stocks," Rogers told AFNN.
"I’m not optimistic for the most part about stock markets. I don’t own many stocks anywhere in the world. The only offset for the caveat for me is that there is an election in the US, and in France, so wherever there are elections coming, and governments spend spend spend, and throw money out the window to buy votes, so some people are going to be much better off in 2012," he added.
Speaking to the BBC's Martin Webber December 26, Rogers reiterated his opposition to printing money as a solution to too much spending and too much debt: " You can debase currency, and history is replete with governments that have debased their own currency and ruined their own currency for hundreds of - well for thousands of years."
"You can do that and everything is okay for a while, but eventually you have inflation, you have high interest rates, you have currency turmoil, you have people no longer trusting each other to invest with each other, and then you have the end of the system, and we have chaos, and it starts over again," he added.
Social unrest, civil war and...a huge mess
Asked if it was right that government owned institutions [nationalized banks] were effectively buying government bonds, the investment guru said: "It is a recipe for disaster... It's a Ponzi scheme, it's a fraud, it's a sham and we are all going to have to - we are already starting to pay for it."
"Eventually one of two things has to happen. We have to get together now and ring-fence the problem and figure out how we are going to survive and start over. Or, in a year or two or three, the market is going to say, no more money, we won't put up any more money. And then the whole system collapses, then you have gigantic chaos, social unrest, governments failing, civil war - huge mess," Rogers predicted.
It's not the euro
Going against mainstream investment thinking, Rogers denied this was a 'euro crisis.'
"It's not the euro. The world needs the euro or something like it to compete with the US dollar. We need another sound currency. The eurozone as a whole is not a big debtor nation. The eurozone has some debtor problems, some debtor nations, debtor states, but it's not a big, big problem. The euro is good for the world. It needs to work," he told the BBC.
But is it a euro crisis?
Rogers, nonetheless is having "serious questions" on what to do about the Euro. "It certainly won’t continue in its current form in 10 years," he told AFNN.
Monetary unions work by automatic transfers from productive regions to less productive ones. This is true in the US as it is true in every single nation with regional variations. No single currency has ever survived without some form of debt 'mutualization'.
Only Germany can reverse the dynamic of a European decay,” billionaire investor George Soros wrote in August in Handelsblatt, the Dusseldorf-based newspaper. “Germany and other countries with an AAA rating have to approve some sort of Eurobond regime. Otherwise, the euro will implode.”
The eurozone, in its current form, is beyond repair. The euro was an idealistic idea dreamed up by politicians. The idea was flawed and could not have worked without swift fiscal and political union. Even Jacques Delors, the architect of the euro, accepted this fact in a recent interview with the Telegraph.
Bankers keep their Lamborghinis
Rogers also expressed limited sympathy for the Occupy Wall Street movement.
"I do have sympathy with the fact that they are saying, we shouldn't have bailed out the banks. I would have let all those banks go bankrupt, as you've heard me say before, but beyond that, I don't have too much sympathy with them" he told the BBC's Webber.
"But beyond that I don't have too much sympathy with them. You know, we all want a free lunch. I would like somebody to pay my bills too. I would like somebody to take care of me the rest of my life too," Rogers added before launching into a rant:
"Listen it's outrageous that the government took the money and saved the banks. Absolutely, they are right about that. It's outrageous, totally outrageous that governments went and bailed out some banker so they could keep their Lamborghinis and their summerhouses".
Occupy Wall Street has made it hard to ignore that the proportion of wealth amassed by a small elite in the United States has increased dramatically over the last three decades. Consider the following comparison.
Between 1975 and 2006, average family income grew 32.3% in the U.S., whereas it only grew 27.1% in France. When you remove the top 1% of earners from the calculation, however, the increase drops nearly by half in the U.S. (to 17.9%), and by less than one point in France (to 26.4%).
This means, incidentally, that the income of the American 1% grew by 1447.9% over that period—80 times more than the rest of the population. Few Americans realize or approve that the top 20% of earners hold over 80% of the nation’s wealth, while the bottom 40% hold only 0.3% of it.
Where the future is
"My children speak perfect Mandarin like a native… their future is in Asia, just as my future is in Asia. Asia’s going to suffer… don’t get me wrong, when the largest two economies in the world, Europe and the US have problems, everybody’s going to suffer. Asia will suffer less than the developed world," Rogers told AFNN.
“If I were buying anything I’d be buying agricultural commodities,” he says.
“Going forward we’re going to have huge shortages of everything – including farmers – I think ag will be a great place for the next 10-20 years,” Rogers told CNBC yesterday.
“Yale did a study recently showing that investors made 300% more by putting money in commodities themselves rather than commodity stocks – that is unless you’re a great stock picker.”
About Jim Rogers
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, The Profit Motive with Jim Rogers, and a media commentator worldwide.
But ask Jim Rogers about his most important venture and he will answer without hesitation: fatherhood.
A Gift to My Children: A Father's Lessons for Life and Investing (RandomHouse, 85 pages, US$16) is Jim Rogers' love letter to his daughters, Happy and Baby Bee. Reminiscent of The Autobiography of Benjamin Franklin, which was also written by a father to his child, Rogers' book is full of no-nonsense, unsentimental fatherly advice.
Among Jim Rogers' best advice:
-- Conduct your own research and trust your own judgment.
-- Focus on what you yourself love.
-- Be persistent.
-- Broaden your horizons and see as much of the world as you can.
-- The most important thing you can learn is how to think and question everything you hear.
-- Study and learn from history.
-- Master more than one language - and make sure one of them is Mandarin.
-- Don't panic.
-- Take care of yourself and don't neglect the sunscreen.
-- Remember that boys need girls more than girls need boys.
Underscoring his convictions that future prosperity will come from China, Rogers' two young children speak Mandarin.