With Jim Rogers, the more things change, the more they stay the same.
Mr. Rogers, the legendary investor, commodities guru and co-founder (with George Soros) of the Quantum Fund, has changed his tune from six months ago, when he was short-selling the market and complaining that slow-moving government policy makers "don't know what they're doing." He recently announced that he unwound all those shorts (bearish bets that profit when prices decline) in the wake of massive global injections of government stimulus money and a bottoming-and-rebound in the world's financial markets.
In fact, like a lot of investors, Mr. Rogers is even feeling confident enough to take on some new long positions. In what, you ask? Commodities. Even after a year of tumultuous and seemingly market-redefining ups and downs, the original commodity bull is still riding the horse he came in on.
We reached Mr. Rogers by telephone at his home base in Singapore and tossed a few pointed questions his way, to find out what one of the market's most respected thinkers is thinking these days.
Last February, you were shorting the market - U.S. blue chips in particular. Recently, you announced that you no longer hold those short positions. What changed for you?
I was not short very long - I unwound them two or three weeks later. I have no shorts for one of the few times in my life. Why? The market collapsed. You're supposed to buy low and sell high - I hope your mother taught you that.
I basically covered the shorts because governments around the world are printing so much money … I decided, rightly or wrongly, that I didn't want to stand in the way. I decided that I would go long commodities, more commodities, because the only thing I know where the fundamentals are improving are commodities. The fundamentals for General Motors aren't improving, Citibank's fundamentals aren't improving, but the fundamentals for agriculture continue to improve, the inventories are the lowest in decades. Maybe farmers cannot get loans just for fertilizer. Nobody can get loans to open a mine. So the supply of everything continues to decline.
So you see commodities, even after a 10-year bull run, as still offering the best investment opportunities? Isn't that dependent on a global economic recovery?
If the world economy is going to get better, commodities will lead the way, because of the shortages. I cannot imagine a better place to be. When you come off periods like this, you want to be in the things where the fundamentals are getting better - those are the ones that always lead the next bull market.
If the economy is not going to improve, commodities are still the best place to be … because governments are printing huge amounts of money all over the world.
Throughout history, when people have printed lots of money, it has always led to higher prices. Throughout history, when governments printed, the money has to go somewhere. Historically, it has always gone into real assets, as people try to protect themselves. … It's not going to go into people buying new cars, it's going to go into wheat and silver and oil first. It may go into new cars eventually, but it's going to go into real stuff first - at least it always has. I'd rather own commodities than just about anything I can think of in a period when the whole world is debasing paper money.
So you see another long-term bull market for commodities once the global economic dust settles? Or would this be a continuation of the bull market that began a decade ago - last year's price plunge was just a dramatic pause?
Did the stock-market bull market end in 1987, when stocks around the world fell 40 to 80 per cent? They had tripled since 1982; 1987 was a period of artificial forced liquidation.
AIG went bankrupt last year, a major commodity player. Lehman went bankrupt - major commodity player. So you had a lot of forced liquidation. In 1987, there was this forced liquidation, and as you know, stocks went up 10-times afterward. If I'm right, the [commodity]bull market still has a long way to go; the fundamentals have only gotten better in the last year. The best place to have your money is in commodities.
Most of them are going to make new all-time highs. … At the end of every bull market, there is wild hysteria. … I'm sure that by 2018 or 2020, when everybody in the world owns commodities and nobody owns anything else, they're going to be selling at just insane prices. I'm sure I will have sold out well in advance. The fundamentals will always change before the market ends.
Which commodities do you like best right now?
On a historic basis, agriculture prices are much more depressed than most things. Silver is probably better than gold on a price basis. Silver's 75 per cent below its all-time high, gold is 10 per cent below its all-time high. Sugar is 70 per cent below its all-time high. That's probably where you're going to find better opportunities, if you do some homework.
And the Canadian market - I take it you also see Canada as a good place to be, given your commodity outlook?
Canada is probably one of the better-placed countries in the world right now, and the Canadian dollar is probably one of the soundest currencies in the world right now, on a fundamental basis. I have only good things to say about investing in Canada.
I've owned the Canadian dollar for a while - since about 60-odd cents [U.S.] And I periodically buy more. Canada's done a much better job than the U.S. - you've had a balance-of-trade surplus for the most of the last decade or so, you've had budget surpluses for most of the past decade or so. You've got a massive natural-resource-based economy at a time when natural resources are going to be the place to be.
I'd much rather own the Canadian dollar than the U.S. dollar.
What about China? You've been a long-time investor in China, long before it was trendy. I'm sure you still like the long-term growth story, but in the nearer term, how do you view Chinese investments?
If you want to invest in China, the best way to play it now is to buy commodities - because China has to buy commodities. Or buy the currency. The stock market? I own shares, I haven't bought any since October or November of 2008.
The economy is growing because they're spending to make it grow. They built up a lot of reserves for a rainy day, and now they're spending them, since it is raining. But is it real? We won't know for several years. The rest of the world may have problems that would affect some parts of the Chinese economy.
So I'm not buying Chinese stocks right now, but I'm holding onto the shares I have. I expect my children to own my Chinese shares one day.