Guillermo Barba’s Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present this exclusive interview with commodities guru and Wall Street legend, Jim Rogers.
Many thanks for accepting this interview, Jim.
Guillermo Barba (GB) Jim, why did you become interested in finance? When and why did you decide to go to Wall Street?
Jim Rogers (Jim): When I was a university student, I didn't know anything. I was gonna go to law school, medicine school, business school… I didn't have a clue. But I happened to get a summer job on Wall Street. It was just a summer job, I didn't know anything about Wall Street. I didn't know there was a difference between a stock and a bond.
I knew something happened in 1929, something bad happened, that Wall Street was in New York. I knew nothing about it! But I liked the guy! The guy said 'come and work for us for the summer' and I liked him a lot and he had a summer job and I said 'okay'. I went down there and I fell in love. This was a place where they would pay me to know about the world and that was always my passion. I was always reading about the world; what's happening in Chile; what's going on in Korea, whatever. I was very interested in the world, and here was a place - and they would pay me! So, I didn't go to law school, I didn't go to medicine school, I didn't go to business school, I went to Wall Street.
(GB) You became famous in the ‘70s thanks to your Quantum Fund. It is said you got a 4200% gain. What did you invest in at that time?
Jim: Well, lots of things. We invested a lot in oil and energy, we invested a lot in defense. America spent nothing on defense after the end of the war and that was starting to change. We sold short, a lot of the stocks that were very, very high priced - we sold short the British Pound, bonds, at one point we sold short gold, at the very top.
We sold gold short at $675 and three weeks later it was $875, so it was very, very painful, but fortunately, we stayed within the collapse. We invested in lots of things.
(GB) You predicted the start of a new major commodities cycle in 1999 if I am right. Has it already come to an end?
Jim: I did, sometimes I get things right! But there's another leg in commodities. I've noticed that energy prices don't go far, they don't continue to collapse, even if there's a lot of bad news. Normally, when there's bad news and things don't go down, it usually means it's making a bottom.
(GB) What commodities do you prefer?
Jim: Well, rice, sugar, agriculture. I own gold and silver, I'm not buying gold and silver, I hedged some of my gold and silver.
(GB) At what price would you buy gold and silver?
Jim: Gold - $900, silver - $11, $10. I don’t know if they are going to get there, but if they do, that's where I would be buying. I might even start before at $950 for gold.
(GB) So you think that agricultural commodities are a better option?
Jim: At this point, yes. That's where the better opportunities seem to be.
(GB) What’s the best way to invest in commodities?
Jim: Well, if you know about commodities, the best way is to buy commodities, if you know about them. For most people, if you know what you're doing the best way to invest is to buy futures. You get very good leverage and you can make a fortune, in a week! If you don't know what you're doing, you'll lose a fortune in a day! But if you know what you're doing, that's the best way, but most people don't, so they shouldn't.
Most people, if they're investing in anything, should be investing in indexes, that's been demonstrated many times in many studies that 75% of professionals don't even do as well as the index. So, if you invest in the index you're going to be better than most professionals. So, the best (thing) for most people is to invest in a commodities index. If you can't spell commodities, please don't invest in commodities, only invest in something you know something about. For most people, if you're going to invest in commodities, then the index is the best way.
(GB) For example, your famous Rogers International Commodity Index…
Jim: Yes it’s a much better one than any other commodity index.
(GB) How can the common person invest in your index?
Indexes are listed on the NYSE. My index is listed on the NYSE. For most people, it's very easy. Very easy! Most people can invest in the NYSE anywhere in the world.
(GB) Let’s talk about oil. Some analysts think that its future is very bleak…
Jim: When you say the future, if you're talking about 60 years from now, perhaps. If you're talking about 60 months from now, then no I would say probably not. The energy crisis seems to be making a bottom. The world is not going to stop using, energy, oil, natural gas any time soon and I would suspect you're going to see a very substantial rally that might go on for several months, or even a few years before it stops.
(GB) And what about gold, Jim? Do you think that gold will have a monetary role in the future?
Jim: Well, I own gold. I'm not buying gold at the moment, I've hedged some of my gold holdings because I suspect there's another opportunity to buy gold, and silver, later.
I don't see gold as being in the monetary system. Unless, if the world suddenly collapses next year, chances are people will grab for something and they might grab for gold. But other than that, I don't see gold coming back again.
(GB) You have said that probably the USD dollar will turn in to a bubble. What will happen when this story ends?
Jim: What will probably happen is that the dollar will turn in to a bubble. Gold, silver and other precious metals will continue under pressure. Now, if I get it right, I will sell my dollars at the right time and put the money into gold and silver. If I get it right! That's probably the way it going to work out.
(GB) The Chinese economy seems to be in big trouble currently. Are you still optimistic about China?
Jim: Well, I didn't know China was in big trouble. The Chinese stock market has been the best stock market in the world this year, that's strange for a country that's in trouble. It's the strongest stock market in the world, the best stock market in the world in the past year, far, far more than any other stock market. Yes, you're right - it had a big correction but markets have corrections all the time. So far whenever it collapses I buy.
China's gonna be the next great country in the world.
(GB) Has the nightmare for developing countries come to an end? Or, do you think it will continue?
Jim: Some of them, during the good times, borrowed money instead of making changes. So some of those countries are going to continue to have problems . . . (like) Indonesia . . . some of them that didn't use the good times to change and they just borrowed more money because it was easier to borrow money are going to have more problems. Some will probably be ok.
Vietnam might be okay. North Korea will be okay. Some of them will be okay. Some will continue to have more problems.
(GB) What about Mexico?
Jim: Oil will determine Mexico's future. The largest part of the government's budget is from oil. You've got a very young population and when you have a young population and you have economic problems people get very angry. I think the price of oil is gonna stop going down, so things will not get worse for Mexico and when prices of oil go up, Mexico can heave a sigh of relief. But I'm not terribly optimistic about Mexico at the moment, until the oil goes up. When the oil goes up I'll be more optimistic about Mexico.
(GB) Let’s talk about the Federal Reserve. What’s your opinion about the Zero Interest Rate Policy and the Quantitative Easing?
Jim: It's absurd! It's a disaster! It's gonna involve a lot of people. People who saved their money for retirement, it's gonna destroy many pension plans, insurance companies. This is destroying a lot of people who save and invest. It's gonna end very badly for all of us.
(GB) Do you see negative interest rates in the US in the upcoming future?
Jim: Maybe, maybe. But I doubt it. I don't think we're gonna see negative interest rates in the US. I doubt it. Maybe when things get really bad, then, next time, they might. But it's not gonna happen any time soon.
(GB) Do you think that it matters if the Fed announces that it will raise the interest rates in December?
Jim: I don't think it matters, the interest rates are going up but I don't think it matters when the Fed does it. The Fed just follows the market.
(GB) What would be your best advice for the young people who want to become investors?
Jim: Don't do it unless you really love it, because there are going to be problems in the financial market in the next 10 or 20 years. When I went into finance, it was a terrible backwater, a terrible place to be but I happened to love it and so I did okay. Now, it's been great for the last 20 years but it's going to be bad for the next 10 or 20 years, so don't do it unless you love it. But, if you really, really, really love it, do it and you'll survive and you'll probably make a lot of money.
If you love it, go to work for a stockbroker or an investment company or a mutual fund or something, but otherwise, stay away because nothing is going to be good for the next twenty years.
(GB) Why do you defend free markets? You know, politicians usually say that they create inequality and poverty…
Jim: Which markets don't have inequality? In communism? We see what happened there, there was a disaster. Socialism? Socialism was an even worse disaster. Free markets have problems but everybody else has worse problems. It's the least bad system. Look at what's happened in China - since they turned to free markets, they've had the most astonishing growth at taking people out of poverty in world history. Hundreds of millions of people became successful because of free markets. You know what they tried before, it was a nightmare! The Chinese are certainly not going back, The Russians are certainly not going back.
(GB) Is that the reason why you recommend people to learn Mandarin?
Jim: Yes. China's going to be the next great country in the world.
(GB) Thank you Jim. It’s been an honor to meet you.