Jim Rogers became an investing legend when he co-founded Quantum Fund with George Soros in early seventies. During the next 10 years, the portfolio gained 4,200%, while the S&P went up by less than 47% and it prompted him to retire at the age of 37. His latest book A Gift to my Children: A Father?s Lessons for Life and Investing published by Wiley is a bestseller. His earlier books Hot Commodities (2004) and A Bull in China (2007) have also become reference books in the world of finance and investment. In a telephonic interview with FE?s Saikat Neogi, he shares his views on how India can become one of the most exciting economies in the world, why commodities are going to do better than stocks and the future of US government bonds. Excerpts:
Have the markets across all countries gone up too much and too fast? And do you think a major correction is in the offing?
The markets have really risen very fast. Normally, when you have such a reaction, the feeling is that a correction is just round the corner. That is how the markets work normally. It is a very powerful rally. However, it could be the beginning of a long term period of stronger stock prices. I don?t think the economy is strong enough to justify it, but then people rarely think that way. I would expect some kind of correction somewhere along the line. I don?t think the problems are over and I would not be buying shares right now.
How strong are the green shoots of recovery that we are hearing about?
Well, in some countries they are very strong and in some they are not. For example, China is doing extremely well and the US is not doing so well. In Europe, different countries are having different economic worries. Australia and Brazil are doing better.
How bullish are you on Asia? Will the continent play a major role in the global economic recovery?
I am more optimistic about Asia than the West. The big creditor relationships in the world are in Asian markets. People save a lot of money in Asia for their future and surely the continent will play a major role in the global economic recovery.
What kind of equities would you like to buy now?
The markets have gone up very fast, very strong and I am not buying any equities at the moment. In fact, I have not bought equities in the last couple of years except in China, which was in the fall of 2008. If the economy is going to recover, commodities are going to do better than stocks as governments worldwide are printing so much money.
How is the global commodity market shaping up and is it better to bet on real asset commodities now?
Stock markets have collapsed for about 20 months and commodity markets were down for about five months. Commodities collapsed in the panic because of bankruptcy of AIG and Lehman Brothers? two big players in commodities. Prices also went up because of massive shortages. Now, some of the best fundamentals are in the commodity markets and these are going to get better. We are going to see serious shortage in commodities as we have the lowest inventory of food in decades and mine reserves are depleting all over the world. So, more shortages are developing and that is where the fundaments are the best.
You have not been too bullish on gold in the past. But do you think gold is a good hedge against inflation now?
I expect to make more money in other commodities than in gold. However, I still own gold and have not sold any. If the price goes down, I will probably buy more. Yes, gold has traditionally been one way to hedge against inflation.
Since the stock market rally, the dollar has fallen considerably and commodities have risen. Do you expect the dollar to decline further and the commodities run up to continue in the months to come?
Commodities and dollar don?t necessarily have to go hand in hand. Some times it has, but not always. I am pessimistic about the fundamentals of the dollar in the long run. I will not sell my dollars right now because there are too many people who are pessimistic on the dollar. In the long term I am going to sell all my dollars.
The US government is printing a lot of money right now and inflation expectation is building up as is reflected by the rates of treasury inflation protected securities. Should investors short sell US government bonds at some point despite their current attractions?
The only bubble that I see in the world, which is developing right now, is the United States government long term government bond. I cannot imagine lending money to the US government for 30 years in US dollars at 4 or 5 or 6% interest. I am not selling bonds short yet, but will probably do some time in the next year or so.
You have said India is not a rational country. How do you see long term growth prospect in India and what kind of policy change would you like to see?
India is the single best country in the world to visit, but I do not want to invest here because the government is extremely bureaucratic and anti-entrepreneurs. If they ever open up the economy, the currency and the markets, it would be one of the most exciting economies in the world, but I cannot imagine it happening.