Chris Waltzek: Todayís special guest, Jim Rogers from his home in Singapore. Well, with the panic gripping the global financial system and paper assets going up in flames, my featured guest says commodities prices never fall to zero.
Jim Rogers taught finance at Columbia University, is the author of several bestsellers and runs the Rogers International Commodities Index, RICI. Welcome back sir.
Jim Rogers: Hello. Iím glad to be here.
Chris Waltzek: Letís begin our discussion with gold and silver. You know, investors were hoping for QE3 but the FOMC, well, they disappointed the markets last week, unleashing instead Operation Twist. How do you rate Ben Bernankeís latest plan?
Jim Rogers: Itís just a royal disaster. I mean you canít say thereís no QE3. There is. As soon as he announced he was going to keep interest rates low, how do you think heís going to do that?
He has to go into the market. He canít just say the words. The M2 numbers started the week he said it and the M2 numbers just jumped up. As soon as he said theyíre going to keep interest rates low. Youíve got to go into the market. You canít just say the words.
Chris Waltzek: Silver futures touched 26.16 on Monday morning, posting nearly a 50% slide from the market peak. Do you agree that the Fed and the CME margin increases led to margin calls and the liquidation?
Jim Rogers: Thatís some of it. The grace margin climbed just a few times for several metals that you know. Thatís certainly part of it. But there are many reasons.
Silver and gold - you know, gold has gone up ten years in a row. Thatís extremely unusual in any financial asset. Silver skyrocketed here in the last several months. So yeah, itís a combination of things - financial panic, market re-quals, etcetera. But I donít see this as any problem.
Itís good for markets. Back in the 1970s gold went up 600% and then gold went down 50%, scared everybodyís socks off. A lot of people gave up on gold. And then as soon as they gave up and sold, gold turned around and went up 850%. Thatís not a typo - 850%.
So this is nothing unusual. Oil has gone down almost 50% three times since the bull market started in 1999. I donít pay too much attention to these things. I try to be smart enough to buy when it collapses some.
Chris Waltzek: A repeat of your scenario would put gold north of $10,000 an ounce, 850%.
Jim Rogers: Yeah. It might go down 50%. But if it does, Iím smart enough to buy more, sure. But gold has already gone up a fair amount. As you know, as I said, itís ten years in a row.
Gold back in the Ď70s has not gone up ten years in a row. It has only gone up two years, three years, four years max. So things are all a little bit different now than what they were then. Can gold trade at over 10,000? Of course it can and it might. But not this year.
Chris Waltzek: You recently told the Economic Times that if silver continues to go down that you would buy more. Do not sell your silver and do not sell your gold. Both will go much higher over the next few years. Do you now think that the metals could be approaching a buying opportunity?
Jim Rogers: Weíre certainly getting closer. I didnít reach out and buy partly because Iím doing other things. But weíre certainly getting closer to a low, a good time to buy. We may have already seen it for all I know. Gold is only down 20% or so, not nearly as much as silver. I havenít bought either this week or so mainly because Iíve been doing other things. Iím still a buyer at the right time.
Chris Waltzek: Once the market finds support and rebounds, what price would make you feel comfortable enough to part with your gold and silver?
Jim Rogers: I have no idea. Gold will move into bubble eventually. All long-term bull markets in every asset wind up in a bubble at the end. So I donít know. I guess itíll depend on the bubble.
I mean if the US dollar goes confetti there is no top. It depends on how the bubble develops. I fully expect a bubble. Not for a few years but all bubbles look the same. And I hope Iíll be smart enough to recognize the bubble when it comes.
Chris Waltzek: In a recent Reuterís interview you noted that the US is entering another loss decade and a new recession is on the horizon. Now that your prediction has come to pass are you expecting a 2008/2009 style economic slow down or perhaps something even more disruptive this time?
Jim Rogers: Well, weíll certainly have something more disruptive this time. You know, the American economy has had an economic slow down every four to six years since the beginning of time. So weíre overdue at the end of 2011/2012/2013.
I donít know when it will come but I know it will come. It always has. And when the next slow down comes Americans are in serious trouble. America shot all its bullets. We canít quadruple our debt again. You know, if you take in all the off balance sheet guarantees and assets, we have a huge debt problem facing us.
And if we try to do that again the market is not going to let us. Likewise, we cannot press staggering amounts of money again. The market is not going to let us. So the next time around is going to be worse than the last time.
Chris Waltzek: Letís discuss the sovereign debt issue. Recently the US lost its AAA credit rating and now much of the Euro Zone is approaching a sovereign debt meltdown. Do you expect the situation to deteriorate and if so, how could that affect the market?
Jim Rogers: The debt situation worldwide has gone up a huge amount. And thatís driving us all down. Many studies have shown you donít have to do a study. Just look at your own life.
If you have too much debt youíre always - most of your efforts are spent paying off previous obligations. So thatís what the worldís saddled with right now. Weíre all - not all but the West anyway - is saddled with these huge obligations built up in the past. And thatís going to continue to cause us a lot of problems. Thereís not nearly as much growth coming out of the West, the developed world - call it what you will - as there was in the past.
And weíre going to continue to have slow growth and problems in the West and in the undeveloped world too, by the way because you know, if Europe and America, which are the two largest economies in the world, have problems naturally itís going to affect everybody else as well.
Chris Waltzek: You also point out that Scandinavia experienced a similar crisis two decades earlier and in response officials consolidated that debt into one big government bank there, wrote off the loans and Scandinavia recovered.
But wasnít the recovery Jim, an indirect beneficiary of a strong global economy? And would their model really be practical today in a world where markets are so highly correlated with the US?
Jim Rogers: It was painful. It was extremely painful for Scandinavia back then. But they did it and the alternative was what the Japanese did at the same time.
The Japanese propped up everybody with zombie companies and zombie banks. The Japanese have two lost decades now. The Japanese stock market is 80% where it was 21 years ago. Sure. You can do it or try to do it the Japanese way. I prefer the Scandinavian way. You make some mistakes, take your losses and start over.
By the way, the Koreans did it the Scandinavian way, the Russians, the Mexicans - various people did it the Scandinavian way, after a horrible period of pain came out okay and thrived. You can do it the Japanese way or the Scandinavian way. I prefer the Scandinavian way. Letís face reality. Saying we havenít made mistakes in the past 50 years defies comprehension.
Chris Waltzek: You know, every time we talk I ask anything else that you see on your radar screen and almost every time youíve given us something that came to pass within six to 12 months.
You predicted the Euro Zone currency crisis and here we are knee deep in it a year, year and a half, almost two years later. Anything else that you see that maybe the rest of the mainline media might be missing?
Jim Rogers: Well, Chris, I donít pay attention to the mainline media. I donít know what theyíre doing. I donít have a TV so I donít watch TV. Anyway, I donít truly pay too much attention to them. There are things going on in the world. Itís going to be very exciting.
Iím - I think we talked about it - Iím long commodities and currencies. Iím short emerging markets and American technology and European stocks. Other - thereís a big bowl forming in bonds. Iím not acting yet. There are some countries wildly - Iíll tell you the most exciting thing I know right now is Myanmar and North Korea.
They both are opening up now just like China did in 1978. Iíll tell you, if I could figure out a way Chris, to get to Myanmar or North Korea, I wouldnít ever have to make an investment again as long as I live because theyíre going to be so unbelievably exciting. The problem is American government in its wisdom has made it illegal for Americans to invest in positive changes.
So itís complicated being an American citizen. We live in the land of the free. Unfortunately, if we werenít so free then maybe we wouldnít have all these controls and regulations and prohibitions on us. Other countries donít have them like we do. Donít sell your gold.
Chris Waltzek: Thank you sir and have a great day.
Jim Rogers: Thank you. Bye-bye.