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Palisade Radio – Jim Rogers: Gold Correction to Continue Into 2015


This week, we are joined by none other than Mr. Jim Rogers. Jim was the co-founder of the legendary Quantum Fund, which he ran together with George Soros, some 35 years ago. Jim has been very successful as an investor, and has many bestselling books to his name. Joining us from Singapore, where he lives with his wife and family, we we’re able to get his opinion on many of the big questions facing investors today.

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Palisade Radio Host, Collin KettellThis is Collin Kettell with Palisade Radio, and on the line with us today is a new guest. Very pleased to have him, Jim Rogers. Jim is the co-founder of the Quantum Fund, Guinness Book Record holder for travelling some 245,000 kilometers around the world in a convertible Mercedez Benz, and best-selling author of four books, three of which I’ve had the pleasure of reading. Jim, thanks for joining us on the show.

Jim Rogers: I’m delighted to be here, Collin.

CK: We’re actually recording this in the middle of the Super Bowl, so I hope I’m not disturbing you too much.

JR: Super Bowl is not showing here in Singapore. Well, I’m sure it is somewhere, but not where I am.

CK: Not on your TV. Well, back in mid-2013 you were interviewed by Kitco News at Freedom Fest in Las Vegas where you called for a continued correction in the price of gold. And as a precious metals investor, I remember hoping that your call would be dead wrong. But here we are nearly two years later, gold is just starting to perk up. Any new thoughts in the price action of gold today?

JR: I expect the correction to continue. I expect another opportunity to buy gold in the next year or two. And if so, I hope I’m smart enough to buy it. Now, that opportunity may— I mean if America goes to war with Iran or something, I’ll be begging to buy gold at $1600. But I expect another opportunity to buy gold in a decline sometime in the next couple of years.

CK:  And do you share the same feelings for the gold stocks, many of which are off closer to 80 and 90%. Are you an investor in any of the mining companies right now?

JR: Well, I actually bought a mining ETF recently, gold mining ETF recently just in case, and just calling it very valid that those stocks had gone down a whole lot more than gold has. And sometimes you can make money in those stocks, or you should be buying in anyway in situations like that, because they can go up even if gold goes sideways. They can go up even if gold goes down just because they got beaten up so much. But I am not a big buyer; I just put a small, small, small toe in the water.

CK: Do you see any significance in the fact that the price of gold, over the past couple of months, has been holding well against the US dollar, which, of course, has been surging against most currencies worldwide right now?

JR: Not really. There’d been many times in history, you know, unfortunately, people in the market just look at the last year or two. And this has happened at a time that gold has gone separate ways from US dollars. It happens at times where it goes the same way. So I don’t pay too much attention to that particular movement at the moment. I’m happy to see both, but I’m looking to buy certainly US dollars, and gold again later.

CK: Okay, let’s shift gears a bit. A couple weeks ago— of course, the Swiss National Bank made a huge move in the markets to depeg from the Euro. Many analysts said that they were actually forced to do that by the printing that’s about to occur. What’s your take on the Swiss’ move, and how do you think that that’s going to further affect the markets?

JR: Well, I wrote extensively about it in my latest book called Street Smarts. I explained why their policy would fail and why it was so foolish. It has all come true, and then they couldn’t just sit there and just continue to buy Euros. They already had a balance sheet which is gigantic compared to the GDP, and then they just get by. I mean I explained this foolish and it was foolish, and they had to break the path. They should never have had it in the first place. Those guys should be fired.

CK: Okay. And stepping back a bit for a more macro view, of course, everywhere around the globe right now, you have Abenomics in Japan; the monetary printing that’s just been announced in Europe; the United States has stepped back for now, but we don’t know what their next move is. What do you see occurring in terms of the currencies worldwide over the next, say, year or two years?

JR: Well, I own US dollars. My main holding’s in US dollars and in Hong Kong dollars, which is tied to the US dollars and renminbi. Those currencies have all done very well here in the last year or so. I own US dollars because there’s going to be more turmoil in the financial markets – currency and otherwise – in the next couple of years. And when there’s turmoil, many people flee to the US dollars. They don’t know what else to do. They think it’s is a safe haven; this is not a safe haven. The US is the largest debtor nation in the history of the world, and the debts are going higher and higher. But since many people flee to the dollar, I own US dollars. I suspect this going to go higher as the turmoil develops. It might even turn into a bubble eventually. If that happens, I’m obviously going to have to sell my US dollars. I have no idea what I would do with my dollars at that point. Maybe renminbi, maybe gold, but who knows?

CK: And Jim, you live in Singapore and you spent much of your life travelling through Asia, and particularly China. You saw opportunity in China decades before the mainstream cut on, and you made what seemed to be outlandish claims that China’s economy would eclipse that of the United States. Recently, the media has been pointing to a potential slowdown in the Chinese economy. Some 70 million apartment buildings are potentially unoccupied, leaving the speculation of a real estate bubble. And the latest data has pointed to some lower industrial production and fixed asset investment. But the average western investor struggles to sensibly analyze these figures. As an expert, what’s your read on China today?

JR: Empty as they we’re building in China, but whoever has gone around and counted that numbers seems like you read a lot of absurd stuff about China about how it’s over built. I’ve been reading that for several years now. In fact, I’ve been reading it for more than several years. I’ve been reading it for a decade or two. There’s one guy who wrote a book fifteen years ago saying that China was about to collapse, etc. Another guy who said China was going to collapse in 2009 and be worse than Dubai. Well, it’s six years later.

There are slowdowns in China, in various parts of the Chinese economy. There have been excesses. I’m more worried about the debt. I am worried about property in China because it did turn into a bubble especially in the coastal cities. There are problems with debt. I mean there are lots of what we would call marginal loans, subprime loans in China now. It’s amazing how many there are. There are some entrepreneurs. I know— there two or three of them who actually have over a hundred shops all around china selling bad loans, not bad loan, selling low quality loans. So I know that’s going to explode. China would certainly have problems. But everybody has problems as they rise whether as an individual or a family, or a company or a country.

You know in the 19th century America had 15 “depressions with a D”, and a horrible Civil War, had virtually no human rights, had massacres in the streets, very little rule of law. You could buy and sell— you can still buy and sell congressmen in America, but in the 19th century they were cheap.

But, you know, America did a fabulous job, and became the most successful country in the 20th century. So don’t think China’s not going to have problems; they’ve probably plenty of problems. I don’t know what or when or why, but I know they will because that’s the way the world works. It’s not the end of the world. Part of their problem at the moment is because everybody else has problems. You know, however, when you tell it to the rest of the world, if the rest of the world has problems, that’s going to affect you, too.

CK: You know Russia is another super power that I’ve heard you continually voice bullishness on over the past few years. Marin Katusa, who works with Doug Casey at Casey Research, has been a guest on our program, and he made a case for continued growth in Russia’s super power status, pointing to what he calls the “Putinization” of resources. Ultimately, what excites you the most about Russia other than the relative cheapness of the Russian stock market today?

JR: I haven’t been bullish on Russia for the past few years, let me correct you again. I first went to Russia in1966 and came away pessimistic, and was pessimistic for the next 46 years. You haven’t heard me being bullish on Russia at all until recently. In the last couple of years I have changed— Russia has changed, therefore I changed my view.

Russia is a country with vast natural resources. It’s got large financial resources, reserves. It’s not a debter nation like US and many other countries in the world right now. It does have a convertible currency in contrast to many other “developing nations” going forward, and Mr. Putin is trying to do things to encourage the financial market in Russia. He’s been hit with a big drop in the oil price. He’s been hit with, you know, probably the coup that the US engineered in Ukraine, which caught him by surprise. Caught everybody by surprise, as a matter of fact. But that is all changing.

I guess we’re somewhat, you know, in a bottom in Russia. I bought a few Russian shares, again, last week, and I’m looking to buy more. It’s certainly very cheap. That’s the most hated stock market in the world right now, and that’s usually a sign you should be buying.

CK: Jim, I want to ask you a few questions about your younger years. In 1973, you co-founded the Quantum Fund with George Soros, and George Soros has gone on to amass huge fortunes, influence in politics, media, and the economy. You probably know George Soros better than most. Can you share what it was like working together with him, and what you remember most about those years running the Quantum Fund?

JR: Well, that was over 35 years ago. Collin, I barely remember what I had for breakfast this morning much less what happened 35 years ago. We worked. We both were very intense and we loved what we’re doing, and, you know, spent a lot of time and energy at it, and had a successful career.

CK: In terms of talking to a young person today, I’ve heard you say, advice for young people is, “Don’t listen to me; you’ll go broke.” But, in more seriousness, what would you tell an individual today who’s just thinking about going to college or coming out of college in order to best successful, and figure out what they want to do in life?

JR: I was quite serious when I said, “Don’t listen to me or anybody else.” I want to talk just about me to make people go broke. If you take your advice from other people you’re probably not going to succeed whether as an investor, a writer, or anything else. What you need to do is figure out your own passion, your own knowledge. If you’re an investor figure out what you know a lot about and find investment there. You’re already ahead of most of us because you’re very passionate about the subject. You’ve probably read about it or watch it on TV, the internet, whatever. That’s the way you’re going to find the most successful investment rather than listening to me or anybody else, and likewise they’re not.

I can tell you that I think that agriculture got a fantastic future for the next 30 years. But if you don’t like being out in the sun or you can’t plant a seed and make it grow, the last thing you should do is go into agriculture. Maybe you could do something else like open a restaurant in the agricultural area or fashion shops or something like, or get a Lamborghini dealership, but you should only do what you love.

When you go to university – if you go to university – and not everybody should go to university. But if you do, study what you love. Don’t listen to me or your teachers or your friends or anybody else. Realize your passion. That’s what is going to make you happy, and it’s the only way you’re going to be successful. Don’t think doing whatever people tell you— not going to make you successful, unless you’re very, very much in love and passionate about that field.

CK: Thank you. That is some very good advice you have. And since you brought up agriculture I want to ask a final question about agriculture. It’s a sector you are very bullish on. How do you, as an investor, best look towards educating yourself on how to profit in the agriculture sector as things begin to turn around. What are you looking at specifically?

JR: You look into the same things in agriculture you would look in any field. You look at inventories. You look at supply. You look at demand. You look at what’s happening technologically, if anything. You look at the cost of production. You look at historic prices. Are they near historic highs or historic lows? Sugar, for instance, is down 75%, or more than 75% from its all time high. I mean that doesn’t mean it’s going to go up. That doesn’t mean it’s going to go down another 50%, but it does mean it’s not— like it’s not in a bubble. That’s for sure.

CK: That is a great piece of advice. I could keep you on the show for hours, but we’re running out of time. Jim, thanks for coming on the show, palisaderadio.com. Hope to get you back here soon.

JR: My delight, Collin. Let’s do this again some time.



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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