Jim Rogers was the guest host of Asian Squawk Box on Monday Morning (Sunday night US time), writes Roger Nusbaum. He let loose with a cornucopia of his thoughts about current investing events and how he his investing around these events.
He is convinced that the current debasing of the US dollar will result in the dollar being essentially worthless in his daughter's lifetime. He said the US has $8 trillion in debt and that we are on pace to add another $1 trillion in debt every 20 months. He said to "do the math, that is serious money."
He also thinks the euro will not be around 15 years from now but he does own some euros because he thinks they are better than US dollars.
He feels that the commodity bull market has another ten or 15 years left because that's how markets work. Mega bull (my word not his) cycles last for 15-20 years at the expense of other asset classes. Meaning that while commodities do well stocks will trade around but not keep gains, as was the case from 1968-1982 for equities and 1982-2000 (roughly) for commodities.
He says that commodity based currencies will do better through this commodity bull market which seems obvious but is worth noting. I believe that by extension a strong commodity currencies creates a nice headwind for equities of those countries. New readers can check the archives to see that I have been writing about having exposure to commodity based economies from the very beginning of this blog.
Jim feels that the Singapore dollar is the soundest currency in the world based on government policy. He also has exposure to the Swiss franc Canadian dollar, the Aussie, the NZ dollar and the yuan. He does not own the South African rand because he is suspicious of the folks running that country but he expects the rand to be an outperformer before too long.
Interesting to me was that the Norwegian Krone did not come up in the conversation because he says he owns oil and oil stocks. Speaking of oil he said that if the US blocks CEO/UCL deal there would be a disastrous trade war that would hurt everyone badly. He believes oil is going higher which will also benefit coal.
He said the yuan will be convertible at some point in the next few years and while he does not know when it will happen he will buy more yuan at that time but would not be surprised if the initial reaction was for the yuan to drop.
He further expects US equity markets to have a very bad 2006 and though he is net long now he expects to be net short US equities in advance of 2006.
In Jim's last segment he said he has a lot of exposure to Australia but he did not quantify a lot. He does have some concerns about their government spending however.
So is he right about all of this? I don't know but there is visibility for all of the scenarios he lays out. I tend to discount the probability of very extreme outcomes, but I could be wrong. Long time readers will notice that I have covered some of the same things Mr. Rogers is concerned about.
What made the show so useful was that Jim was on for the entire three hour show being interviewed two times every 30 minutes for six or seven minutes at a time. This gave time to delve into the way he thinks about everything. This was far better than anything he does on US television. This is why I devote time to watching CNBC World and why I am thankful for all the times that CNBC Asia books me on as a guest.
My take about the US dollar and economy is not that it becomes worthless but that it might lose its role as world reserve currency causing less demand for US denominated assets resulting in higher interest rates and slower domestic growth rates. This may make the average annual 10% stock market return come down to 5%-6%. If any of this happens it will be to the commodity based economies benefit which means it will become more important for US investors to have exposure to places like Australia, Canada and some resource rich emerging markets too.
Being in touch with long term themes is very important to the way I manage money.