Jim Rogers' Picks and Pans - Barron's Interview

Barron's interviews investing guru Jim Rogers, who's gung-ho on China:

China is going to be the next great country. The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China.

He recently moved his family to Singapore so that his young daughter would learn the language.

Rogers doesn't tout any U.S.-traded Chinese firms, but says the best ways to play a China boom are:

1. The currency (renminbi), which will go up against the dollar "for the next several decades." (Ed: Market Vectors - Chinese Renminbi/USD ETN (CNY).)
2. Commodities, specifically nickel (Ed: iPath DJ-AIG Nickel Total Return Sub-Index (JJN)) and water.

Domestically, Rogers likes Boeing (BA), noting you can't get a new plane for the next 5-7 years (or more if Boeing extends its 787 Dreamliner deadline again).

He's short Citigroup (C) and Fannie Mae (FNM), along with the Amex Securities Broker/Dealer Index (Ed: iShares Dow Jones U.S. Broker-Dealers Index Fund (IAI)). He's also short U.S. homebuilders including Lennar (LEN).

He fails to understand the bearish case on commodities:

Nobody has brought on any new supply of anything in the past 25 or 30 years. The last gigantic oil field was discovered in the 1960s. The number of acres devoted to wheat farming has been declining for more than 30 years. Food inventories are the lowest they've been in 60 years... in 2018, or whenever this bubble finally starts to peak, if I'm lucky you will call me up and I'll say it's time to sell commodities.

But Rogers has exited most of his emerging market investments, but says he'd buy back in if and when there's a big correction.

Comments

[deefree]

there are two china closed end funds trading a significant discount to net asset value. CAF which is pure China and TDF which is the Templeton Dragon Fund.

[Y.I.]

It's so interesting: before the China ETF came out, those funds used to trade at a huge premium to NAV.

How big is the discount now?

[paultaut]

Great article James.

Purely chinese:ABAT nasdaq,CNOA.OB,CAGC.OB

Batteries, rice, fertilizer. OWN all for the long haul

[Seasoned veteran]

It is all very fine for Jim to comment on china. BUT!. The bigger picture is all about the potential of keynsian economics. That is FIRE (Financial, Insurance and Real Estate). As these pillars of worldwide commerce and pure economic's continue to be rocked or are potentially crumbling. The simple question on China is their economic plaform. Nobody knows due to China is a closed economy. Never forget China's numerous economis blunders. An example is their vast holding of US treasuries.

Lastly, until we have more transparity of China's economy you are investing in a wild west closed economy senario. Is China really Silverado revisted?

[bearfund]

China's great, but there are few good ways to play it; the regulatory opacity sucks and ETNs expose you to the exact risks you are trying to avoid if you believe China is replacing the US as the great nation of the 21st century. CNY? No thanks. It's high-yield paper issued by MS. That pretty much counteracts the major upside potential. I don't understand Jim's bullishness on it; he's willing to make unsecured loans to the same companies he's shorting.

Indirect exposure is better unless you have big-time resources. If you want to bet on the RMB, just go short Treasuries. A rising exchange rate means the PBOC isn't printing as much to buy dollars and American debt. And with the dollars they do have, they're looking for better yields. This is much safer than any ETN and takes advantage of other macro trends, not just China. Pair the trade with long positions in commodity ETFs, not ETNs, on any corrections.

[Justin Rietz]

You can also buy RMB directly (up to $50,000 I believe) by opening an account at Everbank.com. (I am not associated with Everbank).

[DSX Lover]

Who's going to keep paying 100% increases year over year in commodities while being able to afford them? commodities are so overvalued, and with 8.5% Chinese inflation is just a matter of time before they begin plunging. It seems so fair to say that there's is economic growth in Chindia with over 2.5 Billion in people, but the sad truth is that over half of them are poor, and no one can sustain a 100% increase in commodities, Specially because the income of these poor people did not doubled from last year. Counting the days, wheat, oil, and corn go down like falling knives. As for shorting C, I'm not so sure, over 50% of the Business is International, if shares don't recover they are going to be buying back their own stock like crazy within the next 6 months.

[Howard H Sun]

I know Jim Rogers has been long the Chinese market for several years now. In fact, he's been an advocate of the commodity and Chinese bull market since the very beginning of the run, when few believed the market could sustain for so long.

For those naysayers, it's time to admit the truth - the US is becoming less of a superpower every minute. Don't be muddled by all the mass-media propaganda. Even when all the economic indicators point toward a recession, we can't POSSIBLY be in a recession. Right?

[Georealist]

I know Jim Rogers is an icon...and people..some anyway..may think this is a great article (its not..it's a coattails coast off Rogers timeworn themes...)
but its really a rehash of a rehash.
Rogers..and he HAS been successful..rides around on a motorcycle or travels somewhere exotic every few years and make some observations..usually very keen. But observations are like frozen foods...they have a shelf life..and Rogers shelf life has expired months ago.
The China story is VERY long in the tooth..you'd actually be better served looking to Japan or even Singapore in the East. The BEST commodity plays are oils/gas and their domestic (US MLPs) and near domestic (Canadian trusts..dirt cheap and VERY safe)..As for water..its tha infrastructure and equipment plays that are far better...but we didn't get any of these from the "pretend" article..did we???

[richjoy]

Jim Rogers is spot-on with regard to the growing influence of China (unfortuntely, some of us let our nationalism interfere with our pragmatism). This shift is moving slowly as China makes reforms in both it's economic and political institutions. It should be expected that China's economy will have massive peaks and valleys as reforms are implemented. I've seen a number of Jim Rogers interviews -- it would be helpful if he would make it clear that investments in China have huge short-term risks to go along with the equally huge long-term potential rewards.

[xing-hu]

When you travel in China you become suspicious that it is not so much a country as as a group of tribes which do not know each other very well. The political insecurity of inlands v. coast should worry all investors, even Rogers. China is barely a nation state with many years to go before it is a power in the 20th century definition of that word. They are missing basic financial, poliical and technical systems, and they are not making consistent progress. We can wait to buy.

[laynez]

It's scary to contemplate that China could actually become the dominant world power. Article after article and book after book that I've read by insiders and experts consistently ring alarm bells, based on factual documentation, as to the pervasive government and business corruption, the absolutely god-awful environmental degradation (which is getting worse), the police state control and authoritarianism (fascism?), not to mention the opaque (is it crony capitalism or just corrupt communism?) economic system. The most basic service any government can provide to people is to ensure the safety of drinking water, and in China water from any faucet in any city or town will kill you! (even bottled water is suspect owning to the overwhelming degree of counterfeiting). The police here are all on the take, they're some of the worst gangsters, and ultra-nationalism is shoved down everyone's throat from all directions. I live here so I know somewhat of what I say. I've seen Rogers interviewed stating that China "is the best governed country in the world" (I'm glad he's an economist and not a politician)...By the way, isn't this something like what Lindbergh said at one time about Hitler's Nazi Germany?

[fxtrader07]

@bearfund: i agree, but rogers didn't recommend cny and Etns at all. in the article is clearly stated that these were remarks inserted by the editor suggesting some ways to play roger's recommendations.
and i agree, it's tough to play china from a distance without incurring too much risk. therefore, for all the chances that are there, i would not put more than 10-15% of my funds into china. it will likely be a safer way to play european and american companioes that stand to gain from the growth in china rather than owning some fishy domestic chinese companies where you can get screwed any time.

[karchad]

I remember this guy on TV predicting massive inflation for 20 years. I guess if you predict anything long enough and wait, it will come about. He has very little credibility in my opinion.

[hugoh]

It would be helpful for everyone to remember that Jim Rogers does not claim to be a trader, a person involved in shorter-term market strategies. He looks at things with a years-long viewpoint.

[anonynous]

Jim Rogers moved to Shanghai, not Singapore.

[SA Editor Eli Hoffmann]

Anonymous,

Not according to Barron's.

[huangjin]

He moved to Singapore because China is too polluted.

[john haskell]

he woofed and woofed at great length about "I'm going to move to China, just you watch, I'm going to move to China," then moved to Singapore, "so my daughter could learn the language" in a city where they have to have a "Speak Mandarin Campaign" to get people to speak Mandarin instead of Hokkienese and English is one of the official languages. Oh, and did I mention Russia is going to break up into a congerie of warring tribes? Whatever.

[Richard Schweitzer]

One thing I would like to see a comment on from the "dynamo" of Demopolis, AL., is the basis for the valuation (what supports or is "behind") of the RMB. Right now it appears to be the productive (principally labor rather than technology) resources, which requires other physical units (commodities) for the realization of its functions.

What generates the form of "inflation" being experienced in the economic perimeter?

Should we go back and look at the works of Wesley Clair Mitchell?

[chartsfirst]

Having been in the investment research business for 40 years + I can remember that, ever since his days with George Soros, Rogers has been net bullish on commodities. He understands that inflation is not what you see in prices of goods...that comes after the real inflation which is the government's freedom and penchant to water the currency. Stick with Rogers. He is a brilliant long-term fundamental thinker. We do the long-term technical when.

[Roudy]

I have full confidence in Jim Rogers ever since I first heard him 15 years ago. He has always "walked his talk" to the best of my knowledge.RoudMan

[chancer]

Remember guys that Rogers has an agenda here.

He is tauting the investments that he makes to bring in more buyers so that his investments will go up more.

When he tells people to sell, he already sold. Then he will buy back in when everyone else is selling.

After all, his background is hedge funds.

[Jim C]

I'm sure even Jim Rogers would advise others to be careful about doing what he does. His books on the subject - as I think you point out - have glaringly omitted any discussion of the downside case for commodities. His view about commodity cycles is not a subject of complete agreement, even by commodities investors.

I am watching "nontraditional" commodities -- water (esp in Asia), rare earths, and possibly uranium.

[Ames Tiedeman]

CNY looks very interesting.

[VedantaTrader]

Jim Rogers made 4200% in the difficult market of the 1970s. To say he has no credibility is stupid,IMHO. He bought into commodities in 1999, when people laughed at him. He has been short the USD for a 6 years, and all the financials when they were nea their tops. He states that commodities are in a bull market. he didnt say they wouldnt down. Things do go down in bull markets. Look at the last bullmarket in commodities. There were big corrections, but they went on to make new highs. Gold went up by a multiple of 25 in the last bull market from 35$ to 800$. Gold is only up 3.5 times from its low at the start of this bull market.
This is not a commodity bubble, nowhere near it. It is a money printing bubble. The USD is being debased by the FED and will continue to be. The prices of commodities are relevant to what currency you use. Its a bubble in USD terms, but its not a bubble so much in other currencies, especially if one uses gold as a currency.
Rogers puts his money where his mouth is. He has been wrong in the past, but when he is right he is very right, and when he is wrong he takes his losses and moves on. George Soros said that he was a great source of ideas and was able to do the work of 6 analysts.

[User 30121]

To all of you who commented: Verrrrrry interesting comments, indeed. I will continue to be aggressive in gold/silver, but Jim's other ventures, nah, I'll pass, thank you very much.

[Moby Waller]

Personal opinion: agree with Rogers that Water will be a ever-increasing valuable commodity of the future - we have already seen droughts in the Southern USA which basically caused a couple of states to feud last year over water rights - our monthly utility water bill is still a pittance when compared to your heating and electric bills, so there is obviously much room for future increase -- there will be wars in the future over water - question is, how do you play the growing importance of drinkable water as an investment -- i would say a sector etf or fund, water utilities, infrastructure, new technologies (desalinization of sea water), etc, would be good plays in general

[authentic]

Inflation will impact every thing in the long run. Commodities are so volatile that only the experts should delve into this field. Water will be the next petroleum and world-wide birth control is over the horizon.

[chinesepetti]

You guys; almost retarded; China does not want your investment as there are too much money there already. China's export to the developed nations in 2007 only takes less than 10% of it's GDP; it is already the biggest phones market and 2rd biggest car market overtasking Japan. China can prosper without selling a thing to the rest of the world. Now it's about how much the West can sell to China if you guys want get out of your economic slump; by talking down China is definitely going to help you on that front. good luck and good night!

[REBEL]

Even the great Jim Rogers will take note of Petrobras', (PBR), announcement of a 33 Billion Barrel find of Oil off their coast, (this is on top of their find out in the Atlantic a month or two ago). To top things off, PBR officials said there could be substantial oil finds in other oceans around the world, (and that is 70% of the earth's surface).

[Gob]

"You guys; almost retarded; "

Someone needs to bone up on when to use semicolons.

"China does not want your investment as there are too much money there already."

On second thought, that may be too advanced.

[orion077]

China is not standing still. Yes, they have problems, but they are working on them and they have the capacity to leap into the 2lst Century. They don't have to reinvent the wheel. Look at the
accomplishment of the 3 Gorge Dam that is 5 times larger than Hoover Dam and supplies electrical power equal to 15 nuclear power plants.

China is not above getting expert guidance from other nations, including the US, to help solve her polluted air and water. Patience my friends, big problems take time to materialize.

[pookeye]

Let's put it this way, Rogers has been spot on with china, read his books understand what he is trying to explain, it helps with understanding his thinking. people tend to be a bit too patriotic and ends up being bias towards the west, cause of their misunderstanding of eastern culture, the main thing is Rogers doesnt care who or what you are, he just knows what he sees and observes and decides whether your worth his money, or not.... China obviously impressed him in his first book, why? because he saw the simplicity of capitalism at work, and it was at work better and more efficient than he expected.. which was why his bullishness for the country is high.. is it high risk tooo? yes of course, but so was the states back in the industrial revolution.. soo what makes china different from way back when? that's right, there is no difference, china now is like the USA right after or during the industrial revolution.. that occurred in the states.

[deuxsous]

Rogers is a boorish blowhard, but he understands that the inflation cycle has another decade or more to run. He was negative on investing "IN" China for a long time because of the legal system and lack of financial transparency. He said he'd rather invest in things they were going to buy so much of that they had to go up in price. I still think that is a better plan than investing "IN" China.

My guess is he got angry with the US because a lot of his commodity fund clients in the US and Europe got caught and lost a lot when the "famous" brokerage Hillary made her cattle killing on went belly up.

Singapore is a good place to trade from, and the climate is no worse than NYC in the summer. He can fly all over Asia to bad mouth the US and get new clients. He'll fit right in in the rich Maylasian highlands in the summer...... A nice country club life for an aging billionaire who's burned his bridges here.

[clitosil]

how do you invest in water?

[SPDBRNR]

Clitosil - water - look at PHO, an ETF with about 35 names or so, various companies that deal with potential water shortages, purification, etc... If you go to PowerShares.com, products, you'll find it and can find out all the names in their fund (Winderhill Fund, I think). Good luck.

[Gunslinger]

Stocks to play water:

My best ideas -
LNN (best - big ag play)
FLS
BMI (know this one from inside, strong play)
CWCO

[chinesepetti]

I like to advise every readers here; Mr Michael Petti worked in Bear Stern before, the information is on this website seekingalpha.com/author/michael-pettis
Thank you Mr Petti for your disclosure! You are a great American

[dorvedor]

I have been following Jim Rogers since 2005 so I'm a new fan. Because of his brilliant analysis - they say he can see around corners - my
portfolio is at an all time high today. Every time I deviated from
his advice, I lost. I would love to meet him at some point in time.
In the last few years, I think my portfolio is up more than the Rogers International Commodity Fund. He is amazing.