sundrenched

Exclusive Interview with Jim Rogers: Inflation Is Coming

Another thing I'd like to add: In the face of a consumer economy that's way too small (less than 30% of GDP), in the short to medium term, I think China will hold its nose and buy itself time by keeping its currency low (buy treasuries). Anything else they do will take time, will bring a lot of waste (ineptitude and corruption), and will be on too small a scale compared to the drop in GDP from lost exports and export-oriented capital investment. So for the next few years, they'll continue to play the game of manipulating their currency by buying treasuries.

Exclusive Interview with Jim Rogers: Inflation Is Coming

"Now when a man with that kind of track record (4200% gain over 10 years) gained from being able to look ahead and read the tea leaves "

Correction: He was the junior partner in the Quantum fund which returned 4200% in the 1970s. Soros has stated explicitly that Rogers was someone who "did the work of 5 analysts" but in the end ALL decisions were taken by him. The work was clearly split up so that Rogers was the analyst (with a knack for seeing the big picture), and Soros the decision maker. Just go google it. Soros went on to build the bulk of his fortune after Rogers left. This is not to take anything away from Rogers' achievements, but the fact is that there's no easily verifiable track record for him, just a lot of predictions over the years, among which many prescient ones. I recently re-read the 1989 Market Wizards and a lot of his predictions there did materialize, but others didn't. Notably, he was already extremely bearish on the dollar then. As another poster wrote, the problem with this big-picture stuff is in the timing, and you can get your shirt ripped off your back in the mean time. For instance, if a new panic breaks out that we're entering a long-term slump (Japan-style, but world-wide this time), commodity prices could drop a lot further from where they're now (as of now, they're still well above the levels before the whole commodity boom started). For what it's worth, that's how I'm playing it: I expect most commodities to sink further in the short run.

As for China, in the very long term I believe he's right, but given that only 30% of GDP there is domestic consumption (40% exports and the rest capital investment, a lot of it in turn export oriented), that there's a middle class of barely 150 million people there, and that the Chinese are tightening their belts even more now their explosive growth has come to a halt, in the short run things could get very ugly very easily there. I don't think the market has fully factored in what's coming in China yet. Now there's this sense that China is in a much better position, but frankly, I'm convinced recent economic statistics there are hogwash (exports barely dipped where those in Taiwan, Vietnam, Japan fell off a cliff... How?!?) and that in a few months the true extent of the decline will become apparent. China needs to overhaul its entire economy, and this will be the work of at least a generation. Chinese stocks are cheap now, but they could get A LOT cheaper in the future.