Jim Rogers

All posts tagged Jim Rogers

Jim Rogers doesn’t have any faith in the US financial companies. According to Bloomberg:

Jim Rogers, co-founder of the Quantum Hedge Fund with billionaire George Soros, boosted his bets against U.S. securities firms because of their salary “excesses” and money-losing investments.

Rogers said he increased his year-old short positions in the past six weeks in U.S. investment banks, using exchange-traded funds and bets against individual companies he declined to name. Stocks in the industry, which pays too much in bonuses, may fall as much as 70 percent in a bear market, he said.

“You see 29-year-olds on Wall Street making $10 million to $20 million a year, and they think it’s normal,” Rogers, 65, said in an interview in London today.

The top five U.S. securities firms will probably earn a combined $29.3 billion this year, according to analysts surveyed by Bloomberg, breaking a three-year record streak after Merrill Lynch & Co. reported a $2.2 billion third-quarter loss. Goldman Sachs Group Inc., Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns Cos. earned $30.7 billion last year, three times more than their profit in 2002.

Goldman Sachs, Wall Street’s most-profitable securities firm, said Sept. 20 that it set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of the year, topping the record amount for all of last year.

A month later, Merrill Lynch reported its biggest quarterly loss amid $8.4 billion of writedowns for subprime mortgages, asset-backed bonds and bad loans.

Jim Rogers is short via the use of ETFs. One way you can get in on the action is through UltraShort Financials ProShares (SKF). SKF is a leveraged ETF that returns twice the daily inverse of the Dow Jones Financials Index.

Recently financials like Bank of America, Citigroup and Bear Stearns have reported pretty bad news. Seems like SKF would be a safer bet than shorting any of these companies themselves.

Jim Rogers, co-founder of Quantum Fund along with George Soros, achieved 4,000% returns in the 80’s. He’s famous for being bearish on the US economy and the US Dollar. However, he’s currently bullish on the Dollar, saying that everyone is negative on it.

In his opinion, when too many people take one side of a trade, the opposite is likely to happen. The Dollar has been in a bear market since 2002, but it turned bullish during 2005. He thinks its over-sold and in the short-term at least, due for a correction.

While I’m not buying any Dollars, I could definitely use a spike in the USD for my entry point into Australian Dollars.

Many claim the dollar’s weakness is helping offset a dropoff in U.S. economic demand that’s come from a recession in the housing market. Goods priced in dollars are cheaper in Europe or Australia, and manufacturing in the U.S. becomes more attractive for companies that export goods. That helps preserve jobs in the U.S.

But a debased currency is a hefty price to pay for growth, and not an easily reversible one, says Rogers. It breeds inflation and weak purchasing power, which ultimately undermines any short-term boost in growth. He reiterated his belief that the U.S. dollar is bound for a decline similar to the British pound’s 50% decline in the early 1980s.

He’s not very impressed with Bernanke lowering the interest rates either.

“The fool went and cut interest rates with the stock market down 6%,” he says of Fed Chairman Ben Bernanke. “What’s he going to do when stocks are down 30%?”

He says Bernanke and the Fed are ignoring obvious evidence of inflation in food, education and entertainment prices.

“This is a man who’s made a career learning about printing money and now we’ve handed him the printing press,” he says, likening Bernanke to his predecessor Alan Greenspan in their penchant for saving the markets by cutting rates and inflating asset bubbles.

Rogers is a believer in the global growth story, particularly China’s. He said he’s sold out of all his emerging market investments except for his investments in China, claiming the other emerging nations have “been exploited by 20,000 MBAs running around looking for markets.”

Rogers hopes he’ll be able to pass down his Chinese stocks to his 4-year-old daughter, but adds he may be forced to sell.

“If a bubble develops in China in the next year or two, I’ll have to sell because bubbles end badly,” says Rogers, pointing to Japan, where stocks remain well below their levels of over a decade ago. But he believes Chinese stocks would have to double before he’d feel forced to sell.

The self-proclaimed “inactive investor” is not buying much these days. He’s bullish on commodities, though he agreed he’d be hard pressed to find anything to buy at these levels. If he’d buy any commodity it would be in the agricultural space rather than the metals, though he declined to specify one. He’s short the U.S. investment banks along with the dollar.

Next to China, Rogers says he’s long gold.

I’ll undoubtedly buy more gold,” he says, predicting it will double from here in the next few years.