Legendary investor Jim Rogers shared his outlook for 2012 in an interview with Shanghai’s “First Financial Daily” newspaper. Jim Rogers predicts that world stock markets will bottom up and investors should get ready for an “election market” jump. Jim Rogers is still bullish about commodities in the long-run. However, he expects an even larger world economic crisis in 2013 or 2014. Here is a rough translation of Jim Rogers’ interview:
First Financial Daily: Most stock markets over the world performed poorly in 2011. What about 2012?
Rogers: 2012 is a very special year. Dozens of countries will have elections, including the United States, France, Korea, and Russia. The performance of these countries significantly affects the world economy. Usually governments increase spending in order to win the elections. The central banks will also print more money. Thus we will have more liquidity in the market. However, do not expect that the stock market will perform particularly well, since the global economy is still facing serious problems, such as the debt crisis and the growth slowdown. The rebound will be limited.
First Financial Daily: Gold has been sluggish after it approached $2,000/oz. How do you see the future of gold?
Rogers: The price of gold is indeed correcting, but I think that correction will continue. I am not surprised that gold prices remain at $1,400-1,500/oz. Gold will fall to $1,300/oz. in this wave of adjustment and I will buy then. And if gold fell further to $1,200/oz., I will buy more if I have money.
First Financial Daily: In addition to gold and silver, what are you holding now? How do you predict the future trends of commodity prices?
Rogers: I also bought a lot of agricultural commodities. Their prices are still low. For example, the price of sugar fell 17% from 1974 to the present.
Agricultural development is lagging. We lack the farmers and arable land because of agricultural depression. If this trend continues, we will face food shortages. Therefore, agricultural commodity prices must rise to attract capital and qualified people. Now the trend of investing in agriculture has already started, so not only I can foresee more and more farmers will become rich, but also I know that agricultural commodity prices will rise in the long-term.
If the world economy improves in 2012, commodity prices will rise and I will make money. If there is an economic downturn, currencies will depreciate a lot, and commodity prices will also rise because people will hedge against the depreciation.
New Round Of Economic Recession In 2013; The Euro Area Should Be Bold.
First Financial Daily: In 2002 and 2008, because of the Internet bubble burst, “9.11” and the debt crisis, the U.S. experienced two economic downturns. Do you expect a new round of economic recession in the future? How will this impact the rest of the world?
Rogers: As said before, the market in 2012 will be driven by the general elections. There will be a lot of government spending, which will pile up the debt. Then the situation may be bad in 2013 and 2014. The recession will be caused by the negative effects of the heavy debt loads. The United States may not have enough bullets to fight the next serious recession. Europe will have very serious problems too.
This will undoubtedly affect other countries, including China. But compared to Western countries, China’s conservatism will lessen the blow. However, in general, no country can be spared from the recession in 2013 or 2014.
First Financial Daily: European debt crisis has been going on for two years. What do you think about the euro area and the euro?
Rogers: The best thing they can do is to let the Greeks go bankrupt, let the banks collapse and shareholders lose, and then restructure the whole thing.
The euro area should do the same thing when it dealt with the three Nordic banking crisis in early 1990s. Take quick and decisive measures. The Government took over insolvent financial institutions, restructured the banks through disposing non-performing assets, and emerged from the crisis quickly. Twenty years ago, the Japanese government’s response to the crisis is a lesson to us. Letting those banks become “zombie banks” will only lead to 10 years of recession or even longer.
Therefore, if the euro zone keeps kicking the can down the road, I am very worried that the euro zone economy may face years of recession. The euro will also be in danger, although the world economy needs the euro and the dollar to compete with each other in order to maintain the balance. If the euro collapses, it will lead to the appreciation of dollar, yen, and even RMB.
First Financial Daily: Recently, some analysts said the “BRIC”(Brazil, Russia, India and China) countries’ golden decade is over. Do you agree?
Rogers: To some extent, I do not agree. Although since the beginning of 2011, I have been shorting the emerging markets, including Brazil, India, Vietnam, U.S. technology stocks, and some European stocks, but I did not short China.
China is the world’s largest creditor. The mainland of China, Singapore, Hong Kong, and other Asian regions gather a lot of capital and assets, so I suggest people to move to Asia in the future, and teach their children to speak Chinese. In some aspect, the future opportunities remain in China and Asia.