Reality check
By John Authers
Published: December 3 2009 19:10 | Last updated: December 3 2009 19:10
Is this recovery real? And if not, would it make any difference?
George SorosThe trade of financial economics has taken a bruising after the many surprises of the past two years, but a more ancient discipline is coming back into focus: philosophy. In the vanguard is George Soros, one of history’s most successful hedge fund managers – and someone who prefers to judge himself as a failed philosopher.
Philosophers have long wrestled with the concept of perception: how the “real” world corresponds to our perceptions of it, or whether it even makes sense to say there is something “real” out there.
Most of us tend to dismiss such questions as sophistry. Soros, on the other hand, has wrestled with the problem since he was a student. And he may have the last laugh, because he appears to have turned the philosophy of reality into a way to make money.
Soros’s guiding principle, as outlined in his book*, concerns “reflexivity”: how our perceptions of the world, as expressed through buying and selling, change the world itself. When markets become “reflexive”, they reflect flawed perceptions rather than a prior “reality” – but the market’s version of “reality” is no less real because of that.
Soros’s key principles are first that “market prices always distort the underlying reality which they are supposed to reflect”; and second, that “instead of playing a purely passive role in reflecting an underlying reality … markets also have an active role: they can affect the so-called fundamen-tals they are supposed to reflect”.
Reflexive markets can turn into bubbles. And bubbles can turn into opportunities to make money for those like Soros, who have the self-discipline to invest in an incipient bubble and get out before it bursts.
Armed with Soros’s insight, the question of whether we should believe in the current market rebound looks different. Last year’s collapse rested on confidence. Oil prices, for instance, grew so high that they put pressure on the economy and forced companies to change their output decisions.
However, this year, numerous market factors have reinforced an impression of a recovery. That, in turn, has made it easier to do business and precipitate an “actual” recovery.
Markets had sold off so much that only a slight change in perception moved them dramatically. To make money this year was to understand the market “reality” that investors’ perceptions would create, rather than focus on an apparently separate “fundamental” reality, which followed macroeconomic rules that still saw evidence of high unemployment and lingering bad debt.
Once oil prices and Chinese shares moved upwards, this was evidence the “real” world was recovering. Once credit markets recovered, it became cheaper for companies to raise finance, and that in turn gave good reason to buy equities – and to buy other credit, as it could now be seen there were buyers out there prepared to buy debt. In this way, perceptions of reality led to a different reality.
If this really is an incipient bubble – and the fact it relies on artificially cheap money from the government certainly reinforces that impression – how will we know when it has become a true bubble and when will it end?
Again, Soros has a theory. “Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend,” he says. A boom and an eventual bust are set off “when a trend and a misconception positively reinforce each other”.
Eventually, “market expectations become so far removed from reality that people are forced to recognise that a misconception is involved”. As doubts set in, “a point is reached when the trend is reversed; it then becomes self-reinforcing in the opposite direction”.
World stock markets peaked in 2007 after a sudden sell-off in the bond market. Bond investors decided the rosy assumptions in other markets simply could not happen without higher inflation, and reacted accordingly. The trend was reversed. A long bear market turned into a savage sell-off once the commodity market went into reverse, again collapsing under its contradictions, and then the bankruptcy of Lehman Brothers, the US investment bank, administered a nasty dose of reality.
Some geopolitical event, or a corporate incident like Lehmans’, could bring this rally to an end. Otherwise, it is best to look at the bond and foreign exchange (forex) markets. If forex traders revolt against the huge volume of extra bonds being issued to fund the deficit, that could push up interest rates and end the rally. Or, similarly, if the run on the dollar gets to the point where many countries feel their own currencies are overvalued, and therefore take action, this rally could come to an end.
http://www.ft.com/cms/s/0/c6b6e9ce-d965-11de-b2d5-00144feabdc0.html?nclick_check=1
Monday, December 7, 2009
Monday, September 14, 2009
Jim Rogers on China's stocks: not the time to buy
Jim Rogers on China's stocks: not the time to buy
September 11, 2009
China's shares nearly doubled this year, and then plummeted 20 percent within a month. Reports asked investment guru Jim Rogers when is a good time to buy China stocks while he was attending the China International Financial Services Conference (CIFSC) held in Guangzhou on September 10.
Rogers says since 1999, he bought shares of China, and has never sold them. He believes that after ten years China stocks will still be rising, but at the same time he has sold all stocks from the other emerging market countries.
Last year in October, he bought shares in China again. But the Chinese stocks he bought were H-shares, B shares, and S shares. He has never bought A shares, since the A shares are too expensive, and perhaps one day, China's H shares, B shares, S shares and A shares will merger as one kind of stocks.
If signs of collapse appear in China's stock market, he would buy more Chinese stocks. He thinks this may occur in the near future, but not now, because although China's stock market is making adjustment, no one is selling Chinese shares in large quantities. Besides, China's stock market rose 80 percent in the past six months, prices have been too high, and I will not buy Chinese stocks at this time. After a year or two, I would consider buying Chinese stocks again.
By People's Daily Online
September 11, 2009
China's shares nearly doubled this year, and then plummeted 20 percent within a month. Reports asked investment guru Jim Rogers when is a good time to buy China stocks while he was attending the China International Financial Services Conference (CIFSC) held in Guangzhou on September 10.
Rogers says since 1999, he bought shares of China, and has never sold them. He believes that after ten years China stocks will still be rising, but at the same time he has sold all stocks from the other emerging market countries.
Last year in October, he bought shares in China again. But the Chinese stocks he bought were H-shares, B shares, and S shares. He has never bought A shares, since the A shares are too expensive, and perhaps one day, China's H shares, B shares, S shares and A shares will merger as one kind of stocks.
If signs of collapse appear in China's stock market, he would buy more Chinese stocks. He thinks this may occur in the near future, but not now, because although China's stock market is making adjustment, no one is selling Chinese shares in large quantities. Besides, China's stock market rose 80 percent in the past six months, prices have been too high, and I will not buy Chinese stocks at this time. After a year or two, I would consider buying Chinese stocks again.
By People's Daily Online
Wait and See Investment in A-shares, Big City Real Estate
Jim Rogers: Wait and See Investment in A-shares, Big City Real Estate
byCSC staff, Shanghai
September-11-2009
Jim Rogers, an American investor and financial commentator based in Singapore who has been paying close attention to the Asian market, sees that in the past 10 months, A-shares values have doubled, but predicts that there will be a negative change in September-November. He adds he would neither buy nor sell shares at present, points out that in the next 20 years agriculture will be a very promising industry in China, and suggests that everybody play the role of "farmer."
In the first half of this year, China's economic stimulus policies to deal with the financial crisis and lending of seven trillion yuan boosted domestic stock and property transactions and prices hit new highs.
But the A-share market has been fluctuating recently between 2600 and 3000 points. At the second China International Financial Services Conference, held at Guangzhou in South China on September 9-10, Rogers noted that although China's economy is improving, market risk is brewing, and he predicted the Hong Kong market could have problems in the next few months, which will affect the domestic market. Rogers believes that the current autumn round is perhaps the shift from bear to bull market, and investors should be patient and wait for opportunities to buy rather than rush into the market.
In addition, conditions in Europe and the US have not fully recovered, and their lack of improvement will influence China's exports and affect its markets. Time is needed to observe the continuing development of the European and US economies.
Rogers believes that, just as the market has worried, huge amounts of money issued by central banks is leading to inflation, and that investing in commodities would be a good choice, especially raw materials, natural resources, energy and bulk commodities. Non-renewable resources will be particularly profitable products in the next round of investment. The prices of silver, sugar and coffee have decreased 70% from their high points. When the global economy picks up, demand for commodities will rise, so will prices. If economies continue to falter, governments will continue to release liquidity, and commodity investors can benefit from the effects of inflation.
Rogers emphasizes that in recent years a food crisis has emerged, and may become serious in the next decade. Investors should pay attention to commodities such as wheat. In the long run, investors should watch growth industries. China's agriculture, for example, has great growth potential due to huge investment from the government in recent years. In addition, water conservancy in Asia has great potential because India and China are often affected by flooding or drought. Tourism is also promising.
Rogers predicts the USD's status may be reduced in the next 5-10 years with the development of Asia and the decline of the US. He reasons that China, Japan and other Asian countries are gradually hold financial claims and European and American countries are turning into debtors, meaning that global capital flows are diverting to Asia. In terms of historical evolution, the economic center was in the UK in the 19th century, then in the US in the 20th century. It may well be China in the 21st century.
Rogers believes that domestic real estate development is good. In the past two months, housing prices have greatly increased in many cities, but he says he would not buy property at present, especially in Shanghai or Hong Kong.
In response to the financial crisis, central banks have released vast liquidity but different orientations have emerged in China and the US. Rogers says that in the first half year China invested in medium and long-term infrastructure, which can enhance future competitiveness, truly investing in the future, while the US invested 70%-80% of the resources into short-term projects.
It is generally believed that huge amounts of capital released, whether invested in short or long-term projects, will bring on inflationary pressures. The difference is that the pulling effect of short-term projects for follow-up competitiveness is not as good as for long-term projects. In evaluating government efforts to relieve the financial crisis, Rogers says that China and Singapore have done better than the US or Britain.
http://www.chinastakes.com/PrintArticle.aspx?articleid=1499
byCSC staff, Shanghai
September-11-2009
Jim Rogers, an American investor and financial commentator based in Singapore who has been paying close attention to the Asian market, sees that in the past 10 months, A-shares values have doubled, but predicts that there will be a negative change in September-November. He adds he would neither buy nor sell shares at present, points out that in the next 20 years agriculture will be a very promising industry in China, and suggests that everybody play the role of "farmer."
In the first half of this year, China's economic stimulus policies to deal with the financial crisis and lending of seven trillion yuan boosted domestic stock and property transactions and prices hit new highs.
But the A-share market has been fluctuating recently between 2600 and 3000 points. At the second China International Financial Services Conference, held at Guangzhou in South China on September 9-10, Rogers noted that although China's economy is improving, market risk is brewing, and he predicted the Hong Kong market could have problems in the next few months, which will affect the domestic market. Rogers believes that the current autumn round is perhaps the shift from bear to bull market, and investors should be patient and wait for opportunities to buy rather than rush into the market.
In addition, conditions in Europe and the US have not fully recovered, and their lack of improvement will influence China's exports and affect its markets. Time is needed to observe the continuing development of the European and US economies.
Rogers believes that, just as the market has worried, huge amounts of money issued by central banks is leading to inflation, and that investing in commodities would be a good choice, especially raw materials, natural resources, energy and bulk commodities. Non-renewable resources will be particularly profitable products in the next round of investment. The prices of silver, sugar and coffee have decreased 70% from their high points. When the global economy picks up, demand for commodities will rise, so will prices. If economies continue to falter, governments will continue to release liquidity, and commodity investors can benefit from the effects of inflation.
Rogers emphasizes that in recent years a food crisis has emerged, and may become serious in the next decade. Investors should pay attention to commodities such as wheat. In the long run, investors should watch growth industries. China's agriculture, for example, has great growth potential due to huge investment from the government in recent years. In addition, water conservancy in Asia has great potential because India and China are often affected by flooding or drought. Tourism is also promising.
Rogers predicts the USD's status may be reduced in the next 5-10 years with the development of Asia and the decline of the US. He reasons that China, Japan and other Asian countries are gradually hold financial claims and European and American countries are turning into debtors, meaning that global capital flows are diverting to Asia. In terms of historical evolution, the economic center was in the UK in the 19th century, then in the US in the 20th century. It may well be China in the 21st century.
Rogers believes that domestic real estate development is good. In the past two months, housing prices have greatly increased in many cities, but he says he would not buy property at present, especially in Shanghai or Hong Kong.
In response to the financial crisis, central banks have released vast liquidity but different orientations have emerged in China and the US. Rogers says that in the first half year China invested in medium and long-term infrastructure, which can enhance future competitiveness, truly investing in the future, while the US invested 70%-80% of the resources into short-term projects.
It is generally believed that huge amounts of capital released, whether invested in short or long-term projects, will bring on inflationary pressures. The difference is that the pulling effect of short-term projects for follow-up competitiveness is not as good as for long-term projects. In evaluating government efforts to relieve the financial crisis, Rogers says that China and Singapore have done better than the US or Britain.
http://www.chinastakes.com/PrintArticle.aspx?articleid=1499
Wednesday, July 15, 2009
Commodities are sizzling, says Jim Rogers
Commodities are sizzling, says Jim Rogers
14 Jul 2009, 0013 hrs IST, Andy Mukherjee, ET Now
In an exclusive interview with ET NOW , Mr Rogers reiterated his view that a currency crisis could happen any time in the
near future. But he’s not sure yet who’s going to pay the price — pound sterling, US dollar or even the rupee. Excerpts: ( Watch )
The commodities rally seems to have paused. The Rogers International Commodity Index has come off 13% since June 12. This pullback, essentially as I can see, is because of tin, energy and silver even as some of those agri commodities like orange juice, sugar and cotton have done well. What are your expectations going forward for commodities?
That's the way I know you know about commodities. You read The Economic Times and your ET TV. So, you know that the markets always have corrections whether they are going up or down. Nothing goes straight up or down forever. So, it's having a normal correction. In my view, the best place to be is in real assetscommodities, because if the world is going to recover, they (commodities) will recover first because of the shortages and if the world economy is not going to recover, they are still the best place to be, because governments around the world are printing huge amounts of money. So, if you got to own something, I don't much to own besides commodities.
In India, we are getting worried about the monsoon. We are looking out of our windows and not finding any clouds, and there is also talk about El Nino weather formation. Is this something you would advise investors to keep an eye on?
Of course, I would. The world's inventories of food are at the lowest they have been in decades. We haven't have had any serious weather problems around the world for several decades as a matter of fact. So, with fairly good weather, we have been having bad harvest or we have been consuming more than we have been producing. Can you imagine what's going to happen to the price of agriculture if we have bad weather around the world?
The last time we met here in Mumbai you had a sachet of sugar in your pocket and you pulled it out to underscore your point of impending shortage about agri commodities. You have been right about sugar as far as we can see from the price charts. What are you hiding today in your pockets? A silver coin, a hip flask full of crude oil, may be?
I do actually have a silver coin in my pocket. I don't know how you knew. I also have a gold coin, but the silver one is probably my better play. If I were a bright young man, I would be buying sugar now and silver, given the state of the world. That's not a recommendation, but I am just saying I do own some silver. Silver is cheaper than many things on a historic basis and I do own some silver. The dollar has fallen almost 10% since the beginning of the stocks rally in March. Commodities have risen 94% of the time that the dollar has fallen. A very strong correlation. Do we expect the dollar decline and the commodity run-up, therefore, to continue? It's not always a strong correlation. You are right; there has been (a correlation) in recent months, recent years even. But no, there are many times when the dollar and commodities go entirely separate ways. So, don't get it into your head, and I know many times that the press do have it in their head that commodities and dollars go opposite ways. I am not terribly bullish on the dollar in long term. US dollars are a terribly flawed currency and down the road I hope I don't own any US dollars. I still own some of them at the moment, but it's not getting better for the US. The dollar any way is getting worse. The fundamental for commodities continue to improve. The fundamentals for the US dollar do not continue to improve. They are deteriorating.
Are you still sticking to your prediction of a currency crisis sometime in a year or two?
Yes. The world is full of currency imbalances and economic trade imbalances would have to be resolved or corrected, one way or the other. Unfortunately, given the state of politicians and it's not just the current state of politicians, but politicians throughout history have usually got things wrong. So, we are going to have some problems in the currency market. I don't know when. May be not. I may be wrong. But having seen that sort of thing before in history somebody would have to pay the price whether it's the pound sterling or the US dollar or the rupee, I have no clue. No idea where it’s going to stop, but we are going to have problems in the currency markets.
What’s your view on global equities now? Do you think emerging markets’ premium over developed country markets has gone a way too high?
I don't pay any attention to things like emerging markets premium. You talk about it on TV, but every market is different. Why can't I just go out and buy emerging markets when it is likely to go broke. Every market is different, every country is different, every economy is different and every sector of the economies is different. Just because you are in an emerging country does not mean you are going to make money if you get the wrong sector. I have not bought any stocks anywhere in the world in the last couple of years except China. I did buy some Chinese shares back in October-November. I have not been buying anything other than that for some time. I have been worried about the world economy, about the world stock markets. If you got to be somewhere and if there is going to be a recovery, it will show up in commodities best of all, and if there is not going to be any recovery, commodities are still a better place to be.
So what are you buying nowadays?
If you want to put in your money somewhere, put it in commodities. That's the only thing I bought recently. I have bought some yen and swiss francs. If you know enough about currencies to figure out who is going to benefit, if I am right about the currency turmoil coming, then you can buy some of the currencies and if you think that the rupee is the place to be, then you can buy some rupees.
Long-term inflation expectations in the US as reflected by the five-year forward breaking rates on treasury inflation protected securities. Those have hardened considerably since the beginning of the year. That's also your view, right? Too much money in the financial systems and monetary authorities the world over don't have a credible plan to withdraw liquidity?
I cannot conceive of lending money to the US government for 30 years in US dollars for 3, 4, 5 or 6% interest. It's just inconceivable to me that I would let them have my money for 30 years and they would pay me back someday in US dollars at such a low rate of interest. I expect problems in the bond market. I don't know when. I am not sure about the bond market. I was short in the bond market, but I got out. I expect to see serious problems in the bond market down the road.
In the near term, markets seem to be more concerned about growth than they are about inflation. The difference between the 10-year and the two-year bond yield in the US has narrowed some 40 basis points since early June. Unlike you Jim, people are actually going out and buying long maturity treasuries because they don't see growth, don't see inflation. So, what do say to these bond buyers? Good luck?
When you see anomalies like this in the market, you are supposed to take advantage . The spread is very low. So, why would anybody buy a 10-year when he can buy a two-year ? Not worth the extra risk to go out 10 years. I would urge people to keep their wits. Now, granted Mr Bernanke and the US are buying a lot of government paper and driving the price up. That's why I am not sure. He has got more buying power than I do, at least for the foreseeable future. So, you are seeing longer bonds going up. That gives you an opportunity to get out if you own them or think about selling them short if you don't own them and know how to sell short.
RAPIDFIRE ROUND
Ben Bernanke: Hero or villian?
He's an idiot. ( Watch )
US stocks: Buy now or stay away?
I'm not buying them.
US banking stocks: Short them or stay away?
I'm doing neither. I am watching. They're down a whole lot.
US bonds: Short them or stay away?
I'm doing neither right now. My next move will probably be to sell them short.
In Asia: Sri Lankan stocks or Indian equities?
I'd rather buy Sri Lanka than India.
Chinese stocks or Indian stocks?
I'm not buying either at the moment. I don't own any Indian stocks. I own Chinese shares which I am not selling. The Indian... I wouldn't buy either.
Gold or silver?
I'd rather buy silver today. I own both and I'm not selling either.
http://economictimes.indiatimes.com/articleshow/4774115.cms
14 Jul 2009, 0013 hrs IST, Andy Mukherjee, ET Now
In an exclusive interview with ET NOW , Mr Rogers reiterated his view that a currency crisis could happen any time in the
near future. But he’s not sure yet who’s going to pay the price — pound sterling, US dollar or even the rupee. Excerpts: ( Watch )
The commodities rally seems to have paused. The Rogers International Commodity Index has come off 13% since June 12. This pullback, essentially as I can see, is because of tin, energy and silver even as some of those agri commodities like orange juice, sugar and cotton have done well. What are your expectations going forward for commodities?
That's the way I know you know about commodities. You read The Economic Times and your ET TV. So, you know that the markets always have corrections whether they are going up or down. Nothing goes straight up or down forever. So, it's having a normal correction. In my view, the best place to be is in real assetscommodities, because if the world is going to recover, they (commodities) will recover first because of the shortages and if the world economy is not going to recover, they are still the best place to be, because governments around the world are printing huge amounts of money. So, if you got to own something, I don't much to own besides commodities.
In India, we are getting worried about the monsoon. We are looking out of our windows and not finding any clouds, and there is also talk about El Nino weather formation. Is this something you would advise investors to keep an eye on?
Of course, I would. The world's inventories of food are at the lowest they have been in decades. We haven't have had any serious weather problems around the world for several decades as a matter of fact. So, with fairly good weather, we have been having bad harvest or we have been consuming more than we have been producing. Can you imagine what's going to happen to the price of agriculture if we have bad weather around the world?
The last time we met here in Mumbai you had a sachet of sugar in your pocket and you pulled it out to underscore your point of impending shortage about agri commodities. You have been right about sugar as far as we can see from the price charts. What are you hiding today in your pockets? A silver coin, a hip flask full of crude oil, may be?
I do actually have a silver coin in my pocket. I don't know how you knew. I also have a gold coin, but the silver one is probably my better play. If I were a bright young man, I would be buying sugar now and silver, given the state of the world. That's not a recommendation, but I am just saying I do own some silver. Silver is cheaper than many things on a historic basis and I do own some silver. The dollar has fallen almost 10% since the beginning of the stocks rally in March. Commodities have risen 94% of the time that the dollar has fallen. A very strong correlation. Do we expect the dollar decline and the commodity run-up, therefore, to continue? It's not always a strong correlation. You are right; there has been (a correlation) in recent months, recent years even. But no, there are many times when the dollar and commodities go entirely separate ways. So, don't get it into your head, and I know many times that the press do have it in their head that commodities and dollars go opposite ways. I am not terribly bullish on the dollar in long term. US dollars are a terribly flawed currency and down the road I hope I don't own any US dollars. I still own some of them at the moment, but it's not getting better for the US. The dollar any way is getting worse. The fundamental for commodities continue to improve. The fundamentals for the US dollar do not continue to improve. They are deteriorating.
Are you still sticking to your prediction of a currency crisis sometime in a year or two?
Yes. The world is full of currency imbalances and economic trade imbalances would have to be resolved or corrected, one way or the other. Unfortunately, given the state of politicians and it's not just the current state of politicians, but politicians throughout history have usually got things wrong. So, we are going to have some problems in the currency market. I don't know when. May be not. I may be wrong. But having seen that sort of thing before in history somebody would have to pay the price whether it's the pound sterling or the US dollar or the rupee, I have no clue. No idea where it’s going to stop, but we are going to have problems in the currency markets.
What’s your view on global equities now? Do you think emerging markets’ premium over developed country markets has gone a way too high?
I don't pay any attention to things like emerging markets premium. You talk about it on TV, but every market is different. Why can't I just go out and buy emerging markets when it is likely to go broke. Every market is different, every country is different, every economy is different and every sector of the economies is different. Just because you are in an emerging country does not mean you are going to make money if you get the wrong sector. I have not bought any stocks anywhere in the world in the last couple of years except China. I did buy some Chinese shares back in October-November. I have not been buying anything other than that for some time. I have been worried about the world economy, about the world stock markets. If you got to be somewhere and if there is going to be a recovery, it will show up in commodities best of all, and if there is not going to be any recovery, commodities are still a better place to be.
So what are you buying nowadays?
If you want to put in your money somewhere, put it in commodities. That's the only thing I bought recently. I have bought some yen and swiss francs. If you know enough about currencies to figure out who is going to benefit, if I am right about the currency turmoil coming, then you can buy some of the currencies and if you think that the rupee is the place to be, then you can buy some rupees.
Long-term inflation expectations in the US as reflected by the five-year forward breaking rates on treasury inflation protected securities. Those have hardened considerably since the beginning of the year. That's also your view, right? Too much money in the financial systems and monetary authorities the world over don't have a credible plan to withdraw liquidity?
I cannot conceive of lending money to the US government for 30 years in US dollars for 3, 4, 5 or 6% interest. It's just inconceivable to me that I would let them have my money for 30 years and they would pay me back someday in US dollars at such a low rate of interest. I expect problems in the bond market. I don't know when. I am not sure about the bond market. I was short in the bond market, but I got out. I expect to see serious problems in the bond market down the road.
In the near term, markets seem to be more concerned about growth than they are about inflation. The difference between the 10-year and the two-year bond yield in the US has narrowed some 40 basis points since early June. Unlike you Jim, people are actually going out and buying long maturity treasuries because they don't see growth, don't see inflation. So, what do say to these bond buyers? Good luck?
When you see anomalies like this in the market, you are supposed to take advantage . The spread is very low. So, why would anybody buy a 10-year when he can buy a two-year ? Not worth the extra risk to go out 10 years. I would urge people to keep their wits. Now, granted Mr Bernanke and the US are buying a lot of government paper and driving the price up. That's why I am not sure. He has got more buying power than I do, at least for the foreseeable future. So, you are seeing longer bonds going up. That gives you an opportunity to get out if you own them or think about selling them short if you don't own them and know how to sell short.
RAPIDFIRE ROUND
Ben Bernanke: Hero or villian?
He's an idiot. ( Watch )
US stocks: Buy now or stay away?
I'm not buying them.
US banking stocks: Short them or stay away?
I'm doing neither. I am watching. They're down a whole lot.
US bonds: Short them or stay away?
I'm doing neither right now. My next move will probably be to sell them short.
In Asia: Sri Lankan stocks or Indian equities?
I'd rather buy Sri Lanka than India.
Chinese stocks or Indian stocks?
I'm not buying either at the moment. I don't own any Indian stocks. I own Chinese shares which I am not selling. The Indian... I wouldn't buy either.
Gold or silver?
I'd rather buy silver today. I own both and I'm not selling either.
http://economictimes.indiatimes.com/articleshow/4774115.cms
Friday, June 26, 2009
Jim Rogers says has no short positions, selling dollars
Jim Rogers says has no short positions, selling dollars
Thu Jun 25, 2009 4:49am EDT
SINGAPORE, June 25 (Reuters) - Investor Jim Rogers said on Thursday that he sees prolonged economic problems and while he did not see much worth buying, he is not shorting any assets either.
He repeated a previous comment that he is selling his U.S. dollars and that commodities were the best investment bet.
"I have no shorts for one of the first times in my life," Rogers, a co-founder with George Soros of the Quantum Fund, told Reuters TV in Singapore. "On the other hand I don't see much to buy."
He said huge borrowing by governments, particularly in the United States and Britain, would hurt their currencies and lead to future problems, though he picked the Canadian dollar CAD as one of the "soundest" currencies. "I've got out of my pounds. I will be getting out of my (U.S.) dollars soon," he said, repeating his view that commodities were the best place to be with metals having gained more than stocks this year and long-term potential for soft commodities.
"I'd rather be a farmer than a stockbroker for the next couple of years," he said. "No-one you went to school with became a farmer... so we have a shortage of farmers."
Rogers, who lives in ethnically Chinese Singapore, co-founded the Quantum Fund in 1970. The fund, since closed, returned 4,200 percent in the next decade, compared with a 50 percent gain in the S&P 500 index.
"If you're in London you're in the wrong place at the wrong time... You gotta move east."
http://www.reuters.com/article/bondsNews/idUSSP50971720090625?sp=true
Thu Jun 25, 2009 4:49am EDT
SINGAPORE, June 25 (Reuters) - Investor Jim Rogers said on Thursday that he sees prolonged economic problems and while he did not see much worth buying, he is not shorting any assets either.
He repeated a previous comment that he is selling his U.S. dollars and that commodities were the best investment bet.
"I have no shorts for one of the first times in my life," Rogers, a co-founder with George Soros of the Quantum Fund, told Reuters TV in Singapore. "On the other hand I don't see much to buy."
He said huge borrowing by governments, particularly in the United States and Britain, would hurt their currencies and lead to future problems, though he picked the Canadian dollar CAD as one of the "soundest" currencies. "I've got out of my pounds. I will be getting out of my (U.S.) dollars soon," he said, repeating his view that commodities were the best place to be with metals having gained more than stocks this year and long-term potential for soft commodities.
"I'd rather be a farmer than a stockbroker for the next couple of years," he said. "No-one you went to school with became a farmer... so we have a shortage of farmers."
Rogers, who lives in ethnically Chinese Singapore, co-founded the Quantum Fund in 1970. The fund, since closed, returned 4,200 percent in the next decade, compared with a 50 percent gain in the S&P 500 index.
"If you're in London you're in the wrong place at the wrong time... You gotta move east."
http://www.reuters.com/article/bondsNews/idUSSP50971720090625?sp=true
Thursday, June 25, 2009
Warren Buffett's Live Lunch Interview on CNBC
Warren Buffett's Live Lunch Interview on CNBC
24 Jun 2009 04:05 PM ET
Warren Buffett appeared live on CNBC with Becky Quick today, Wednesday, June 24, 2009.
Buffett told us the economy is in a "shambles" with no signs of a recovery anytime soon. He also criticized Apple for not disclosing earlier that CEO Steve Jobs had received a liver transplant.
This is a complete transcript of their conversation:
BECKY QUICK: We are here at Smith & Wollensky where Warren Buffett is paying off last year's winner for this auction. This is, right now there's another auction underway. And this is the tenth year in a row he's been doing this. Warren, we want to thank you very much for joining us.
WARREN BUFFETT: It's a pleasure.
BECKY: You've been doing this for 10 years, raising money for the Glide Foundation. Why the Glide Foundation?
BUFFETT: I think it's probably as remarkable a social organization as there is in the country, and it's run by Cecil Williams, who, for 45 years, has taken people that have hit bottom and said, 'You're still a worthwhile individual and we're going to do what we can for you in terms of housing, medicine, vocational training and you're going to become the kind of person that you can become.' He believes in people and he carries it out every day and I've never found a more effective place at lifting people from bottom.
BECKY: This year's winner, last year's winner showing up today, Zhao Danyang, who is someone who paid 2.1 million dollars. That's a remarkable amount of money that's out there. Last year, obviously, the markets were in a very different place than they are this year. The auction is underway. I know the bidding goes through Sunday. (Note: Bidding actually ends this coming Friday at 10p ET). Do you think someone can bid as much as you saw last year?
BUFFETT: (Laughs.) Well it surprised me last year. They have qualified a number of bidders that are good for very big figures. They make sure of that beforehand. So we'll see what happens. (Laughs.) Two-point-one million is a pretty good number to shoot for. I hope I don't have to leave a 10 percent tip at the end of the lunch. (Laughs.)
BECKY: The last time we sat down to talk to you was on May 4, and at that point you told us that you think we're in an economic war right now. How much progress do you think we've made in that war?
BUFFETT: Well, it's been pretty flat. I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report, I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true.
BECKY: We hear people on our air all the time who talk about the 'green shoots' that they're seeing. Are you seeing any of those green shoots?
BUFFETT: (Laughs.) I looked. I wasn't seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet.
BECKY: Earlier this year you also told us that you think Washington and the Obama administration should be paying attention to jobs, that's the number one, jobs and the economy is the number one, the number two, and the number three job that they should be doing. Has there been progress made at all on that front?
BUFFETT: Well, they're doing thing but they take awhile to have an effect. They're doing things on a lot of fronts. But you can't produce a baby in one month by getting nine women pregnant, you know. (Laughs.) It just doesn't work that way. So you can be throwing things at the economy and they will have an impact, but they haven't had much impact yet. And unemployment will go high and it will lag the turn up of the economy.
BECKY: But has Washington done enough that you think they can turn their sights to other problems that exist?
BUFFETT: Well, they've turned their sights to other problems, but this problem is not yet solved. And it's the most important problem we have.
BECKY: It continues to be? You don't think any of the urgency has come away?
BUFFETT: No, I don't think the urgency has come away. The urgency has moved away from a total meltdown of the financial sector which we faced last fall. I've never seen anything like that. But I would give enormous credit to the people there. (Federal Reserve Chairman) Bernanke did a fabulous job. We were right at the point where people lost faith in money-market funds, when commercial paper stopped being issued. People would be having a problem meeting their payroll, very big companies, if that hadn't gotten addressed very quickly. And I give credit to people for doing that. So that part, we've moved past that particular period. We haven't got the economy going again.
BECKY: You mentioned that you think Ben Bernanke did a good job. Today is an FOMC meeting day. We're going to be hearing more about that at 2:15 today. Do you think Ben Bernanke should be reappointed to a second term?
BUFFETT: I don't see how you could do better. Yeah. He has taken decisive action at a time when really decisive action was needed, and extraordinary action, things that we hadn't done before. If he hadn't of done -- I give the Bush administration credit on this. (Former Treasury Secretary) Hank Paulson. They don't do everything perfectly. Nobody does. And we were getting balls thrown at your head by the hour. You're going to make some mistakes. But they got us through a period that, if we had different people in those jobs, I'm not so sure we would have gotten through.
BECKY: Well now you do have different people on those jobs. You have (National Economic Council Director) Larry Summers, who is advising the president. You have (Treasury Secretary) Tim Geithner who's there. You have Ben Bernanke. What do you think of the troika today?
BUFFETT: I think you've got three very, the people you named are very, very good. And I think Bernanke is very much the key. The Fed came through for us.
BECKY: You haven't commented since the Obama administration rolled out these new regulatory overhaul plans that they've been looking at. What do you think overall about it? There's a consumer protection agency that's involved with this. There's a lot of other different arenas. But is this the right, is this a step in the right direction?
BUFFETT: We'll see how the statute reads. But basically we got way overleveraged in the financial arena. And the American public got overleveraged too. We do need something to address that. We do need something to address institutions where the wrong incentives are in place so that their personal incentives are at real variance with what our national incentives should be. We need something to make sure we don't get into the situation again that we were in last September. And leverage is a big key to it. Now that's a huge problem to attack and how it's written and how it's administered is not an easy job.
BECKY: Can you lay that down as a rule? Should it be that you can't be levered more than 10-to-1? You can't be leveraged up more than 20-to-1? How do you figure out?
BUFFETT: And it's very difficult. And you can't lay down a rule like that, unfortunately. Because just through derivatives you can have an enormous amount of leverage that doesn't show and you can have an inter-connectedness that causes one domino to hit the next. It is not a simple problem. You don't just write down leverage of 10 or 20 to one or something of the sort. There's all kinds of different leverage. You can leverage against home mortgages with big down payments and that will be relatively safe. You can leverage against somebody else who's leveraged and you've got troubles getting compounded. So it's not a simple problem but it is an important problem.
BECKY: Is it one that can be tackled? Is there a solution, a potential solution?
BUFFETT: It's not easy. It's not easy. You need somebody - you need reasonable rules, and you need a very, very good administrator or group of administrators doing it. It's not an easy problem. People like to go to excesses. And the incentives are, in a market system, to overshoot. And it's happened over the years. America's genius has not been in avoiding problems, it's been in surmounting them once they happen. And fortunately, you know, we've come through again on that.
BECKY: So you're not saying it's an impossible task but it doesn't sound like you're very hopeful we can prevent something like this from happening again?
BUFFETT: I think that what started out with a tulip, maybe four-hundred years ago, and continued through the South Sea Bubble and all of those sorts of things, it's in human nature to go to excess. And it's very hard, in a country of 300-million people and a 14-trillion dollar GDP and all of that, to set up a set of rules that will prevent excesses in a market system. But I think there can be improvements made and I think that's what we're shooting for.
BECKY: When we sat down with you here last year, you said inflation was a very big worry for you. What do you see today? Do you worry about inflation or deflation?
BUFFETT: Well, I don't worry about deflation at all. We won't see deflation in any significant amount in your lifetime, which is more relevant than my lifetime. We've taken action in fighting the economic war that we face that certainly sows the seeds of substantial inflation down the road. Not in the next six months or year or two years, but we have done things that raise the probability of really high rates of inflation at some point. We're flooding the system with dollars. We're monitizing debt. We're doing all the things that lead to that. Now those are appropriate things to do. Our economy was like a fellow going down in quicksand last September and up to his shoulders, and somebody tosses a rope. You can tie it around and yank him out with a truck, you may dislocate a couple of shoulders but it's still pays to get him out. And we may dislocate the economy in certain ways. There's really no choice. But we could see a lot of inflation.
BECKY: You mentioned that the financial system was in tatters just last year. It's turned around quite a bit. In fact, some of the big banks have been paying back TARP money, or have made plans to pay back that TARP money. One of your big investments, though, Wells Fargo , has not. Does that put Wells Fargo at a disadvantage?
BUFFETT: Well, it doesn't put them at a disadvantage with the person on the street that's putting in deposits. And they've got the widest spreads, really, in terms of interest income of anybody. But I'm sure they would like to get out of TARP. There's been unanimity among the people in the TARP plan that they want to get out as fast as possible, so I'm sure they'd like to get out at Wells. But from my standpoint, the earning power of Wells is dramatic with or without the TARP money.
BECKY: So, with or without, it doesn't matter to you as an investor?
BUFFETT: It doesn't really, no, no. I wish they didn't have the warrants outstanding that came with the TARP money because that's a call on the future profits of it, but the government set the terms on it. They just signed a blank piece of paper.
BECKY: Over the last few days, Steve Jobs and Apple's board have gotten a lot of attention because of the disclosure, or lack of disclosure of the liver transplant that he had while he was out. You're someone who has also gotten some criticism about your succession plans. What do you think about how the Apple board went about it and do you think that criticism there has been fair?
BUFFETT: Well, I think it probably has. I think if I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American, the Berkshire shareholders about it. I work for 'em. Some people might think I'm important to the company. Certainly Steve Jobs is important to Apple. So it's a material fact. Whether he is facing serious surgery or not is a material fact. Whether I'm facing serious surgery is a material fact. Whether (General Electric CEO) Jeff Immelt is, I mean, so I think that's important to get out. They're going to find out about it anyway so I don't see a big privacy issue or anything of the sort.
BECKY: Just this past week, the Class B shares of Berkshire were able to start trading options on them. What happened? Why did you do that and what's it mean?
BUFFETT: They didn't ask me.
BECKY: What does it mean for the stock though?
BUFFETT: Well, it means people can speculate on it instead of invest in it and I'm basically not for it. We have the lowest turnover of any stock in the New York Stock Exchange by far. We've got more real owners. People buy our stock to own a piece of the business. The people that buy puts or calls, or sell puts or calls, are just betting on what it's going to do in the short term. So it's no plus to us. It is no big minus either. I don't think there will be a lot of trading in it.
BECKY: It doesn't bother you?
BUFFETT: No. If I had my choice it wouldn't happen, but it doesn't bother me.
BECKY: You know, cap and trade is something we talked about when we spoke with you back in May as well. And you raised some of the issues and concerns you have about cap and trade. It does look like it is still on the agenda for right now. So is health care. Does it concern you to see Washington, Congress and the administration, moving on some of these big initiatives while you're still concerned about the economy?
BUFFETT: Well, I think if they're important issues and they get well thought out solutions. It is important that we move on carbon emissions. It's important we move on health care. But I don't think they should be jammed through in a hurry. But those are issues that should be addressed by America. But I do think the economy is number one.
BECKY: You said you didn't like cap and trade especially in this economy though, because it puts a tax on people.
BUFFETT: I think if you get into the way it was written, it's a huge tax and there's no sense calling it anything else. I mean, it is a tax. And it's a fairly regressive tax. If we buy permits, essentially, at our utilities, that goes right into the bills of the utility customers and an awful lot of people in Iowa, in Oregon, and Utah, and places where we are, very poor people are going to pay a lot more money for electricity. So I think that can be improved.
BECKY: And finally, the last question. You've written about the economy and where you see the stock market in the past. You wrote an op-ed for the New York Times. How are your thoughts on where the stock market stands right now compared to where you saw it then?
BUFFETT: Well, I think it's attractive over the next ten years compared to alternatives. If your alternative is buying some fixed-dollar investment, I think inflation will eat away at that. I think it's almost certain over a ten-year period that equities will do better than fixed-dollar investments. So, if people are keeping their money in cash and getting virtually nothing for it they may feel comfortable, but it will be very expensive for them over time.
http://www.cnbc.com/id/31526815
24 Jun 2009 04:05 PM ET
Warren Buffett appeared live on CNBC with Becky Quick today, Wednesday, June 24, 2009.
Buffett told us the economy is in a "shambles" with no signs of a recovery anytime soon. He also criticized Apple for not disclosing earlier that CEO Steve Jobs had received a liver transplant.
This is a complete transcript of their conversation:
BECKY QUICK: We are here at Smith & Wollensky where Warren Buffett is paying off last year's winner for this auction. This is, right now there's another auction underway. And this is the tenth year in a row he's been doing this. Warren, we want to thank you very much for joining us.
WARREN BUFFETT: It's a pleasure.
BECKY: You've been doing this for 10 years, raising money for the Glide Foundation. Why the Glide Foundation?
BUFFETT: I think it's probably as remarkable a social organization as there is in the country, and it's run by Cecil Williams, who, for 45 years, has taken people that have hit bottom and said, 'You're still a worthwhile individual and we're going to do what we can for you in terms of housing, medicine, vocational training and you're going to become the kind of person that you can become.' He believes in people and he carries it out every day and I've never found a more effective place at lifting people from bottom.
BECKY: This year's winner, last year's winner showing up today, Zhao Danyang, who is someone who paid 2.1 million dollars. That's a remarkable amount of money that's out there. Last year, obviously, the markets were in a very different place than they are this year. The auction is underway. I know the bidding goes through Sunday. (Note: Bidding actually ends this coming Friday at 10p ET). Do you think someone can bid as much as you saw last year?
BUFFETT: (Laughs.) Well it surprised me last year. They have qualified a number of bidders that are good for very big figures. They make sure of that beforehand. So we'll see what happens. (Laughs.) Two-point-one million is a pretty good number to shoot for. I hope I don't have to leave a 10 percent tip at the end of the lunch. (Laughs.)
BECKY: The last time we sat down to talk to you was on May 4, and at that point you told us that you think we're in an economic war right now. How much progress do you think we've made in that war?
BUFFETT: Well, it's been pretty flat. I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report, I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true.
BECKY: We hear people on our air all the time who talk about the 'green shoots' that they're seeing. Are you seeing any of those green shoots?
BUFFETT: (Laughs.) I looked. I wasn't seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet.
BECKY: Earlier this year you also told us that you think Washington and the Obama administration should be paying attention to jobs, that's the number one, jobs and the economy is the number one, the number two, and the number three job that they should be doing. Has there been progress made at all on that front?
BUFFETT: Well, they're doing thing but they take awhile to have an effect. They're doing things on a lot of fronts. But you can't produce a baby in one month by getting nine women pregnant, you know. (Laughs.) It just doesn't work that way. So you can be throwing things at the economy and they will have an impact, but they haven't had much impact yet. And unemployment will go high and it will lag the turn up of the economy.
BECKY: But has Washington done enough that you think they can turn their sights to other problems that exist?
BUFFETT: Well, they've turned their sights to other problems, but this problem is not yet solved. And it's the most important problem we have.
BECKY: It continues to be? You don't think any of the urgency has come away?
BUFFETT: No, I don't think the urgency has come away. The urgency has moved away from a total meltdown of the financial sector which we faced last fall. I've never seen anything like that. But I would give enormous credit to the people there. (Federal Reserve Chairman) Bernanke did a fabulous job. We were right at the point where people lost faith in money-market funds, when commercial paper stopped being issued. People would be having a problem meeting their payroll, very big companies, if that hadn't gotten addressed very quickly. And I give credit to people for doing that. So that part, we've moved past that particular period. We haven't got the economy going again.
BECKY: You mentioned that you think Ben Bernanke did a good job. Today is an FOMC meeting day. We're going to be hearing more about that at 2:15 today. Do you think Ben Bernanke should be reappointed to a second term?
BUFFETT: I don't see how you could do better. Yeah. He has taken decisive action at a time when really decisive action was needed, and extraordinary action, things that we hadn't done before. If he hadn't of done -- I give the Bush administration credit on this. (Former Treasury Secretary) Hank Paulson. They don't do everything perfectly. Nobody does. And we were getting balls thrown at your head by the hour. You're going to make some mistakes. But they got us through a period that, if we had different people in those jobs, I'm not so sure we would have gotten through.
BECKY: Well now you do have different people on those jobs. You have (National Economic Council Director) Larry Summers, who is advising the president. You have (Treasury Secretary) Tim Geithner who's there. You have Ben Bernanke. What do you think of the troika today?
BUFFETT: I think you've got three very, the people you named are very, very good. And I think Bernanke is very much the key. The Fed came through for us.
BECKY: You haven't commented since the Obama administration rolled out these new regulatory overhaul plans that they've been looking at. What do you think overall about it? There's a consumer protection agency that's involved with this. There's a lot of other different arenas. But is this the right, is this a step in the right direction?
BUFFETT: We'll see how the statute reads. But basically we got way overleveraged in the financial arena. And the American public got overleveraged too. We do need something to address that. We do need something to address institutions where the wrong incentives are in place so that their personal incentives are at real variance with what our national incentives should be. We need something to make sure we don't get into the situation again that we were in last September. And leverage is a big key to it. Now that's a huge problem to attack and how it's written and how it's administered is not an easy job.
BECKY: Can you lay that down as a rule? Should it be that you can't be levered more than 10-to-1? You can't be leveraged up more than 20-to-1? How do you figure out?
BUFFETT: And it's very difficult. And you can't lay down a rule like that, unfortunately. Because just through derivatives you can have an enormous amount of leverage that doesn't show and you can have an inter-connectedness that causes one domino to hit the next. It is not a simple problem. You don't just write down leverage of 10 or 20 to one or something of the sort. There's all kinds of different leverage. You can leverage against home mortgages with big down payments and that will be relatively safe. You can leverage against somebody else who's leveraged and you've got troubles getting compounded. So it's not a simple problem but it is an important problem.
BECKY: Is it one that can be tackled? Is there a solution, a potential solution?
BUFFETT: It's not easy. It's not easy. You need somebody - you need reasonable rules, and you need a very, very good administrator or group of administrators doing it. It's not an easy problem. People like to go to excesses. And the incentives are, in a market system, to overshoot. And it's happened over the years. America's genius has not been in avoiding problems, it's been in surmounting them once they happen. And fortunately, you know, we've come through again on that.
BECKY: So you're not saying it's an impossible task but it doesn't sound like you're very hopeful we can prevent something like this from happening again?
BUFFETT: I think that what started out with a tulip, maybe four-hundred years ago, and continued through the South Sea Bubble and all of those sorts of things, it's in human nature to go to excess. And it's very hard, in a country of 300-million people and a 14-trillion dollar GDP and all of that, to set up a set of rules that will prevent excesses in a market system. But I think there can be improvements made and I think that's what we're shooting for.
BECKY: When we sat down with you here last year, you said inflation was a very big worry for you. What do you see today? Do you worry about inflation or deflation?
BUFFETT: Well, I don't worry about deflation at all. We won't see deflation in any significant amount in your lifetime, which is more relevant than my lifetime. We've taken action in fighting the economic war that we face that certainly sows the seeds of substantial inflation down the road. Not in the next six months or year or two years, but we have done things that raise the probability of really high rates of inflation at some point. We're flooding the system with dollars. We're monitizing debt. We're doing all the things that lead to that. Now those are appropriate things to do. Our economy was like a fellow going down in quicksand last September and up to his shoulders, and somebody tosses a rope. You can tie it around and yank him out with a truck, you may dislocate a couple of shoulders but it's still pays to get him out. And we may dislocate the economy in certain ways. There's really no choice. But we could see a lot of inflation.
BECKY: You mentioned that the financial system was in tatters just last year. It's turned around quite a bit. In fact, some of the big banks have been paying back TARP money, or have made plans to pay back that TARP money. One of your big investments, though, Wells Fargo , has not. Does that put Wells Fargo at a disadvantage?
BUFFETT: Well, it doesn't put them at a disadvantage with the person on the street that's putting in deposits. And they've got the widest spreads, really, in terms of interest income of anybody. But I'm sure they would like to get out of TARP. There's been unanimity among the people in the TARP plan that they want to get out as fast as possible, so I'm sure they'd like to get out at Wells. But from my standpoint, the earning power of Wells is dramatic with or without the TARP money.
BECKY: So, with or without, it doesn't matter to you as an investor?
BUFFETT: It doesn't really, no, no. I wish they didn't have the warrants outstanding that came with the TARP money because that's a call on the future profits of it, but the government set the terms on it. They just signed a blank piece of paper.
BECKY: Over the last few days, Steve Jobs and Apple's board have gotten a lot of attention because of the disclosure, or lack of disclosure of the liver transplant that he had while he was out. You're someone who has also gotten some criticism about your succession plans. What do you think about how the Apple board went about it and do you think that criticism there has been fair?
BUFFETT: Well, I think it probably has. I think if I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the American, the Berkshire shareholders about it. I work for 'em. Some people might think I'm important to the company. Certainly Steve Jobs is important to Apple. So it's a material fact. Whether he is facing serious surgery or not is a material fact. Whether I'm facing serious surgery is a material fact. Whether (General Electric CEO) Jeff Immelt is, I mean, so I think that's important to get out. They're going to find out about it anyway so I don't see a big privacy issue or anything of the sort.
BECKY: Just this past week, the Class B shares of Berkshire were able to start trading options on them. What happened? Why did you do that and what's it mean?
BUFFETT: They didn't ask me.
BECKY: What does it mean for the stock though?
BUFFETT: Well, it means people can speculate on it instead of invest in it and I'm basically not for it. We have the lowest turnover of any stock in the New York Stock Exchange by far. We've got more real owners. People buy our stock to own a piece of the business. The people that buy puts or calls, or sell puts or calls, are just betting on what it's going to do in the short term. So it's no plus to us. It is no big minus either. I don't think there will be a lot of trading in it.
BECKY: It doesn't bother you?
BUFFETT: No. If I had my choice it wouldn't happen, but it doesn't bother me.
BECKY: You know, cap and trade is something we talked about when we spoke with you back in May as well. And you raised some of the issues and concerns you have about cap and trade. It does look like it is still on the agenda for right now. So is health care. Does it concern you to see Washington, Congress and the administration, moving on some of these big initiatives while you're still concerned about the economy?
BUFFETT: Well, I think if they're important issues and they get well thought out solutions. It is important that we move on carbon emissions. It's important we move on health care. But I don't think they should be jammed through in a hurry. But those are issues that should be addressed by America. But I do think the economy is number one.
BECKY: You said you didn't like cap and trade especially in this economy though, because it puts a tax on people.
BUFFETT: I think if you get into the way it was written, it's a huge tax and there's no sense calling it anything else. I mean, it is a tax. And it's a fairly regressive tax. If we buy permits, essentially, at our utilities, that goes right into the bills of the utility customers and an awful lot of people in Iowa, in Oregon, and Utah, and places where we are, very poor people are going to pay a lot more money for electricity. So I think that can be improved.
BECKY: And finally, the last question. You've written about the economy and where you see the stock market in the past. You wrote an op-ed for the New York Times. How are your thoughts on where the stock market stands right now compared to where you saw it then?
BUFFETT: Well, I think it's attractive over the next ten years compared to alternatives. If your alternative is buying some fixed-dollar investment, I think inflation will eat away at that. I think it's almost certain over a ten-year period that equities will do better than fixed-dollar investments. So, if people are keeping their money in cash and getting virtually nothing for it they may feel comfortable, but it will be very expensive for them over time.
http://www.cnbc.com/id/31526815
Thursday, June 4, 2009
Fund Managers can become farmers: Jim Rogers
Fund Managers can become farmers: Jim Rogers
4 Jun 2009, 0005 hrs IST, ET Bureau
Even if you are outright bearish, don't short the market. Stocks could touch crazy levels, but they may be in currencies which are worthless.
Indeed, a sovereign default and currency turmoil could rattle world markets in a year or two. In a chat with ET, global investor Jim Rogers says cotton, silver and sugar can be hot picks. Read on.
At one stage we were inundated with gloomy forecasts, which were further reinforced by the IMF and World Bank. And then suddenly stocks surged — something most were not prepared for. How risky is the market today?
Central banks all over the world have printed huge amounts of money, and the real economy is not strong enough for all this money to be absorbed... so, it's going into stocks and real assets such as commodities. It's a mistake what they are doing. It's giving short-term pleasure, but there's long-term pain as we are going to have much higher inflation, much higher interest rates and a worse economy down the road.
The American bond market is already beginning to go down dramatically as people realise that the American government has to sell huge amount of bonds, and secondly, there is going to be inflation, serious inflation, as it was always in the past when you had governments printing huge amounts of money.
Stocks are rising even as fiscal deficit is widening. Somewhere it has to snap...
It's going to snap. Later this year, next year, we are going to have currency problems, maybe even a currency crisis. I don't know with which currency — maybe with the pound sterling, maybe with the US dollar, who knows. It maybe with something none of us have at the moment. When you have a currency crisis, stocks will be affected, many things will be affected. It is not sound, what's happening out there in the world.
In the 1930s, we had a huge stock market bubble which popped. And then politicians started making many mistakes. They became protectionist. They made solvent banks take over insolvent banks and then both banks failed in the end.
They are doing many of the same mistakes now. What's different this time is that we are printing huge amounts of money which they did not print at that time. So, we are going to have inflation this time.
What do you do? No politically-elected government can afford so much pain, unemployment and hardships...
America could have. America just had an election. The guy was elected in November and he could have come in the beginning of a four-year term and said the guys before me were hopeless idiots. They ruined things. We have to solve this problem. We have to take some pains now. But don't worry, we will get through this pain, and in two to three years or four years, things would be fine. And he could have been re-elected.
If the pain comes in 2010, 2011 or 2012, there will be nobody he can blame. Especially, if things go bad later, the opposition will say, wait a minute, 2009 looked good. The next guy is going to say you did it... But you are right. It's very difficult for an elected government. You have a newly-elected government in India. Whenever you have a new government they can take some of the pain.
You recently said that you would invest in China and Sri Lanka but not in India. Aren’t you betting on the new government in India?
I was trying to make a point that if anyone wants to invest in this particular part of the world, the best place would be Sri Lanka. Because it looks like the 30-year war is coming to an end.
Throughout history, if you go to a place after the war ends you usually find everything as very cheap, everyone is demoralised, people are just depressed and there are enormous opportunities if you have energy.
In my view, investing in Sri Lanka in May 2009 is probably a better bet than Pakistan, Bangladesh, India or some of the other countries nearby. Let's hope the new Indian government does something. I have heard wonderful things from Indian politicians for 40 years.
And rarely do they produce. It's not the first time that the Congress party has been in the power. If they mean it, India's going to be one of the greatest development stories in the next 20 years. But I don’t know if they mean it.
What kind of reforms?
Why isn't the currency convertible, why isn't foreign capital encouraged, why isn't foreign expertise encouraged, why is it so protectionist? Why are farmers only allowed to own five hectares? India should be the greatest farming nation in the world. You have the soil, the weather, you have everything and yet an Indian farmer can own only five hectares.
How can an Indian farmer compete with a guy in Ireland who can own 1,000 hectares or a guy in Brazil who can own 5,000 hectares? Smart people don't become farmers. Because what's the future? Whenever prices start going up, Indian politicians ban futures trading, as if futures trading makes prices go up. It's the craziest and the most absurd thing in the whole world. Prices go up because there is a reason for prices to go up.
Last year you were buying only Chinese stocks. Why?
The market collapsed in October-November. That's when I bought more Chinese shares. I have not bought any Chinese shares since then. I have not bought shares anywhere in the world since then. My way of participating in what's going on now is to buy commodities.
In my view, commodities are the only place where fundamentals are improving. Farmers can't get loans for fertilisers now, even though inventories of food are the lowest in decades. Nobody can get a loan to open a mine. So, you will have supplies of everything continuing to decline.
What else are you looking at while investing?
There are some industries in India that would do exceedingly well in the next few years, one of which is water. You have a horrible water problem. China also has a horrible water problem. So, I bought water companies in China. There are some great opportunities if America falls off the face of the earth. China is spending hundreds of billions of dollars to solve the agricultural problem.
So, I am buying agricultural stocks and water stocks in China. There are other industries in India which have a great future. I am very bullish on Indian tourism. Wherever I go for speeches around the world I tell people, if you have to go to one country in your lifetime, you should go to India.
Your government is going to re-build the military, they say. So, there's going to be great opportunities here. Also, they may build the infrastructure. So, I see many opportunities in India.
The possibility of a sovereign default in the developed world could further depress sentiments. You think it’s possible?
In 1918, the UK was the richest and the most powerful country in the world. Within one generation it was in shambles, within two-and-a-half generations it defaulted. The UK defaulted in 1970s and had to be bailed out by the IMF. Many of the countries in the developed world are in serious trouble right now.
Iceland has already defaulted. I think there could be a currency crisis because of sovereign debt problems later this year, next year or 2011. Developed nations have defaulted before. Remember the Asian crisis. It was a default of one kind or the other. It has happened before and it will happen again.
Are you worried about any particular market or region?
I am glad that I have no investments in the UK. Neither long, nor short. I am convinced that it’s in trouble. I am worried about the US. I have sold nearly all of my US dollars. I always had some as I am an American citizen. But I see serious problems developing there. Those two of the big developed countries are the ones that I see with the most likely problems.
But the problem is that it never works that way. Everybody is sitting here watching the UK and US and it may happen in say Portugal or some place we haven’t thought of and it will come suddenly to surprise us all.
If US unemployment touches the 10%-mark, it would further impact retail sales. How bad could this be for Asia?
Let's pick on China for a minute. If you sell to Wal-Mart in the US and if you are a Chinese supplier you know there is a problem. And you are going to be suffering. Any company that deals with the West is going to have problems. On the other hand, companies that are in the water-treatment business in Asia will care less if the West disappears. They are too busy making money, too busy going to work everyday.
What kind of commodities will smart money chase? Can money be made in crude?
I own gold but think silver is better right now. Natural gas is cheaper than oil right now, but I own them all. If you want to buy crude, you should probably buy cotton. Because all farmers in the US are planting corn to turn into energy. That means they are not going to plant any cotton. The best way to play crude oil is to buy cotton.
Right now, there are huge subsidies around the world for farmers to plant corn, maize, for instance, so that they can be converted into energy. If energy prices go higher, there will be even more of that.
If everybody plants his fields with soya, corn or palm oil to turn it into oil or energy then no one is going to plant cotton.
And you can make a lot more money in cotton than oil. Between oil and gold, buy cotton. Between oil and gold buy silver. The other way to invest in oil is to buy sugar as everybody is converting a lot of sugar into energy.
Silver is so much cheaper on a historic basis. And gold is near its all-time high. Silver is 75% below its all-time high. So, I would suspect that silver and cotton are going to do better than gold and oil.
Global population is close to its peak and genetically-modified crops will increase productivity. What makes you so bullish on agriculture?
It doesn't matter. The world has been consuming more than it produced. Food inventories are at a multi-decade low. And we haven't had any bad weather. We had isolated cases of droughts and things. That may never happen again. But if it does, the prices of food would go through the roof.
If there is climate change taking place, the best way to participate is through agriculture or through agriculture products. There are many positive things happening. Right now, there is a shortage of everything in agriculture — seeds, fertilisers, tractors, tractor tyres. We have a shortage of farmers because farming has been a horrible business for the past 30 years.
What kind of a market are you witnessing now?
It's a bear market rally. I was going to say I don't think S&P 500 will see new highs. But I have to quickly temper that by saying against the dollar because the S&P 500 could triple from here if they print enough money and the value of the US dollar collapses, then S&P could go to 50,000, Dow Jones can go to 1,00,000.
Which is one reason why I am not shorting stocks right now. Because there is a possibility of this sort of a thing. There is a possibility that stocks could go through unheard of levels, but would be in worthless currency.
That naturally brings us to the debate on a new international reserve currency
Several countries have raised the issue once again. The US dollar is terribly flawed right now. Something has to be done to the US dollar and something will be done just as something was done about the pound sterling. After World War II, people stopped using the pound sterling and converted to the dollar for many reasons. Something's going to be done about the dollar.
We are much closer to be doing something about it or will be forced to do something about it. India was forced to change in 1991 and the world will be forced to change the currency situation in the foreseeable future.
There is already an underlying fear that this mountain of cash will chase assets and eventually force central banks to mop up liquidity. How do you think this would play out?
I know they all say, 'Don't worry, we will reverse gears and take the excess liquidity out in time.' I don't believe them for a minute. No one has ever done it that way. When central bankers started trying to, it caused so much pain that they quickly reversed or have got rid of that central banker and put somebody else in.
I just don't think they could do it. That's why I am worried about the bond market and the inflation. If all central banks do it together, that's going to lead to higher unemployment, riots in the streets, civil unrests.
Your track record as an investor has been more than impressive. But in todays market can you replicate your performance of the past 20 years?
One can. I probably cannot as I am not spending enough time at it. But it can be done. There are going to be people who we will read about in 20 years having made legendary fortunes starting now. In the 1930s, there were people who built huge fortunes and laid the foundations like Templeton.
He started in the 1930s. He saw opportunities and took advantage. These are people who saw great advantages and opportunities in the 1930s, acted and became fantastic successes. There may be somebody out there now. I don’t know who she is. Maybe she is in Brazil, China or India.
What will you tell a confused fund manager who seeks your advice?
Become a farmer. The world has tens of thousands of hotshot fund managers right now. If I am correct, the financial community is not going to be a great place to be in for the next 30 years. We have many periods in history when financial people were in charge, we had many periods when people who produced real goods were in charge — miners, farmers, etc.
The world, in my view, is changing and is shifting away from the financial types to producers of real goods, and this is going to last for several decades as it always has. This may sound strange but it always happens this way. Ten years from now, it may be farmers who will drive the Lamborghinis and the stock brokers will drive tractors or taxis at best.
http://economictimes.indiatimes.com/articleshow/4610704.cms?prtpage=1
4 Jun 2009, 0005 hrs IST, ET Bureau
Even if you are outright bearish, don't short the market. Stocks could touch crazy levels, but they may be in currencies which are worthless.
Indeed, a sovereign default and currency turmoil could rattle world markets in a year or two. In a chat with ET, global investor Jim Rogers says cotton, silver and sugar can be hot picks. Read on.
At one stage we were inundated with gloomy forecasts, which were further reinforced by the IMF and World Bank. And then suddenly stocks surged — something most were not prepared for. How risky is the market today?
Central banks all over the world have printed huge amounts of money, and the real economy is not strong enough for all this money to be absorbed... so, it's going into stocks and real assets such as commodities. It's a mistake what they are doing. It's giving short-term pleasure, but there's long-term pain as we are going to have much higher inflation, much higher interest rates and a worse economy down the road.
The American bond market is already beginning to go down dramatically as people realise that the American government has to sell huge amount of bonds, and secondly, there is going to be inflation, serious inflation, as it was always in the past when you had governments printing huge amounts of money.
Stocks are rising even as fiscal deficit is widening. Somewhere it has to snap...
It's going to snap. Later this year, next year, we are going to have currency problems, maybe even a currency crisis. I don't know with which currency — maybe with the pound sterling, maybe with the US dollar, who knows. It maybe with something none of us have at the moment. When you have a currency crisis, stocks will be affected, many things will be affected. It is not sound, what's happening out there in the world.
In the 1930s, we had a huge stock market bubble which popped. And then politicians started making many mistakes. They became protectionist. They made solvent banks take over insolvent banks and then both banks failed in the end.
They are doing many of the same mistakes now. What's different this time is that we are printing huge amounts of money which they did not print at that time. So, we are going to have inflation this time.
What do you do? No politically-elected government can afford so much pain, unemployment and hardships...
America could have. America just had an election. The guy was elected in November and he could have come in the beginning of a four-year term and said the guys before me were hopeless idiots. They ruined things. We have to solve this problem. We have to take some pains now. But don't worry, we will get through this pain, and in two to three years or four years, things would be fine. And he could have been re-elected.
If the pain comes in 2010, 2011 or 2012, there will be nobody he can blame. Especially, if things go bad later, the opposition will say, wait a minute, 2009 looked good. The next guy is going to say you did it... But you are right. It's very difficult for an elected government. You have a newly-elected government in India. Whenever you have a new government they can take some of the pain.
You recently said that you would invest in China and Sri Lanka but not in India. Aren’t you betting on the new government in India?
I was trying to make a point that if anyone wants to invest in this particular part of the world, the best place would be Sri Lanka. Because it looks like the 30-year war is coming to an end.
Throughout history, if you go to a place after the war ends you usually find everything as very cheap, everyone is demoralised, people are just depressed and there are enormous opportunities if you have energy.
In my view, investing in Sri Lanka in May 2009 is probably a better bet than Pakistan, Bangladesh, India or some of the other countries nearby. Let's hope the new Indian government does something. I have heard wonderful things from Indian politicians for 40 years.
And rarely do they produce. It's not the first time that the Congress party has been in the power. If they mean it, India's going to be one of the greatest development stories in the next 20 years. But I don’t know if they mean it.
What kind of reforms?
Why isn't the currency convertible, why isn't foreign capital encouraged, why isn't foreign expertise encouraged, why is it so protectionist? Why are farmers only allowed to own five hectares? India should be the greatest farming nation in the world. You have the soil, the weather, you have everything and yet an Indian farmer can own only five hectares.
How can an Indian farmer compete with a guy in Ireland who can own 1,000 hectares or a guy in Brazil who can own 5,000 hectares? Smart people don't become farmers. Because what's the future? Whenever prices start going up, Indian politicians ban futures trading, as if futures trading makes prices go up. It's the craziest and the most absurd thing in the whole world. Prices go up because there is a reason for prices to go up.
Last year you were buying only Chinese stocks. Why?
The market collapsed in October-November. That's when I bought more Chinese shares. I have not bought any Chinese shares since then. I have not bought shares anywhere in the world since then. My way of participating in what's going on now is to buy commodities.
In my view, commodities are the only place where fundamentals are improving. Farmers can't get loans for fertilisers now, even though inventories of food are the lowest in decades. Nobody can get a loan to open a mine. So, you will have supplies of everything continuing to decline.
What else are you looking at while investing?
There are some industries in India that would do exceedingly well in the next few years, one of which is water. You have a horrible water problem. China also has a horrible water problem. So, I bought water companies in China. There are some great opportunities if America falls off the face of the earth. China is spending hundreds of billions of dollars to solve the agricultural problem.
So, I am buying agricultural stocks and water stocks in China. There are other industries in India which have a great future. I am very bullish on Indian tourism. Wherever I go for speeches around the world I tell people, if you have to go to one country in your lifetime, you should go to India.
Your government is going to re-build the military, they say. So, there's going to be great opportunities here. Also, they may build the infrastructure. So, I see many opportunities in India.
The possibility of a sovereign default in the developed world could further depress sentiments. You think it’s possible?
In 1918, the UK was the richest and the most powerful country in the world. Within one generation it was in shambles, within two-and-a-half generations it defaulted. The UK defaulted in 1970s and had to be bailed out by the IMF. Many of the countries in the developed world are in serious trouble right now.
Iceland has already defaulted. I think there could be a currency crisis because of sovereign debt problems later this year, next year or 2011. Developed nations have defaulted before. Remember the Asian crisis. It was a default of one kind or the other. It has happened before and it will happen again.
Are you worried about any particular market or region?
I am glad that I have no investments in the UK. Neither long, nor short. I am convinced that it’s in trouble. I am worried about the US. I have sold nearly all of my US dollars. I always had some as I am an American citizen. But I see serious problems developing there. Those two of the big developed countries are the ones that I see with the most likely problems.
But the problem is that it never works that way. Everybody is sitting here watching the UK and US and it may happen in say Portugal or some place we haven’t thought of and it will come suddenly to surprise us all.
If US unemployment touches the 10%-mark, it would further impact retail sales. How bad could this be for Asia?
Let's pick on China for a minute. If you sell to Wal-Mart in the US and if you are a Chinese supplier you know there is a problem. And you are going to be suffering. Any company that deals with the West is going to have problems. On the other hand, companies that are in the water-treatment business in Asia will care less if the West disappears. They are too busy making money, too busy going to work everyday.
What kind of commodities will smart money chase? Can money be made in crude?
I own gold but think silver is better right now. Natural gas is cheaper than oil right now, but I own them all. If you want to buy crude, you should probably buy cotton. Because all farmers in the US are planting corn to turn into energy. That means they are not going to plant any cotton. The best way to play crude oil is to buy cotton.
Right now, there are huge subsidies around the world for farmers to plant corn, maize, for instance, so that they can be converted into energy. If energy prices go higher, there will be even more of that.
If everybody plants his fields with soya, corn or palm oil to turn it into oil or energy then no one is going to plant cotton.
And you can make a lot more money in cotton than oil. Between oil and gold, buy cotton. Between oil and gold buy silver. The other way to invest in oil is to buy sugar as everybody is converting a lot of sugar into energy.
Silver is so much cheaper on a historic basis. And gold is near its all-time high. Silver is 75% below its all-time high. So, I would suspect that silver and cotton are going to do better than gold and oil.
Global population is close to its peak and genetically-modified crops will increase productivity. What makes you so bullish on agriculture?
It doesn't matter. The world has been consuming more than it produced. Food inventories are at a multi-decade low. And we haven't had any bad weather. We had isolated cases of droughts and things. That may never happen again. But if it does, the prices of food would go through the roof.
If there is climate change taking place, the best way to participate is through agriculture or through agriculture products. There are many positive things happening. Right now, there is a shortage of everything in agriculture — seeds, fertilisers, tractors, tractor tyres. We have a shortage of farmers because farming has been a horrible business for the past 30 years.
What kind of a market are you witnessing now?
It's a bear market rally. I was going to say I don't think S&P 500 will see new highs. But I have to quickly temper that by saying against the dollar because the S&P 500 could triple from here if they print enough money and the value of the US dollar collapses, then S&P could go to 50,000, Dow Jones can go to 1,00,000.
Which is one reason why I am not shorting stocks right now. Because there is a possibility of this sort of a thing. There is a possibility that stocks could go through unheard of levels, but would be in worthless currency.
That naturally brings us to the debate on a new international reserve currency
Several countries have raised the issue once again. The US dollar is terribly flawed right now. Something has to be done to the US dollar and something will be done just as something was done about the pound sterling. After World War II, people stopped using the pound sterling and converted to the dollar for many reasons. Something's going to be done about the dollar.
We are much closer to be doing something about it or will be forced to do something about it. India was forced to change in 1991 and the world will be forced to change the currency situation in the foreseeable future.
There is already an underlying fear that this mountain of cash will chase assets and eventually force central banks to mop up liquidity. How do you think this would play out?
I know they all say, 'Don't worry, we will reverse gears and take the excess liquidity out in time.' I don't believe them for a minute. No one has ever done it that way. When central bankers started trying to, it caused so much pain that they quickly reversed or have got rid of that central banker and put somebody else in.
I just don't think they could do it. That's why I am worried about the bond market and the inflation. If all central banks do it together, that's going to lead to higher unemployment, riots in the streets, civil unrests.
Your track record as an investor has been more than impressive. But in todays market can you replicate your performance of the past 20 years?
One can. I probably cannot as I am not spending enough time at it. But it can be done. There are going to be people who we will read about in 20 years having made legendary fortunes starting now. In the 1930s, there were people who built huge fortunes and laid the foundations like Templeton.
He started in the 1930s. He saw opportunities and took advantage. These are people who saw great advantages and opportunities in the 1930s, acted and became fantastic successes. There may be somebody out there now. I don’t know who she is. Maybe she is in Brazil, China or India.
What will you tell a confused fund manager who seeks your advice?
Become a farmer. The world has tens of thousands of hotshot fund managers right now. If I am correct, the financial community is not going to be a great place to be in for the next 30 years. We have many periods in history when financial people were in charge, we had many periods when people who produced real goods were in charge — miners, farmers, etc.
The world, in my view, is changing and is shifting away from the financial types to producers of real goods, and this is going to last for several decades as it always has. This may sound strange but it always happens this way. Ten years from now, it may be farmers who will drive the Lamborghinis and the stock brokers will drive tractors or taxis at best.
http://economictimes.indiatimes.com/articleshow/4610704.cms?prtpage=1
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