Jim Rogers: Gold Might Deserve Substantial Correction in the Short Term

Jim Rogers, one the world’s best speculators along with George Soros, who co-founded the Quantum Fund with Soros in 1973, recently appeared on CNBC for an interview about different investing vehicles and his thoughts on his own positions.

Rogers has been famous for his bullish opinions on China, commodities and gold. I wrote previously about his opinion versus Marc Faber's on stocks, commodities (especially gold) and their views on China. He is very bullish on commodities, especially agriculture products. He believes that we are having a shortage of farmers, so agriculture will not do very well in the next 20-30 years. The reason for being bullish on commodities is that if the world gets better, he would make a lot of money because of shortages. And if the government kept printing money, the only way to protect oneself is to own the real assets. In terms of stocks, he is shorting emerging markets, American technology companies and European stocks.

On the debate about whether China will have a hard or soft landing, Jim Rogers said that some parts of China have experienced a hard landing, and the Chinese government has been trying to chill the real estate boom for the last two and a half years. They had raised the interest rates six times and the reserve requirement a dozen times to counteract it. They were going to pop the real estate bubble and they are doing it. But real estate is not all the Chinese economy is about. According to Rogers, some parts of the Chinese economy would be in a boom no matter what happened in the real estate conditions in China, particularly Shanghai.

On whether to choose between owning commodities or commodities stocks, Jim Rogers reminded us of the situations in the 1970s, when, while the stocks went down, they did nothing for the investors; the economy did nothing, yet the commodities prices themselves went through the roof. Yale University conducted a research study to show that investors had made 300% more investing in commodities rather than in commodities stocks broadly. Unless investors were very good stock pickers, the story might be different. For that reason, Rogers is sticking to real commodities himself.

In his emerging markets portfolio, he has been shorting India, Russia and similar places, but Brazil has a huge natural resources-based economy, so in a commodity boom market, it would do very well. But the government's actions made Rogers less bullish on Brazil. Currently, he is not shorting or longing Brazil, and has no positions there.

As usual, he claimed he is a terrible market timer as well as a terrible trader. We would not be surprised to see gold at $1200 - $1300. If it drops to that low, he will buy a lot more. Gold has gone up for 11 years or more, which is very unusual for any asset class. And because of that, it deserves a very substantial correction.

The full interview is here:

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