Checking in on Jim Rogers & George Soros ~ market folly

Tuesday, November 4, 2008

Checking in on Jim Rogers & George Soros

In keeping up with all the various hedge fund managers and 'whales,' I would be remiss if I did not include Jim Rogers and George Soros, co-founders of the legendary Quantum Fund. In a recent Canadian Business article, Jim Rogers sat down to share his thoughts.

"In fact, so convinced is Rogers of the commodities story that he has been buying agricultural products while selling U.S. dollars through this period. “The U.S. dollar is the most flawed currency in the world right now. I plan to sell all my U.S. dollar holdings on this boost. It’s losing its status as the reserve currency of the world,” said Rogers at a press conference before the dinner. “We owe the world $13 trillion and every 15 months we add another $1 trillion.

According to this theory, the drop off in commodity prices is just what the Chinese economy, already suffering from inflation, needs right now. The drop in prices will give the Chinese economy some breathing room. And if the country can avoid a major meltdown, the slack in western demand might be just the thing to allow China to increase its own consumption bubble. Not only that, but as China reduces its reliance on foreign exports we might see the country focus on more internal consumption, and that will see it pull in even more resources.

Let’s not overlook the fact that as prices drop, all kinds of new projects to bring more commodities online are being delayed. That means even less new supply online and ready to go once the world economies get back on the growth track. That is, the current price declines are piling fuel up for a new commodities boom, which sits just one recovery out says Rogers."

Additionally, Rogers recently appeared on Bloomberg to discuss his theses.

George Soros, on the other hand, sees a vast contraction in the hedge fund industry. He is not alone in this regard, as we also pointed out previously in our post 'Hedge Fund Redemptions: Let the Bloodbath Begin.' If the recent hedge fund performance numbers are any indication of the true pain felt in the broader industry, then Soros should be right on the money with this call as redemptions continue. Soros recently said,

" 'The hedge fund industry is going to move through a shakeout,' Soros said in a speech at the Massachusetts Institute of Technology in Cambridge, Massachusetts. 'In my estimation (the industry) will be reduced in size by anywhere between half and two thirds.' "

You can view the entirety of Soros' thoughts at MIT by clicking here (windows media file). Additionally, it should be noted that Soros definitely agrees with Rogers when it comes to agriculture. As we noted back in August, Soros had been picking up a lot of Potash (POT). And, we also recently posted Soros' in-depth interview with Fareed Zakaria.

Overall, these investing legends seem to harp on one major point: the commodities bull is not over, it is just beginning.

Sources: Canadian Business, MIT

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