Jim Rogers Sees Opportunity in Silver and Palladium

From time to time, we like to check in on investment guru Jim Rogers to catch up on his thoughts on the markets and global economy. We do so of course due to his past success with the Quantum Fund he previously ran with George Soros. Nowadays, Rogers invests his money under Rogers Holdings and he has some pretty staunch viewpoints. Rogers himself proclaims he is a poor market timer. So while he may be early on an investment theme, he often finds and rides macro trends. To some, his views seem repetitive. But you must keep in mind that he very frequently appears in the media and is seemingly asked the same questions over and over. The last time we checked in on Jim Rogers we saw that he was shorting market indices. From all of these interviews, one of his stances has become abundantly clear: he loves commodities and in particular, precious metals.

In his recent slew of interviews, Rogers has proclaimed that he is fond of gold and still owns it. However, he is not buying more nor is he selling. In the end, he actually thinks gold will be a bubble in the distant future. For some reason he tosses out the year 2019 as his estimate, and it seems he thinks gold's reign will last a decade or so. He thinks this bubble top is a ways off because governments have been debasing their currencies at a rapid rate. Historically, he points out, this has always led to higher prices for real assets and he thinks this time will be no different.

Speaking on the subject of gold, Rogers says that, "I know the old (gold) high, adjusted for inflation, is over a couple thousand dollars an ounce. I know it'll get over that in the next decade. It depends on how much they debase the currencies. It's all part of the same picture... most governments everywhere only know one thing and that's to print and spend money that they don't have. Whenever you do that, it debases currency, always has, and until I see some governments realize that they have to do something else, then I plan to own gold and other precious metals and other real assets."

This of course is not the first time we've detailed a prominent investor's fascination with gold. John Paulson's hedge fund Paulson & Co started a gold fund mainly to bet against the US dollar and the currency debasement that Rogers centers his thesis around. We've also seen John Burbank's hedge fund Passport Capital lay out the rationale for owning physical gold. Not to mention, David Einhorn's Greenlight Capital has owned physical gold for some time now. Inflation is a very legitimate future concern for some of the top minds in the investment industry. Rogers is no different.

His main rationale here stems from the fact that many long-term bull markets end in hysteria and bubbles. He doesn't like to buy things at all time highs and that's pretty much where gold is trading these days. As such, Rogers' interest has been piqued by other metals.

If he had to buy a metal right now, he said he would focus on depressed metals such as silver or palladium. Rogers points out that silver is 60-70% below its all-time high while palladium is around 50-60% below its all-time high. He already owns all four metals: gold, silver, palladium, and platinum. Throughout all his interviews, he was very adamant that he was not selling his gold, but he was not buying more either.

Shifting to Rogers' views on currencies, he is particularly fond of the renminbi. While it is not his favorite overall investment due to liquidity concerns, it is the long-term investment he is most certain of. Rogers mentioned this last week in talking with Bloomberg. And on CNBC that same week, Rogers reaffirmed that he is still long commodities and short stocks due to the withdrawal of government stimulus and his anticipation that central banks will keep the printing presses rolling. This is directly in line with what we saw from Rogers' portfolio in early May.

Lastly, we wanted to highlight that Rogers has been eyeing the events surrounding the oil spill as well. We've already detailed how Whitney Tilson's T2 Partners has bought BP, citing valuation and extreme circumstances. Rogers hasn't quite gone that far yet, but it has definitely caught his eye. On the topic Rogers ponders, "Is it the end of BP? I doubt it. Somewhere along the line I expect that I will buy BP. But I'm not buying it now - just watching to see what happens." In his experience, he notes that disasters are usually a great time to buy. On that same note, he also cautions that there's usually plenty of time to buy into the opportunity presented by the problem. For the time being, Rogers is more than comfortable to wait and watch the proverbial knife drop before jumping in the (oil coated) water.

Embedded below is one of his recent television interviews with CNN Money where he talks about various topics of interest (email readers will need to come to the site to view it):



That wraps up the latest views and portfolio positioning from investment guru Jim Rogers. For more of his thoughts and to learn from this investment guru, check out Rogers' books, Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market as well as A Gift to My Children: A Father's Lessons for Life and Investing.

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Jim Rogers Shorting US & Emerging Market Indexes

A few months ago we detailed how Jim Rogers had started some short positions. At the time, he was pretty vague but we did get a market call from him. This time around, he was more specific and more bearish. Legendary investor and ex-Quantum Fund founder Jim Rogers recently disseminated some of his thoughts via the Economic Times in India and keep in mind that he actually made these comments on Wednesday, so they preceded the downward market spiral we saw yesterday. Rogers noted that, "I am shorting a stock market index in the US; I am shorting an emerging market index and I am shorting one of the large western international financial institutions."

He specifically mentions that he's not shorting a particular country in the emerging markets but rather a cumulative index. Thus, traders/investors wanting to piggyback his trade could simply short the Emerging Markets exchange traded fund EEM. He is currently short that index because he feels there are excesses developing there. While he does not name names regarding his western bank short, Rogers says that, "it is a bank which people think is extremely sound & if I am right, there are going to be more currency problems and more turmoil in the markets. It will have to come down." So, let the guessing game begin there.

Further elaborating on currencies, Rogers says that, "The currency crisis has been going on for a while. It did not start this week. It has been happening for a while. It started with, maybe depending on how you want to look at it, with Iceland or Latvia or many other countries who have been having problems. And the currency crisis is continuing and is going to get worse. This is not the end. Over the next year or more, we are going to see more, so prepare yourself." An ominous omen from Mr. Rogers there, certainly. You'll remember that hedge fund 'rockstar' John Paulson has designed a fund to bet against the US dollar as he clearly feels the currency is in trouble. He is obviously not alone as Rogers is also worried about various currencies as is Eric Sprott who said to beware of fiat currencies at the recent Value Investing Congress.

So, we know what Rogers is bearish on, but what is he bullish on? Well, we previously outlined how Rogers is bullish on commodities and he has been for some time. We'll have to see how all of his market calls turn out, but even he admits that he's not a great market timer.

Jim Rogers Starts Some Short Positions

Legendary investor Jim Rogers recently appeared on television and voiced some of his latest opinions and investment maneuvers. We haven't talked about the former Quantum Fund manager for a while because, let's face it, he's on television all the damn time. But, some of his comments from this recent interview made us take notice.

Potentially the most notable bit of his conversation was when he said, "I had no shorts for about 15 months so I started putting out some shorts recently. But the fact that I've been putting out shorts means the stock market won't pull back." So, it's interesting to see Rogers fight the current trend. In his mind, it's the right play, but he knows he's going to potentially feel some pain first. Many investors out there will agree that the market is overdue for a near-term pullback. MarketClub voiced these concerns in their recent technical analysis video of the S&P 500. Additionally, Bespoke outlined that many stocks are overbought.

We've also noticed some other signs that the market might be getting overheated for now. If you hadn't realized yet, there's been an insane amount of secondary offerings hitting the market. As we tweeted earlier, these secondaries typically come in droves when there is complacency and it could be a contrarian signal. (You can follow us on Twitter here). It's been noted many times in the past that investors often buy the most at the top. Where were all these secondaries when the market was tanking and stocks were cheap? There was no demand; investors were too scared. Now that everyone feels 'safe' again, the secondaries are rolled out, the buybacks crank up, and the insiders start purchasing. So, you can't really blame Rogers for taking a stab here even though he's going against the current trend.

In his interview, Jim Rogers also talked about some other hot topics. He touched on the euro given the fact that European sovereign defaults have taken centerstage. Rogers notes that, "The euro will probably break up in the next 15 to 20 years. Don't get me wrong, I own the euro. We've had currency unions in history. They didn't survive. This one won't survive either." So, he's short-term bullish and long-term bearish on the euro.

He then shifted his focus to how potential sovereign defaults could have ramifications for the currency. Rogers said that, "If the euro zone helps the Greeks, that weakens the fundamentals of the euro. As the next government comes to demand concessions, they weaken the currency from within. I would let Greece go bankrupt because then everybody will say the euro is a serious currency." This stance of his is by no means new. He's a staunch supporter of the notion that markets should work things out on their own, even if it means something will fail. So, it's always intriguing to hear what Rogers has to say.

In the end, everyone knows market timing is a bitch. While Jim Rogers obviously isn't suggesting you go net short, it makes perfect sense to us to put on some hedges, take some profits on longs, and to identify companies that are now looking too frothy. And, it sounds as if that's just what Rogers is doing. Whitney Tilson of hedge fund T2 Partners has been doing the same. Lee Ainslie of hedge fund Maverick Capital said in his investor letter that he thinks 2010 will be a return to a stockpicker's market. He makes a great point that the decline in the price of risk equals opportunity for shorts.

Here's the video of one of Rogers' recent television interviews:



In financial markets, you can never be too cautious. After all, it usually hurts more to be reactive rather than proactive. We just wanted to highlight Rogers' new application of short positions since he's previously been long for many months. It's been a while since we last covered the legendary investor in detail, but those looking for more of his wisdom can head to our ancient post on Rogers' portfolio and an interview with his thoughts on commodities.

Warren Buffett Sells Moody's (MCO) Shares... Again

Warren Buffett's Berkshire Hathaway has sold shares of Moody's (MCO) for the sixth time since July. We've covered Buffett's previous sales and now Berkshire has sold 87,992 shares on December 18th at a price of $26.77 per share. While they've been selling numerous times this year, they still remain Moody's largest shareholder and still own 31,814,610 shares. Berkshire sold shares in early December, previously sold Moody's shares in late October, and in months prior as well.

It has become clear that Buffett at the very least wants to reduce the size of his position. However, some will ponder whether or not Buffett will completely sell out of the name given the frequency of his sales thus far. Unfortunately we'll have to wait and see for the verdict on that one. Given that Buffett has been selling every time Moody's shares reach the mid-to-high 20's, he could potentially just be looking for the right price. Someone who will undoubtedly be fond of these developments is David Einhorn. His hedge fund Greenlight Capital has been publicly short Moody's (MCO) as well as McGraw Hill (MHP) in a bet against the ratings agencies. You can see Einhorn's short thesis in his presentation on the curse of the Triple-A.

Taken from Google Finance, Moody's is "a provider of credit ratings and related research, data and analytical tools, quantitative credit risk measures, risk scoring software, and credit portfolio management solutions and securities pricing software and valuation models. The Company operates in two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA)."

Hedge Fund Legend Michael Steinhardt Says Treasuries Are Foolish

The legendary hedge fund manager Michael Steinhardt has recently voiced his distaste for Treasuries over the long-term. In a recent Bloomberg television interview, he said, "To be a long-term investor in Treasuries at this point I think is foolish. The rates are low, and the danger is high." If you're unfamiliar with Steinhardt, he ran one of the first truly successful hedge funds, garnering a 20% return each year for almost thirty years. His Steinhardt Management Co, which he opened in 1967, earned 24% a year for multiple decades. He truly is a successful hedge fund manager with a proven long-term track record.

And, with that in mind, it's interesting to see that Steinhardt has joined numerous other well-tenured investors in his dislike of treasuries. He thinks that government bonds are not safe investments and shares Jim Rogers viewpoints on this subject. Rogers, of course, has a solid background as well, having run the successful Quantum fund with ex-partner George Soros. So, we now see that both Steinhardt and Rogers see Treasuries as poor investments for the future, as we noted in our Jim Rogers portfolio update. In the past, we here at Market Folly have even gone as far to lay out the rationale behind shorting treasuries. (That play has picked up steam as of late and we still need to do a follow-up post on that subject).

Steinhardt goes on to say that he thinks the current market rally will not last and that we are not out of the woods yet. He says, "The economy is still a scary place. My net feeling is that this rally doesn't have all that much more to go and the dangers out there remain consequential." Clearly he sees this as a bear market rally and thinks we have large fundamental problems still unsolved.

Nowadays, Steinhardt is the chairman of WisdomTree Investments, a firm that creates exchange traded funds (ETFs). Steinhardt also has an autobiography out entitled No Bull. It is a fascinating read detailing the life of one of the first true hedge fund managers out there, as his firm survived the collapse of the 1960's. This book also recently appeared on hedge fund Blue Ridge Capital's suggested reading list, in their biographical/historical category. We'll continue to track Steinhardt's words of wisdom whenever he makes a sporadic appearance.

Jim Rogers Newsweek Interview

Jim Rogers, noted investor and founder of the highly successful yet now defunct Quantum Fund (with George Soros) recently conducted an interview with Newsweek and we wanted to highlight the interesting bits. For the most part, Rogers has been saying the same thing on mainstream media appearances over the past few months. He appears on TV so often that he keeps having to repeat himself. But, at least he's not like Jim Cramer and doesn't throw out a million ideas just for the sake of new content.

So, while Rogers might not always have new points, it's interesting to hear him elaborate in more detail on some of the investment themes he has divulged thus far. We've covered many of his major stances on the blog before, most notably publishing a summary of Rogers' recent portfolio. Some of his main bullish theses include agriculture and commodities. Focusing in particular on agriculture, Rogers has become so bullish that he has gone to the extreme of investing in physical farmland. He touches on some of these theses again in his interview, where he talks about commodities:

"What’s the fundamental case for commodities right now?
Supply is declining. There’s been 35 years of low investment in production capacity. The last lead smelter in the U.S. was built in 1969! There’s been no major oilfield discovery in 40 years. Oil is in decline. According to the International Energy Agency, oil reserves are declining significantly. At this rate, in 20 years, there will be no oil left. The only people to make money in the next 20 years will make it in commodities. It’s the only asset class where the fundamentals are improving. I mean, look at Citigroup, look at GM. Those fundamentals are not improving.

Do you see commodities as an inflation hedge?
Absolutely. This is only time in history where you’ve got every central bank in the world printing money at the same time. Consumer prices are going to go way up. The public is already getting out of paper money, which is why you’re seeing gold go up.

Does the future growth of China factor into your bullishness?
China is tiny in comparison to the U.S. economy. Anyone who thinks that the commodities story is driven by China needs to do more homework. In the 1970s, everyone was in recession, and you still had declining supply [in oil] and higher prices. Asia wasn’t even in the game then. China was run by Mao. But now, of course, there are those 3 billion people in Asia who are in the game. It’s just another factor.

Are we going to see another food-price spike sometime soon?
Definitely. I think you should move back to Indiana and marry a farmer. There are times in history when the money lenders have been in charge, and we just came through one of those periods. But it wasn’t always that way. Wall Street was a backwater in the ’40s, ’50s, ’60s and ’70s, and it will be again. Farmers are going to be the ones driving Lamborghinis, and the traders are going to have to learn to drive tractors.

How about you? Are you upping your own commodities positions right now?
As a matter of fact, I am. I never sold anything to begin with. And I’m not planning to, either."

You can read about the rest of Rogers' current investment themes in detail in our recent summary. And, as always, you can check out the interview in its entirety at Newsweek.