The big talking point this morning is that some of the US companies are getting a little bit cautious and the US seems to be preparing for the delta variant. Amazon has already pushed back their work-from-home timeline. But the markets seem to be completely shrugging off any threat from the third wave or the Delta variant?
As you know, markets everywhere have been going through the roof. It has been unprecedented because we have had so much money printing by central banks all over the world. I am not good at market timing but I am sure it is going to come to an end some time in the next few months. This has never happened before.
Unlike equities, commodities are getting a little bit more sensitive on the news flow around Covid. We have seen a bit of a knee-jerk reaction in crude overnight. It could have a domino effect on raw material prices, inflation and thereby earnings of corporates?
Well the cheapest asset class in the world at the moment happens to be commodities. Bonds are in a bubble everywhere. Many stocks have started to form a bubble. Property in Korea, New Zealand and many places are in a bubble. But commodities are still cheap. Silver is down 50% from it’s all-time high. Oil is down over 50%. I do not know whether oil is going to go up and down this week. The known reserves of oil continue to decline. The fracking bubble has popped and so I would suspect we are going to see strength in oil in the next few months. Not every day, not every week but oil is down a lot from it’s all-time high.
When you say that the known reserves of oil continue to fall, the fracking bubble has popped, you are speaking from the supply point of view. But what about prospective demand? The world wants to move EV and move away from fossil fuel. Don’t you think that fundamentally, the picture for oil does not look all that strong?
It does seem clear to the world that we are going to have electric vehicles in the future but this takes a long time. Henry Ford’s wife had an electric vehicle. She did not like internal combustion . She insisted that electric vehicles were the future. Well she was over a 100 years too soon. Yes they are coming but it is not going to happen overnight. In the meantime, reserves of oil continue to go down. I am not urging you to rush out and become a oil trader by any stretch but I am not giving up on the price of oil yet.
So where do you see the price of oil in the long term? At what point would you realise that this is an end game for crude?
There are many alternate sources of energy coming – especially solar, wind, ocean power, but it is going to take a long time. As I said, oil is down 50% from all-time high and known reserves everywhere in the world including Saudi Arabia continue to decline. The fracking bubble has popped. In the meantime, reserves go down. It would not surprise me at all to see oil much higher over the next two or three years because of supply and demand. Remember there are two sides to this equation. Electric vehicles are coming, but it takes a while as Henry Ford’s wife found out.
What is happening in agri commodities and in particular sugar? This is an extension of moving away from fossil fuels. The Indian Prime Minister Narendra Modi is now pushing for sugar fuelled cars or ethanol blending. He has said by 2025, he wants 80% of all constituents to be blended 80% with ethanol. What are you foreseeing on sugar? Going by the stock prices back in India, it seems that we are at the cusp of a super cycle.
As you know cars can be fuelled with sugar fuel but the Brazilians are already working on it. Americans are working on it from maize. We can have fuel that is based on agriculture and that is going to happen. We are going to have electric cars and it is good for some commodities. Electric car uses several times as much as copper and lead and nickel as does a regular car. Likewise if we have fuel based on sugar or maize or whatever, you are going to see a lot more demand in several commodities even though we may see oil eventually being used less and less and less. There are many ways to play commodities and commodities are certainly the cheapest asset class that I know of in 2021.
In the entire agri commodity basket where are you placing your bets?
I have been buying EFG, there is an ETG on the New York Stock Exchange of Commodities and an agricultural ETF RJA. I will continue to buy it. It has been down recently. World agricultural commodities are among the cheapest in the world and so I have been buying more of the Rogers Agricultural ETF. I do not know of any other asset class that is as cheap as commodities, especially agricultural companies anywhere in the world. And that includes asset classes which are not agriculture.
You have been a long time bull on not only silver but also gold. Let us just recap what happened in the last two odd weeks. Real yields in the US fell to new lows; the dollar index also had been very, very subdued. This creates a perfect storm for gold to rally but we have not really seen that happen.What is your take there?
I am not buying either at the moment but again I am not a good trader. I am waiting for silver and gold to correct even more. If I were buying today, I would buy more silver than gold. Silver is down 50% from its all time high, gold is down 10% from its all time high. I am not buying either at the moment but when I buy again, I will probably buy a lot more silver than gold.
ET Now: Do you continue to see the US dollar as a safe haven index or do you think that there have been other asset classes which have come in as a store of value which better play the role of safe haven?
Jim Rogers: I still own the US dollar. It is rallying now, it was down for a while. When things go wrong, people look for a safe haven and I suspect that they will look for the US dollar at least one more time but no reserve currency has lasted more than a 100 year or 150 years throughout history. The US dollar has been around for a long time, so we are coming to the end, not this year, maybe not even in the next two or three years but it is extremely vulnerable because it has got such staggering debt.
I do not know yet what will replace the dollar. Yes, many people will go with silver, including me, but I do not know what currency, if any, will replace the dollar. Everybody is looking for something to compete with the US dollar. India is one of the countries which is looking for something to compete with the dollar. And it is sure the US is the largest debtor nation in the history of the world.
In an your earlier answer you mentioned that there are several ways to play commodities. Even though you have your ICEs which will perhaps reduce over time in production, you will have EVs taking their place and EVs will use lot more copper, a lot more nickel, a lot more of some of these base metals. How would you play that space, would you want to participate in that at all right now given the fact that you mentioned EVs are still a while away?
Well, I own the commodity. As I said before, commodities are the cheapest asset class as I can see anywhere in the world in 2021. I continue to buy commodity indexes that are listed. You can buy them on the New York Stock Exchange and other stock exchanges and many studies have shown that index investing is the best way for most investors most of the time. And I am lazy. I know that index investing works. I am bullish on nearly all commodities.
How do you foresee interest rates panning out? How long do you think central banks across the world will continue with low rates given the high inflationary scenario?
Bonds are clearly in a bubble. They have never been this expensive in the known history of the world and we are going to see higher interest rates. The central banks will do their best to hold them down but there comes when the markets says no we do not care, we are not going to play this game anymore.
Central banks are going to try to hold the line but the debt is skyrocketing everywhere. The supply of debt is gigantic and inflation is coming. All the fundamentals are going against interest rates, I am not buying, I am not shorting today but there is no question that interest rate will be going higher, may be not this quarter but certainly over the next two or three years.
Yes because you know the ECB has mandated saying that negative rates are going to stay here for longer the bank of England has said that the delta outbreak concerns overpower any hawkish stance and the Fed also has said that rate increases are still far away but Jim in that sense would you say that if the markets have already begun to sense it are we looking anywhere at a peak for equity markets?
Look you know there is going to come a time when the market is going to say to the central banks we do not care and when the market takes control which it will again someday that is when there is going to be a very very serious problem for all of us equities, property, loans everything because when the market is in control and they will drive interest rates very high. As I said, there is a huge supply of bonds out there and many more coming. There is inflation. All of these things are basic fundamentals that drive interest rates higher and the central banks in the past have lost control at times and they will lose control again and when that happens we are going to have the worst bear market and equities in my lifetime.
In 2008, we had a problem in the equity markets because of too much debt. The debt has skyrocketed everywhere since 2008. Everywhere, there is gigantic debt. So, the next time we have a bear market it is going to be terrible.
We have seen EMs underperform the developed markets so far this year. What according to you is the trigger and secondly how could the higher interest rates scenario play out for EMs and DMs?
These things always start in the margin of markets where people are not looking. We are starting to see the Chinese stocks go down, we are starting to see problems in some banks and some small countries. In 2008, Lehman Brothers went bankrupt and then everybody knew there was a problem but that had been building for several months with many markets around the world. We are now starting to see problems in China, we are starting to see problems in some markets. I am not selling out of equities yet, not by any stretch of the imagination because there are still many stocks around the world that have not gone into a bubble yet.
I expect everything to go into a bubble eventually but when that happens probably later this year or 2022 that will be the end and then we are going to have a horrible bear market for the reasons I said I mean I am not some doom and gloomer I am just telling you that the debt is much much higher now than it was in 2008 and the next bear market has to be very very bear.
Do you think that FIIs are already sensing this?
It does not have to be bad for you, it is good for you. You have job security, somebody has to report the bear market, somebody has to tell us what is going on. It may be a bear to me and many other people, but it is not a bear market for journalists.
