China to replace America as next superpower - Jim Rogers
13 April 2008
Jim Rogers, Rogers, a former member of the Barron's Roundtable and, with George Soros, co-founder of the Quantum Fund in the 1970s, investor, author, biker, and adventure capitalist, has moved to Singapore for its Chinese atmosphere.
Having two daughters, one 4 years old, and one 4 weeks old, he wants them to grow up in an environment adaptable for the next superpower, China. And why not, Singapore is predominantly Mandarin speaking, less stressful and less polution than China.
He remains bullish on commodities but has sold many of his emerging-market holdings. Rogers, 65, doesn't run others' money these days, though an index he developed in the late 1990s, the Rogers International Commodities Index, has been licensed to some funds. Its cumulative return, from inception in 1998 through the end of March, was more than 380%, versus about 38% for the S&P 500.
In a recent conversation with Barron's, Rogers had no shortage of strong opinions on topics ranging from regulation of the financial markets to China's future.
Here are some excerpts with his Barron's interview:
Why are you so bullish on China?
China is going to be the next great country. The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China. Even if I'm wrong, there are 1.5 billion people who speak Chinese every day, so it's not as if our daughter is learning Danish. Even if she winds up working in a Chinese restaurant, she is going to be the maitre d' — not the dish washer.
What else intrigues you about China?
China was in decline for 300 years and then around 1978 Deng Xiaoping said, "OK, let's find something new." He reintroduced entrepreneurship and capitalism to a country that has had a long, long history of both. In China they save and invest more than 35% of their income; in America we save less than 2%. The Chinese work from dawn to dusk. When they come to work, they don't say, "How many holidays do I get?" They want to live like we do in America and they are willing to work hard, save and invest for the future.
What about investment opportunities in China?
Perhaps the safest investment is the renminbi, the Chinese currency. I don't see how the renminbi should not go up against the dollar, anyway, for the next several decades. Commodities, of course, are a great way to invest in China. If you have nickel, they will take you to dinner, pay for dinner and pay you on time. They have to buy commodities. And there are some industries in China that are going to do well, no matter what happens to the world economy — water treatment, for instance. China has a horrible water problem that it is doing something about.
What other industries in China look interesting?
Agriculture. Mao Zedong [who ruled China from 1949 until his death in 1976] totally ruined agriculture. China now is spending huge amounts of money trying to rebuild agriculture. The same goes for power generation. Another growing industry is tourism; the Chinese have not been able to travel for some 300 years, for a variety of reasons. But now the government is making it much easier to get passports, and they are encouraging travel.
Switching to your old home, what are your thoughts on the U.S. credit crunch?
We had the worst credit bubble ever in American history, perhaps world history. I can't remember anytime in history when people were able to buy a house with no money down — sometimes with no income. You don't clean out a bubble like that in six months to a year. I've been short the U.S. investment banks by using the Amex Securities Broker/Dealer Index [ticker: XBD], an exchange traded fund with exposure to many of those firms. I've also been short Citigroup [C] and Fannie Mae [FNM]. I'll short some more if we get nice rallies in any of them. I am still short some of the U.S. homebuilders like Lennar [LEN].
Some other excerpts and tidbits from the interview include:
- He likes airlines and sees them filling up and fares going up
- He is against bailouts and believes bankruptcies are a natural process
- He believes America and the world could have adapted to the collapse of LTCM Long Term Capital Management and Bear Sterns
- the commodities bull market started in early 1999. There are going to be corrections — and big ones — along the way. That's true for every bull market.
- Commodities will not yet bubble this soon because nobody has brought on any new supply of anything in the past 25 or 30 years. The last gigantic oil field was discovered in the 1960s. The number of acres devoted to wheat farming has been declining for more than 30 years. Food inventories are the lowest they've been in 60 years.
- He has sold all his emerging markets except China and Taiwan.
- He is bearish on the dollar, but not too aggressively bearish right now, since most people already are.
And the exclamation point on the U.S. Economy:
As recently as 1987 the U.S. was a creditor nation. We are now the largest debtor nation the world has ever seen. We owe trillions. That's with a "t." The real problem is that that our foreign debt is increasing at a rate of $1 trillion every 15 months. You can do the arithmetic.
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jim roger talks about south and north korean re-unification within 5 years and making this a good investment
http://youtube.com/watch?v=h5ztR8eAHcg
that’s my theory too, but damn! 5 years? im not done with my research on how to invest there!
dragon:
HSBC Korea Equity Fund.
http://www.hsbcinvestments.com.hk/site/fund_centre/retail_fund_centre/retail_individual_fund?fund=HGKEA
Fact Sheet:
http://www.hsbcinvestments.com.hk/site/fund_centre/retail_fund_centre/retail_individual_fund?fund=HGKEA#
Something about Rogers, he’s got staying power and good research. Admittedly never gets the timing right, but he’s got excellent foresight.
Still wonder why he and Soros split up once upon a time though.
mtm, thanks. maybe i can finish my article on this na. i wonder how to time the entry