Tuesday, December 27, 2011

The Curse of Bad Governance Hangs Over Earth Like a Shroud

Australia's Finance News Network recently interviewed Jim Rogers by teleconference from his home in Singapore. Rogers' insights into the sad underpinnings of the ongoing global economic crisis are useful for anyone who is making short, medium, and long-term plans.

First Rogers explains his pessimistic outlook for the US and Europe, then he moves to Asia:

Lelde Smits: You say Asia will suffer, do you see signs this suffering has already begun?

Jim Rogers: Oh of course it has. If you look at China, China’s already got problems they have inflation. They’re doing their best to calm things down in China, wisely in my view, and then China’s been hit of course with the slowdown in America and Europe. So no, everybody in Asia is slowing down.

Lelde Smits: And what about Chinese property prices. The latest government data from 70 Chinese cities shows the average price of Chinese property has fallen for the second straight month. Do you believe Chinese property is in a bubble and are we witnessing the bust?

Jim Rogers: Some parts of the Chinese real estate market have been in a bubble. Certainly urban coastal real estate in China was in a bubble - that bubble has popped. How far down it has to go, I don’t have a clue. Probably a lot further because usually when bubbles pop, a lot of people get hurt. But it’s not like in the US where in the US, people are buying four or five houses with no job, no down-payment. You know, and then the banks were taking the mortgages and jigging them up even more. China didn’t have that kind of problem. You’re going to see real estate developers go bankrupt in China - no question about that. But it’s not going to be the end of the Chinese economy as it was in the US, the UK, Spain and a few other places.

Lelde Smits: OK Jim, so we’ve spoken about US and European debt, and a potential Chinese slowdown. How do you see global markets reacting in 2012?

Jim Rogers: Well I’m not optimistic for the most part about stock markets. I don’t own many stocks anywhere in the world. The only offset of the caveat for me is the fact that there is an election in the US, in Spain – sorry in France, a few other places. So whenever there are elections coming governments spend, spend, spend they throw money out the window to buy votes. So some people are going to be much better off in 2012. Is it enough to offset the world’s problems? I don’t think so, except in some sectors which will benefit.

So for myself, I’m short stocks around the world, I’m short American technology stocks, I’m short emerging market stocks and I’m short European stocks.

Lelde Smits: And what else are you buying Jim and why?

Jim Rogers: Well I own commodities, because if the world economy gets better Lelde, then commodities will do well because of the shortages. The lucky countries will continue to be lucky for a while. I own some currencies, which I mentioned, I’m worried about currency markets. I’m short stocks. I mentioned the things I’m short. So I anticipate problems in stock markets. If the world economy doesn’t get better, you’re not going to make money in stocks. But then central banks will print more money and when they print money Lelde, the thing to do is to own real assets. _FNN

Rogers can afford to live almost anywhere on the planet, and he has chosen Singapore. He states that his reason for choosing that location is so that his children can learn to speak fluent Mandarin Chinese, away from a polluted environment such as one might find in Beijing or Shanghai.

I suspect that Rogers is not being entirely truthful here, since he does not want to earn the enmity of the CCP government in China. Nevertheless, a person tends to vote with his feet and with his bank balances, and Rogers is likely to be particularly honest in those cases.

The western nations which comprise modern western civilisation continue to innovate in the scientific and technological areas. This innovation is dependent upon the underlying financial productivity of these nations.

In other words, the scientific and technological promise of the future is warring against the political realities of today, in order to come to reality. Keep that in mind when making your plans. And always watch what the "smart money" is doing.

All governments are corrupt, all ideologies are false, and everything you think you know just ain't so. Other than that, the way ahead is relatively straightforward.

No comments: