While his former colleague at the Quantum Fund, George Soros, was busy discussing the euro zone sovereign debt crisis, Jim Rogers chose to focus this week on the fiscal problems facing the United States.
In an interview on Fox Business News, the legendary investor provided his latest scathing criticism of American politicians and the federal government as a whole.
“They will probably raising the debt ceiling and announce some kind of wonderful deal, which they will promptly ignore,” Jim Rogers
contended. “The United States is not going close down. It might be good for the world if the United States closed down for a while, but I can’t see that happening. Something will happen, things will look better, but then in six months or a year, things will be worse again.”
“We are going to default one way or the other but they may not call it default. These debt reduction talks are a sham.”
While he did not discuss President Barack Obama specifically, he had some rather frank words for Treasury Secretary Tim Geithner. ”He never should have taken the job…Mr. Geithner doesn’t have a clue about what’s going on. Just about everything he has done has been wrong. We are in worse shape now than we were a couple of years ago except now we have staggering debt to show for the efforts.”
Rogers, generally quite entertaining in his media interviews, went on to say that “If congressmen had to go to the same grocery stores you do and send their kids to the same schools, and ride public transportation, the world would be a lot different. They go down to Washington and laws get passed that we have nothing to do with. But if everybody stayed home and voted from the high school gym, we would have a much different government and the world would probably be better.”
He also discussed some of his current investment positions, which happen to include the U.S. dollar. ”I own the U.S. Dollar. It has been terribly beaten down. Everybody is bearish on the U.S Dollar including me. It’s fundamentally a terribly flawed currency. But when everybody is bearish on something it is usually a time to own it.”Jim Rogers Calls U.S. Debt Ceiling Talks “A Sham”
Inflation, the outlook for commodity prices and social unrest in the Middle East are three of the most important topics facing global investors today. On the sideline of the “World Money Show” in Shanghai on Saturday, I talked about all three and other subjects in the news with Jim Rogers, co-founder of the Quantum Fund, and best-selling author of investment books including “A Bull in China: Investing Profitably in the World’s Greatest Market.” Excerpts follow.
Q. What’s your current take on China’s economic outlook?
The China boom continues. The China prosperity continues. I notice it spreading. The property boom continues to spread. I see that more and more. But of course, there are those who think that it’s a property bubble, including me – at least I think there is a property bubble in coastal cities. The government is trying to pop that bubble as you know and I presume that they (will) pop the bubble. The Chinese government has enough authority and control that they can pop something if they really mean it. We’ll see.
Q. What about inflation in China?
A. It’s here. It’s serious. It’s going to get worse. Part of it comes from China because they’ve got the block on currency and the money’s trapped in China. It has to go into something so it goes into furniture and property and real goods and whatever else. So that’s part of the problem. But the real problem of course is the U.S. is printing a lot of money, and that’s sloshing around. No matter how much the People’s Bank of China might resist, the U.S. central bank is much, much, much bigger, and has got a lot more money. All central banks are up against the fact that we do have a commodity boom market, and even if they didn’t print money, the prices of things are going to continue to go much, much higher. So forget the printing of money, for the moment, we’re going to have more inflation. But with U.S. pouring gasoline over the fire, it’s going to be much more difficult for anybody to stop inflation. America is fanning it as best as (it) can, and it’s going to get worse.
Q. Given that kind of outlook, where are you investing in China?
A. The only thing I’m buying in China is the RMB. I can’t just pick up the phone and buy millions of RMB as you know, but when I can buy more RMB, I do so legally. I’m not buying Chinese shares. I would like to buy Chinese shares when they collapse. I don’t know when the next collapse will come, but there’s always a collapse in every country, so I would buy more. My view toward China is different from any other investment. I buy these shares, and I plan to hold onto them for my grandchildren – my children, anyway. I hope they own them for their grandchildren, because I’m convinced that China will be the great country of the 21st century.
Q. What are some of the companies that you’re sitting on for your grandchildren?
A. I own the airlines. I own vineyards. I own coal and natural resources. I own tourism companies I own. That’s the sort of thing that I own here, and I’m looking to buy more.
Q. What about the B-share market? That’s relatively cheap.
A. I never buy A-shares. I buy B-shares, H-shares, S-shares and ADRs sometimes because they’re always cheaper. The shares which are not A-shares, they will always trade cheaper than the A-shares, so I never buy A-shares. I started buying B-shares in the spring of 1999 because I thought I could buy at that time and they were unbelievably depressed. I came in late of 1999 and I looked around and said, “My God, look how cheap these things are! Look, this is amazing!” So I bought up the B-shares and that’s when I bought Changyu for the first time.
Q. What do you make of all these Chinese Internet listings in the States? Just last week there was another company.
A. I have not bought any of those, mainly because I don’t really understand technology and it’s not my style.
Q. The multiples seem rather high?
A. Yes. What I’m getting at is that I’m skeptical of why they’re selling in the U.S. I guess I know why they’re selling in the U.S. — because they can get a higher multiple. I don’t like to buy high multiple stocks, especially ones I don’t understand. It’s not for me. Doesn’t mean they’re not going to be great successes, it just means it’s not for me.
Q. In the commodities, prices have come up quite a bit. Are there areas you think still have room to climb?
A. Agriculture as a sector. Sugar prices have gone up 500% in the past few years, but sugar is till 50% below its all-time high, which just shows you how depressed agriculture is. So with agriculture as a class, it’s still the most depressed on a historic basis. I try to find the ones that are still depressed like silver and natural gas or rice. Even though it’s been booming, silver is still 30-40% below its all-time high. If I’m right, agriculture prices are going to go much, much higher.
With a lot more social unrest in the world, more governments are going to fall, more countries are going to fall, because we’re going to have serious increases in prices of agriculture. People don’t go into the streets when the price of copper goes up, because they don’t know or care, but if the price of sugar and rice and wheat goes up, everybody knows that day, and everybody’s unhappy that day. That’s part of what’s happening in the Middle East and it’s going to continue. There’s going to see more and more social unrest. We’ve had a fair amount of social unrest in the past few years because of agriculture. It’s going to get worse, much worse, or better depending on which side you’re on.
Q. What other parts of the world do you see as risky?
A. I would say any place that’s had one person in place for 30 or 40 years. When things start going wrong, it’s easy to blame that guy. Qaddafi’s been there 42 years! Same guy for 42 years! Even in China they change the guy every five years, which makes it better, because you do have change and you have new faces. So it’s mainly places that have had the same old guy for a long time where I see the most pressure.
Q. What do you make of the ultimate fallout from Japan?
A. I bought some Japanese shares last week. I was thinking about buying them before last week, before the collapse, so I stepped in and bought some. It’s certainly going to cause more pressure on commodities because Japanese agriculture is now suspect and maybe even going to be scrapped. On metals, the Japanese have not been doing construction for many years, but now you’re going to have a big new buyer, a surprise buyer, of copper, cement and steel because they’re going to rebuild. Likewise with for oil, natural gas and coal because there’s now more emphasis on alternate, non-uranium sources of energy, (and) it’s going to cause more pressure on that kind of energy going forward. It’s more commodity demand for the world.
Q. What will the commodity price boom mean to the U.S. agricultural land prices?
A. It’s already making them go higher and they’re going go much, much higher. We still have a huge presence in agriculture. Land prices are going up. Farm prices in Iowa are going up; condominium prices in Iowa are going up as a result. That’s going to continue. Agriculture is going to be extremely profitable for the next 10, 20, 30 years. We may very well have gigantic food crises in the next few years, because we have shortages of everything including farmers. The average age of the farmers in state “X” is 58. In 10 years, they’re going to be 68 if they’re still there. This is happening all over the world. In Japan, there are vast fields that cannot be farmed. The Japanese government has just started to go, “What are we going to do?” They started to even bring in Chinese farmers as an experiment to farm the fields. So farmland worldwide is going to go up in price, certainly in America. And agriculture is going to be one of the most exciting professions in the next 10, 20 years. It’s going to be the farmers driving the Lamborghinis going forward, not the stock brokers. In fact, the stock brokers are going to be driving taxis. If I’m right, the smart ones will learn how to drive tractors so they can work for their farmers. They’re going to be driving their Lamborghinis to their lake houses, and then they’ll be going through the roof in price.
Q. So if you’re an American investor and you’re looking at that, how do you invest into that kind of future?
A. You could buy businesses that benefit from farmlands, farming, seeds, fertilizers, tractors, the stores and shops that are in the agriculture belt. There are plenty of ways to invest. I presume there are some banks in that part of the world which will be prosperous and thriving. But the best way of course is to buy rice futures or the futures themselves. There’re plenty of ways to do it.
Q. What do you make of India?
A. I am not optimistic. I’m short India, as a matter of fact. I can go on and on about the shortcomings of India and how people don’t understand India, but the one fact is that India now has now a 90% debt to GDP ratio, which, for some reason, the bulls either don’t know or ignore. As you probably know, the studies show that when a country gets to 90% to GDP it’s very difficult to grow very rapidly because everything you’re doing is paying off the debts of the past. So no matter how productive and dynamic you are, you’ve still got a big burden. So for that and all the other reasons, I’m less optimistic about India then most people. It’s a phenomenal country to visit, but boy, it’s tough to do business there. Even for Indians, it’s tough to do business there.
Q. What about some of these other Asian markets?
A. I’m not buying shares anywhere right now because I would rather own commodities. I’m still skeptical of the world economy. If Myanmar opens a stock exchange – and they’re trying, I would buy shares there in a minute.
Q. Why?
A. Well, there are 80 million people (that are) disciplined (and) educated, and vast natural resources. There is India on the left and China on the right, It’s starting to open up – not according to the western press, but you know, it’s time (for them) to open up. It’s got enormous potential. They don’t have to compete with Westerners because the Westerners are all boycotting. They don’t have to compete with Exxon because Exxon is not there, so it’s wonderful for anybody who’s there in business. They’re going to make a lot of money, because a lot of Westerners are not going there yet.
Investors should not sell into a selling climax, according to Jim Rogers, the CEO and Chairman of Rogers Holdings.
Speaking following a 500 point drop in the Dow Jones index [.DJIA 11444.61 60.93 (+0.54%) ] on Thursday, the veteran investor noted that 500 points is not what it once was, but warned the heavy selling was a result of huge debts being run up by the United States and Europe.
“We have had this debt [cnbc explains] charade (over the debt ceiling) in the US in recent days and the Europeans are not doing anything about their debts either,” said Rogers in an interview with CNBC.
“There are huge imbalances in the global economy and markets had to crack,” added Rogers, who founded the Quantum Fund with George Soros in 1970.
Asked what he would do to boost the global economy, Rogers dismissed the idea that more government spending to jobs was not the answer.
“You need to take an axe to debt, you need to take a chainsaw to the debt,” said Rogers who also dismissed the idea that another round of quantitative easing [cnbc explains] was the answer.
“America is making horrible mistakes. It is the largest indebted nation in the world and is going deeper and deeper into debt. The world is not in good shape the markets got to correct and take care of these imbalances,” he said.
"The market should be allowed to bottom out. QE1 (the first round of quantitative easing) and QE2 didn’t work. Let the market bottom out as more money printing will just make matters worse".
Any trader who does not only follow his guts, should have a set of rules that she or he follows. This set of rules is a trading system. Just saying this to make clear that I am not talking about automated strategies. The set of rules typically include
Entry rules
- condition(s) for setup
- filter rules (trend filter, volatility filter, time filter, intramarket filter)
- trigger condition
Exit rules
- stop loss and stop loss adjustment
- targets
- time based exit
Money management rules
- how many contracts to trade
- max. drawdown allowed per day and week
- drawdown that invalidates the setup
Quite often only one entry rule is discussed and called a setup and treated like a trading strategy. In my opinion this is not enough. Money management rules are most important, exits come second and entries third. Money management rules prevent the trader from blowing her or his account. Exit rules can be tested independently from entry rules. Entry rules should at least (!) have three components: a setup bar, filters to increase the probability of an edge and a trigger bar.
The markets change. Edges in markets disappear. Trends change. The participants change. The levels of volatility and risk change. As traders we have to adapt to stay in the game. One thing thats affecting the markets right now is HFT algos. Average daily volume has skyrocketed 164 percent since 2005, according to NYSE data. Up to 73 percent of this volume is handled by algorithmic trading programs. These algos might not change the destination but they do change the path.
Think about it. We track volume to see the footprints of larger traders. But with the new algos these guys are executing in fractions and they aren´t just sitting in the orderbook waiting to get hit. Then we have the pure HFT systems that are trading on their own, messing up the volme readings. We might se big volume coming in on a breakout and think we got confirmation when it´s just algos playing for ticks.
So when up to half of all stock market volume consists of these algorithmic trades, I make it my business trying to learn as much as I can on how they operate. I recently read an very interesting article on HFT by the propfirm SMB and yesterday they had a clip on StockTwitsTV talking about it.
In spring 2008, financial markets witnessed the early makings of what may emerge as globally coordinated support for stabilizing the U.S. dollar. The first signs occurred at the April G8 meeting in Washington, D.C., where finance ministers and central bankers of the world’s leading economies expressed concern about the economic repercussions of persistent damage in the U.S. currency. Not only had a rapidly falling dollar further deepened the emerging economic slowdown in places such as Europe, Japan, and Canada by excessively lifting their currencies and hampering their exports, but it also signaled the acceleration in the dollar price of key commodities, such as oil and food, which boosted the cost of these imports and lifted inflation at home. Never since the 1980s has the United States and its trading partners experienced such a deep and protracted loss in the value of the dollar, and not since the Louvre Accord of 1987 have the world’s leading economies expressed such broad concern with the falling U.S. currency.
The U.S. Dollar Index lost 40 percent of its value between January 2002 and April 2008, averaging a decline of 8 percent per year. On June 3, 2008, Fed Chairman Ben Bernanke shook the currency market by taking the unusual step of talking up the dollar in a speech at the International Monetary Conference in Barcelona, Spain. The topic of the dollar had long been the purview of the U.S. Treasury since the 1990s, when then Treasury secretary Robert Rubin shaped the so-called “strong dollar policy.” But as the currency slipped into a multiyear decline between 2002 and 2007, the strong dollar policy was limited to mere rhetoric and no action.
In fact, the real currency policy of the United States had grown to be that of benign neglect as Treasury officials tacitly encouraged a depreciating dollar so as to favor U.S. exporters. Meanwhile, the Federal Reserve’s actions were everything but dollar positive when policy makers engaged in aggressive easing of monetary policy by sharply slashing interest rates in two different easing cycles within less than five years. In the aforementioned speech, Bernanke said, “We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion of longer-term inflation expectations.” The speech was largely perceived as a potential sea change in the U.S. economic priorities vis- ` a-vis the value of the dollar.
Reading Price Charts Bar by Bar
This book is extremely hard to read, and some of his ideas seem "wishy-washy" (technical term) to me, so I struggled with believing them. His webinars make much more sense, I encourage you to find them in the Brooks thread and watch them.
Trading without indicators is the right step, in my opinion. But by itself it won't make you profitable. Only a sound money management plan will do that, along with the wisdom to follow it.
There are many ways to continue your pursuit of growth of knowledge and understanding, which will ultimately lead to success. Some ideas:
- Trade ES only
- Trade during cash session only
- Use a 5 minute chart and EMA 20 only, maybe my new Envelope bands
- Trade only with trend, only take longs when price is above EMA 20, shorts below
- Limit yourself to 5 trades a day. I don't care if you are on-fire or have lost every one, stop at trade #5. This will force you to space them out and look for only the best setups.
- Create a journal here. Take a screen shot every time you enter a trade, and make a note as to why you entered the trade. Then record the result. You MUST be honest with yourself.
