INTERVIEW: Jim Rogers – the investment biker rides again

INTERVIEW: Jim Rogers – the investment biker rides again
Jim Rogers was one of very few senior American business figures to attend the Spief forum.
By Liam Halligan in St Petersburg June 23, 2016

“I was bearish on Russia for 47 years, ever since I visited the Soviet Union back in 1966,” says Jim Rogers, the veteran US investor-extraordinaire. “But then, in 2012 and 2013, I started to see reforms happening, so I got interested and ended up changing my mind”.

With his white suits, trademark bow tie and rapid-fire opinions, Jim Rogers is a big personality. Given that he started the legendary Quantum Fund with George Soros back in early 1970s, making his fortune and “retiring” at the tender age of 37, he is also a serious investor.

Well-known for his focus on emerging markets, hard assets and “Austrian school” economics, Singapore-based Rogers wields considerable influence – the combination of his stellar track record and fluent TV appearances giving him a “guru status” few can match. In mid-June, he was one of very few senior American business figures to attend the 20th St Petersburg International Economic Forum, where he spoke to bne IntelliNews. Then again, Rogers was never one to worry what others think, let alone run with the crowd.

“In my view, the Russian market boom has started and is ongoing,” he says, pointing to the 22% year-to-date rise in the RTS Index of leading Russian stocks. “They used to take your money and shoot you, but now they invest alongside foreigners with this new Russia Direct Investment Fund – I’m convinced something good is happening here.”

Pointing to Russia’s “vast natural resources”, Rogers says the fundamentals “compare very favorably” with those of the big Western economies. “The US is the largest debtor nation in the world, while the UK is basically bankrupt – they just haven’t figured it out yet,” he says. “Russia, meanwhile, has very low government debt, around 10% of GDP, and a convertible currency unlike almost all other large emerging markets – I think the positives outweigh the negatives.”

Acknowledging that Russia needs “deep structural reforms”, he describes the country as “no Nirvana”. Having said that, “some reforms are now underway”, and “should the Kremlin make the changes it’s talking about, this could be and should be a very exciting place to invest”.

During the three-day St Petersburg Forum – half-way through President Vladimir Putin’s keynote speech, in fact – it was confirmed that the 28 members of the EU had agreed to extend trade sanctions against Russia by another six months, to keep pressure on Moscow over the conflict in eastern Ukraine. Does Rogers worry about the ongoing impact of EU sanctions?

“These things can be overcome,” he says. “Frau Merkel happens to be German, and many German companies aren’t happy with this situation – sanctions against Russia are seriously hurting their business interests, given the extent of trade between these two countries.”

When asked about the even more intractable issue of America’s financial sanctions against Russia, the lifting of which requires the consent of Congress, Rogers doesn’t hold back. “Many people are now working out all this shouldn’t have happened in the first place,” he says. “America started that coup in Ukraine, not Russia – the difference being that the Americans have better public relations than the Russians.”

Going way beyond the mainstream Western narrative of recent tensions with Moscow, Rogers – a graduate of both Yale and Oxford – points the finger directly at his compatriots. “This coup was driven by arrogance,” he says. “The US state department, as so often in history, said we want to change things in Ukraine and we’re going to do it.”

Asked to reflect more broadly on “the New Cold War”, Rogers harks back to the fall of the Berlin Wall more than a quarter of a century ago. “When the Wall came down, the Americans and Russian were great friends,” he says. “But now both Ukraine and Syria have backfired, with the Russians outsmarting the US, so our arrogant politicians and bureaucrats say ‘screw the Russians, let’s paint them as bad guys’.”

Questioned on Russian aggression in eastern Ukraine, or Putin’s increasingly anti-Western rhetoric, Rogers becomes even more animated. “Is it really true Nato is sending a military force of a few thousand to the Russian border because of ‘continued Russia aggression’?” he asks rhetorically, shaking his head. “Our politicians say that, the American press writes it down, then people assume it’s correct – but if there is continued aggression, it’s coming from the US.”

Crisis in motion

Asked about his broad views, what Rogers has to say will be even less welcome in his former hometown of New York. “I expect lots of serious problems in the world over the next two to three years – the US is having economic problems and Japan is probably already in recession,” he says.

“We’ve had recurring economic slowdowns for a decade, with each worse than the one before, because the debt keeps going higher,” Rogers continues. “The politicians keep saying everything is fine, but if you believe them you’ll go bankrupt - another big problem is coming and it will be worse than in 2008”.

So when will crisis come, in Rogers’ opinion? “It’s already happening,” he says. “This crisis is unfolding now – go to Japan, go to many parts of Europe and America, look out of the window.”

Where should people invest, then? While Rogers says there is no genuine safe haven for investors, he acknowledges the dollar will rally in the event of a systemic collapse, if only because investors expect the majority of other investors to take the same view. “People view dollars as safe, so they will buy dollars as the turmoil unfolds,” he says. “An over-priced dollar will then turn into a bubble, though, and I hope I’m smart enough to sell it when it does.”

With crude oil up over 80% since hitting a low of $27 a barrel in February, what does Rogers make of the recent commodity price rally? “Oil is making a complicated bottom and we may have seen the worst,” he says. “Five years ago, everyone said fracking was a miracle – but now the frackers are going bankrupt and known supplies of oil continue to decline.”

The implication is “don’t sell oil and don’t sell Russia”. Putting forward a view that is eye-catching, even by his standards, Rogers declares: “I’d rather be invested in Russia than in most parts of the world right now.”

What of the US, then, and the upcoming presidential election? Dismissing both Donald Trump and Hillary Clinton as “turkeys”, Rogers sees “very little room for optimism” whoever wins November’s vote. “If Trump comes in, we’ll have trade wars with everybody – and trade wars have always led to bankruptcy and often to war, so that’s not a great prospect.”

The outlook is similarly bleak under Clinton. “With her, it will be bankruptcy and war, just slower,” Rogers says. “I’m an American, I don’t like what’s happening, and I don’t like talking like this either, but I have to deal with facts – or I’ll go bankrupt too”.

What’s your first trade, Jim, if Trump is elected to the White House? “I’d have to give up my US citizenship,” Rogers shoots back in an instant. “That would be my first trade under President Trump”.