Money Manager Says No to U.S. Stocks
Late last August, celebrity money manager Jim Rogers, a New York City resident for 20 years who was bearish on both the economy and the stock market, packed his bags and flew to Singapore to take up permanent residence there with his wife and 4-year-old daughter. "I see a lot of problems ahead for America," he told me at the time.
Over the weekend, I rang up the 65-year-old manager in Singapore and asked him a question posed via e-mail by reader Margo Halloway: "Since Jimmy Rogers has been so right, why not ask him what he thinks now?"
Mr. Rogers, who in the 1960s teamed up with global investment whiz George Soros and made millions before they parted company, is even more bearish now despite the drop of about 15% in the major averages from their highs. "The trend is still lower and I wouldn't buy any American stock now," he told me. "Unless you're a very good trader, you're not going to make money on the long side."
He added: "I don't know if the market is going down another 10% or 50%, but it's going down. Washington," meaning the Federal Reserve, the Treasury, and President Bush, "is making loads of mistakes."
Mr. Rogers, whose second daughter, Beeland, was born over the weekend, is especially critical of the Fed's policy of printing money like crazy in an attempt to prop things up. That's what Japan did in the 1990s, he noted, and the Japanese market is 60% below where it was in 1990. "In the end," he said, "the Fed's action will produce much higher inflation, a weaker dollar, higher long-term interest rates, and the worst recession we've had in years."
He said he believes Bear Stearns should have been left to go bankrupt, characterizing the Fed's bailout of the liquidity-squeezed brokerage as "welfare for the rich." In the last several weeks, he points out, the Fed has taken on its balance sheet $400 billion of suspect assets. "Chairman Ben Bernanke is giving away America to save the investment banks and that's not what the Fed is supposed to do," he said.
Although extremely bearish, Mr. Rogers thinks a near-term rally could occur, given the recent decline. As a result, he has covered some shorts and stopped selling the dollar, which he says is ultimately headed considerably lower. Still, he remains short Fannie Mae, which he says he thinks is going broke, the home builders, and the investment banks.
In fact, while many bargain hunters have been snapping up the bloodied shares of investment banks following the Fed's efforts to bail out Bear Stearns, Mr. Rogers has gone the other way, shorting more of them through an exchange-traded fund, Amex Securities Broker/Dealer, which is traded on the American Stock Exchange under the symbol XBD.
On the other hand, he has bought some airline stocks in China, Taiwan, and Europe, citing very little new capacity coming online , sold-out production at Boeing and Airbus, and rising fares. Mr. Rogers said he wouldn't touch the stock of an American airline because "they're so hopelessly managed."
Mr. Rogers is a long-term bull on commodities, which have recently been hit by a wave of selling pressure, and he reiterated his enthusiasm for them, though he says he wouldn't be a buyer now because they could be subjected to further weakness from forced hedge fund liquidations. For the year ahead, he expects agricultural commodities to be the sector's best performer.
An active player in currencies, he favors the Chinese renminbi, which he bought recently and sees on a rising trend for years to come, Swiss francs, and the Japanese yen.
As far as the national election goes, Mr. Rogers views it as a nonevent for the market, although he notes the next president will inherit an economic mess.
dandordan@aol.com
