On October 8, 2008, both Bloomberg and CNBC interviewed Jim Rogers.  Here are a few things he had to say during the two interviews and some comments by Jay O'Keefe.

Bloomberg interview on YouTube (5 min.)

Betty: Is there any place to park your money these days?

Rogers: I’ve been putting money in the Japanese Yen, and the Swiss Franc. I bought agricultural products yesterday. They’re down today. I bought a little bit of China and little bit of Taiwan. But mainly, I’ve just been watching

Jay: He thinks selling climax has not been reached yet.

Betty: OK, let me turn to commodities. We are seeing an all-out liquidation of commodities. Would you be buying into oil right now? 

Rogers: I’m not buying into oil right now. We’re having a complete liquidation of everything. We’ve seen periods like this in history. In such periods, people pay no attention to fundamentals. It doesn’t matter whether things are good or bad. They have to sell, and that’s what’s going on. This will pass. And what will come out of this…that has always historically come out…the things where the fundamentals are unimpaired, where the fundamentals are still sound, will come out of this and lead the next market.

Jay: This is a key!! Forced selling is usually the only time we get an opportunity to buy a great asset at a fire-sale price. Yesterday I bought [a stock] at $12.80. Its high in July was $74! In part, this was pure luck because I learned after I bought it that the CEO of the company was forced to sell $1 billion worth of the stock to meet a margin call on his other investments. Think of this irony: A rich billionaire, who is using leverage (debt) to try to become a multi-billionaire gets caught in the aftermath of the credit crisis, and is forced to sell his stock. He is the instrument that creates the opportunity for us little guys to buy a wonderful asset at a super bargain price…PROVIDED we are out of debt, have a cash reserve, and the patience to wait (sometimes months or years) for just the right moment. 

CNBC Interview on YouTube (7 min.)

Mark: Jim, good morning. Thanks for joining us. Jim, are we witnessing a market crash before our very eyes?

Rogers: Yes, you can call it what you will. It’s very clearly a crash. It’s really a liquidation where people are selling everything no matter what the fundamentals, no matter what the underlying value, they have to sell…it’s forced liquidation. We’ve had this before in history and we’re having it again.

Mark: Jim, how long will it last?

Rogers: Well, it lasts until it stops. I don’t know. I wish I were that smart. It doesn’t seem to be over yet. It looks as though we’re in the middle of an old fashioned selling climax. If you buy during such a climax you usually do well a few months or years later. I’m not stepping in and buying in a big way yet.

Jay: PATIENCE!!

Mark: What are the signs to know when to get back in? What are you looking at as the key indicators?

Rogers: I’m looking for total absolute panic, which we haven’t seen very often in history. We’re seeing the markets down 5% or 6% per day, but that’s not the kind of day…many people are emailing me every day and telling me it’s the bottom. It’s not going to be the bottom until everybody is saying, “There’s never going to be a bottom.” When you see that kind of panic, then it’s probably time to buy. 

Jay: Tighten your spurs and hang on. Maybe it won’t be too much longer. I have no idea.

Mark: When the time arises that they’re going to get back in, what asset classes should we be in do you think?

Rogers: Throughout history, if you buy the assets for which the fundamentals have not been impaired, where everything is still good…where the companies or the asset is still making progress, that’s what will lead us out of this. The only assets I can see like that right now are commodities, especially agricultural commodities, where the supply-demand situation hasn’t changed at all …

Jay: Notice how often this theme is coming up in his interviews.

Mark: Gold is seen as a haven in times of market turbulence. Does that rule continue in coming weeks and months?

Rogers: Well, I own some gold. If it goes down, I’m sure I’ll buy some more gold. I’ll probably buy more gold if it goes up, as a matter of fact. Yes, throughout many historical periods people have flocked to gold at times like this. I’m sure that will continue in the same vane, especially Mark, since the plans they are coming up with in Washington and other places are hugely inflationary. They’re printing gigantic amounts of money. Throughout history, that has always lead to worse and worse inflation. The reason the markets are collapsing is that nobody has any confidence in these clowns, who keep coming up with these absurd remedies, which just means bigger inflation six months or a year from now. That’s why people are selling stocks, and eventually will buy other assets…

Jay: This is the first time I’ve heard him make this statement. And a few days ago, I heard him say (for the first time ever) specifically that he was adding to his silver! 

Mark: Talk to me about the possibility of a recession, and how bad is it going to be in the next 3, 6 months or a year?

Rogers: We’ve been in recession for some time. It’s only the people on TV or in Washington that say we’re not in recession. Houses and automobiles have been in worse than recession for 15 months. The financial community, machinery, all these have been in horrible times, and yet the government says there’s no recession. Tell me what is so strong that it can offset all these things that are clearly in worse than recession. How long will it last? It’s going to be the worst we’ve had since the second world war, and it’s being compounded by the fact that the people in the Capitol don’t know what they’re doing, and they are making it worse. Just like the Japanese did in the 90s, just like the Americans did in the 70s.

Jay: I’m afraid houses will go down more from here than most everyone thinks.

Mark: Jim, all eyes are on China. How is China going to be affected by what’s going on right now?

Rogers: Look, everybody’s going to be affected when the largest economies in the world are in recession, Europe and America…not everybody, but everybody who deals with those economies is going to suffer. I actually bought some Chinese and Taiwan shares recently, and of course agriculture, the Yen, the Swiss Franc…I’ve covered a few shorts (I wish I hadn’t). That’s what I’ve been doing.

Mark: What have you been selling, Jim?

Rogers: I’m not selling anything right now. I have huge amounts of cash, and some shorts. Why would I sell anything? The things I own, I think are going to come through this fine. Ask me in five years and I’ll tell you.

Jay: THIS COULD BE THE SINGLE MOST IMPORTANT PHRASE IN THE ENTIRE INTERVIEW. This is the first time I have heard him quantify his cash reserves. Think of the years he has waited for the opportunity now developing. 

Mark: Well, right now, where is the favorite place to put your money? Is it cash? Is it Treasuries?

Rogers; Well, you have to have the right kind of cash. You could be in the Icelandic Krona and you’ll wish you hadn’t. I told you I have the Yen and Swiss Franc. The panic liquidation of assets is causing a rally in the US dollar. I plan to sell the US dollar on this rally…

Jay: In recent months he has told us several times he is buying the Chinese Renminbi. You can do so at www.everbank.com, FDIC insured.

LESSONS AND CONCLUSIONS

The strategy followed by Rogers, and most other great investors, is to buy only at super bargain prices (“hated assets” as he calls them), then hold through the inevitable corrections until people are falling all over themselves to buy them, then sell. Most secular bull markets have at least one correction which is severe enough to create fire-sale values, and he will sometimes add on those, but he doesn’t sell until he believes the bull market is over or near its end.

Rogers made a major investment in his entire index of commodities in 1998, and has sold none of them to date. He says he does not plan to sell until 2017, or later, when everyone will be buying them, and the supply of commodities will have overcome the demand. We are nowhere near that now. But that’s not all. He also holds a substantial cash reserve then patiently waits, and waits, and waits until the next hated asset class emerges. That opportunity could be eminent, as he is beginning to nibble on a few things (see above), but only in a small way so far.

Rogers also employs the same strategy on the short side. More than three years ago when he saw what was happening in the housing bubble, he shorted both the investment banks and the homebuilders. He is covering those shorts now. His statement above that the long treasury bond is the last bubble around is a loud bell ringing. All you have to do is look at long term chart of the 30-year treasury bond, and you will see that it is near a 26-year high in price (low in yield). He has already begun shorting it. Shorting it could be one of the best investments over the next ten years. I am looking into safe ways to do this.

On October 19, 1987, the Dow Jones Industrial average fell 22.7%, still the largest one-day percentage decline in history. I will never forget it. I suspect a large percentage of all investors in the world were frightened. I assure you I was terrified. That was on a Monday as I recall. Four days later, on Friday evening, John Templeton (considered then by many as the greatest investor in the world) appeared on the Wall Street Week TV show. He made a couple of statements I’ll never forget. He said that on the day of the crash, he was buying heavily in all of his mutual funds. He also said that in his opinion the bear market was at least half over. As it turned out, the bear market was completely over. The low was made that day. I would bet Rogers was buying stocks that day also.

Judging from his recent interviews, it appears that Rogers’ next significant investment will be adding to his agricultural commodities on this correction. He hasn’t sold any of the ones he bought in 1998, but they have now fallen sufficiently to attract his interest in adding. His reasons make sense. The fundamentals look strong for years to come, and will not be changed much by what is going on now. The world food supply is at a thirty-year low, and the prices of the ag products are down about 50% from their high. Here’s a statement he made in a recent interview, “Without a doubt, farmers, with their wealth in land and machinery, are less likely to go down in flames than those whose jobs and savings are tied to financial systems. Real assets are the way to protect wealth. Stockbrokers are turning in their Maseratis. In the next decade, farmers will drive them.” 

I don’t like owning futures, and I’m leery of owning ETFs that are funded with them, but I am highly motivated to find a way to own some agricultural commodities.

Let me say a word about trading. I’ve heard Rogers say at least 50 times that he is the world’s worst trader. Long ago I had already concluded that I was a terrible short term trader, so I rarely ever do it. I follow the strategy I’ve learned from Rogers and Maybury, described briefly in these paragraphs. But let me be clear about one thing. It is my conviction that God judges our hearts and our faithfulness at stewarding His resources for the benefit of His kingdom, and not the specific methods employed by His stewards. I am not qualified to judge the management techniques of any other steward. My only success has come by buying deeply undervalued assets and holding them as long as it takes for the market to recognize the value and bid the price up to full or overvaluation.

I conclude this with two verses of Scripture:

“He who works his land will have abundant food, but the one who chases fantasies will have his fill of poverty.”
Proverbs 28:19 (NIV)

“If a man shuts his ears to the cry of the poor, he too will cry out and not be answered.” Proverbs 21:13 (NIV)

This article is public domain.  It was written by Jay O'Keefe.
This page was last updated on 19 October 2008 .