Interview with Jim Rogers: Oil will go to 150 USD!
V. Riemer: Good morning Mister Rogers. Thank you for taking the time for this interview. Since our last interview in March has already passed half a year. It was a quite turbulent time and commodities got in the focus of the media. In most of the commodity markets there was a lot of money to earn. What is your view of the current sentiment at the commodity markets? Are we already at an intermediate high or will the commodity train start now?
J. Rogers: When ever that happens that means there will be a reaction. We will probably have a consolidation, but I am not very good at market timing. I am probably the world’s worst trader. I know I am the world’s worst trader. So don’t use my advice for timing. But I do know that people have that interests and talking about it. Usually when that happens there is a time for a setup, but basically the bull market is going to last for years.
V. Riemer: As a result of the massive rise of the oil price the inflation is now exploding all around the world. More and more investors are fleeing into gold as their alleged sheet anchor in the flood of inflation. Will their be an comparable situation like in the 1970ies or is this rise of the gold price only be a flash in the pan and will end soon?
J. Rogers: It’s not just oil, copper and a lot of other things are going up and that leads to inflation. When prices are rising, are going up, that means inflation. Gold sometimes has been a way to protect you from inflation, but not always. Sometimes other things have done. I own some gold. I think you make more money in other commodities than gold.
V. Riemer: After the prices of oil, gas and their derivatives have already passed through a incredible rally many investors ask themselves if this trend could go on or if their must be a massive correction at the energy sector first. How high could the oil prise rise in future?
J. Rogers: It can go to 150 USD per barrel. At least it can go very high, because nobody has discovered any oil.
V. Riemer: Another question about a precious metal. Silver, the small brother of gold, is more and more getting into investors focus. After Barclays had proclaimed the will to establish a Silver ETF (Exchange Traded Fund) the “Silver Users Association” is now fighting against this plan. It seems ridiculous; however they use the same arguments than silver bugs, especially the silver expert Theodore Butler, used for years to verify the need of a coming silver price explosion. One of the justifications is that there is not enough physical silver at the market to back only one single silver ETF. What do you think about silver a commodity for industrial use and what is your view about the situation of the silver market?
J. Rogers: Yes, I know. Well, it doesn’t matter what I think or doesn’t think. The situation in silver and any other commodity will be determined by the supply and demand. Whether there is an ETF or not an ETF is not really that significant in the long run. It is a short term thing which will have some effect, but the real situation is supply and demand. So I pay not to much attention what’s going on with the ETF.
V. Riemer: More and more economists are claiming that there will be a burst of the homebuilding bubble and therefore a coming recession. What do you think about this often quoted homebuilding bubble? Is there really a bubble in the housing sector and if there is one, when can or must it burst? Could this event have an impact on the American economy? What could therefore be the consequence for the commodity demand?
J. Rogers: Well, I’ve sold short homebuilders in America and I’ve sold short Fannie Mae, which finances a lot of homes. In some parts of the US there is a bubble, the east coast, the west coast. But some parts in the US there is no bubble at all. Prices are not gone up at all. In places that produce agriculture and places like that there is no bubble. Prices will now start going up there and will go down other places. That will have some effect. Yes, people stop building houses that will certainly have some impact on the price of things that going in the houses. But remember copper is a world wide product. If they stop building houses in Florida, that’s going to have minimum effect on the price of copper. But all of these things are world wide commodities; it’s not just a local situation.
V. Riemer: China is spreading its arms all around the world to satisfy its greed for commodities. One of the most important focal point is Africa, because here you are finding the last huge not accessible oil fields. What is your view about the risk of political tension between the USA and the forthcoming super power for the commodity resources of this planet?
J. Rogers: Throughout history as a new country has come to the rise they have run into the old country, which was a top country. That always led to tensions between those two countries throughout history. It will probably happen with China and the US. It’s too bad. It doesn’t have to happen if they could work together and make a lot of money and success. But unfortunately throughout history that’s always led to tension.
V. Riemer: After you have proofed your good sense as investor a few times, we would naturally like to know if you have already new ideas what could be the next mega trend after the commodity boom.
J. Rogers: No, you know these things don’t come along to often. You don’t need more that one or two areas every ten or fifteen years. I don’t know what the next thing will be yet; maybe some specific things. But basically commodities are the place to be for another decade.
V. Riemer: Many thanks for the interview! We wish you a pleasant stay in Germany
