Yesterday, Jim Rogers, chairman of Rogers Holdings, spoke to Bloomberg’s Carol Massar and Erik Schatzker from Singapore about Federal Reserve monetary policy, the financial sector, and his investment strategy. Here are some notable excerpts from the interview:

Monetary Policy

The Federal Reserve in the last several months has taken on something like $400 billion of bad assets. They’ve taken on more bad mortgages, they’ve taken on who knows what in bad mortgages. Who gave the Federal Reserve the authority to do that? That’s not their mandate. Their mandate is not to prop up Wall Street. Their mandate is to keep a sound currency, not to prop up Wall Street.

What are they gonna do when the market is really down? The stock market went down maybe 20%. What are they gonna do when it’s down 30%, or 40%, or 50%? They’re not gonna have any bullets left. They’re gonna be out of money. They’re not going to be able to solve the problems at that point.

This is the same mistake they made in the 1970s… The Japanese did the same thing. They kept printing money in the early nineties. Said we’re not gonna let anybody fail. Japan still talks about the lost decade in Japan, because their central bank wouldn’t let anybody go broke. You can keep propping it up, but you may lose a decade, you may lose 15 years. Who knows how long you’re gonna lose?

Financial Sector

I’m still short them, I shorted more last week on the rally, I may not short any more now, because it looks like this latest gambit by the Fed may buy some time for a while. But no, I’m not covering my financials. I’m still short Fannie Mae and Citibank and all the investment banks.

Eventually, when an industry goes from this kind of excess into cleaning itself out, you have nearly everybody losing you money, you have one or two go bankrupt. When we see that sort of thing, I’ll probably be buying all the investment banks I can. But we’re far, far, far away from that situation.

The system is terribly corroded. The system, and by the way, Erik, think about all the tier 3 assets. Let’s remember the term— tier 3 assets. These guys still have huge debts, problems on their balance sheets that they haven’t gotten rid of yet. Now, the Federal Reserve is taking it at a rapid rate, they took $30 billion. You and I taxpayers, took $30 billion from Bear Stearns recently to clean them out. But they still have a lot of problems in the balance sheets.

I’m short all the investment banks… I’m short the ETFs, I’m short the index.

Commodities

(On cycle) If it’s a nine inning baseball game, we’re in the 4th inning. We have a long way to go. Mr. Bernanke may make it last longer and longer.

I own all the agricultural commodities. I bought more recently… I buy the Rogers Agricultural Index.

I think gold probably should calm down for a little bit. But, I own gold, I’m buying more, and I will continue to buy gold if it goes down.

(On commodities as a whole) Nobody’s buying this stuff yet.

Taipei Market

Taiwan

I’m buying Taiwan and will be buying more soon.

The 12 minute 18 second video can be accessed from Bloomberg’s website here.

Source:

Jim Rogers Interview
Bloomberg, March 19, 2008

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