Jim Rogers appeared on CNBC earlier today and emphasized that the credit crunch the global financial system is experiencing will contribute to the allure of commodities. From the CNBC website:

The fundamentals for commodities were not affected by government policies that are propagating inflation, Jim Rogers, CEO of Rogers Holdings, told CNBC Wednesday.

“I bought more agriculture this week,” Rogers told “Squawk Box Europe.” “What’s happening is that there will be less supply of everything if we ever come out of (the credit crunch). Nobody can get a loan for a zinc mine or, long term, increase crop production.”

If history is any guide, things to buy are things that are doing fine right now like water treatment companies in Asia or agriculture, Rogers added.

Rogers, who recently moved his young family to Singapore to take advantage of Asia’s bright prospects, also predicted that the Federal Reserve will be lowering interest rates. From CNBC:

Rogers also said that interest-rate cuts are coming.

“I know we are going to get aggressive rate cuts everywhere, that’s why I’m long short-term government bonds in the U.S., but shorting long-term government bonds because it’s not going to help, it’s going to add to inflation,” he said.

Source:

“In Times of ‘Zombie Banks,’ Buy Commodities: Jim Rogers”
CNBC, October 22, 2008

Legendary investor Marc Faber told Bloomberg Television viewers yesterday where he’s putting his money these days. Bloomberg’s Eric Martin and Rhonda Schaffler wrote Monday:

Faber said he is holding gold, cash and short-term bonds because inflation will increase as the U.S. government lowers interest rates to stave off an economic slowdown. Gold climbed 5.8 percent from Sept. 11 through yesterday and yields on three-month Treasury bills fell 51 percent over the period.

“The governments in this world have no other option but to print money. That will lead down the road to inflation,” Faber said. “You don’t need to be an economist graduated from Harvard to know we’re already in a recession. They will just put white paint on a crumbling building.”

Faber, the Gloom, Boom & Doom report publisher, said stocks make up 7 or 8 percent of his holdings, with cash, bonds and gold, his biggest position, accounting for the rest.

Martin and Schaffler also reported on Dr. Faber’s stock picks. They wrote:

Faber recommended buying stocks in Singapore because they are inexpensive relative to company assets. He said this is true particularly for the nation’s real-estate investment trusts and banks.

Singapore’s Straits Times Index has fallen 49 percent from a record one year ago.

“You should just buy the whole of Singapore,” Faber said. He also recommended stocks in Turkey.

Source:

“Faber Says Stocks May Rally, Won’t Reach Records (Update1)”
Eric Martin, Rhonda Schaffler
Bloomberg, October 20, 2008

Here are the latest plays by legendary investors Warren Buffett, Jeremy Grantham, Mark Mobius, and Jim Rogers:

Warren Buffett

Equities:

(GurusFocus.com, October 13)

Warren Buffett has been one of the most notable buyers. After cutting an amazing deal with Goldman Sachs and watching shares of Berkshire Hathaway (NYSE:BRK-A) fall about 30% in the last month, he’s making plenty of other moves. Berkshire was perfectly positioned as it entered September with a $40 billion cash.

The bid to take over Constellation Energy Group (CEG) still stands. Berkshire has also agreed to put $3 billion into 10% preferred shares of General Electric (GE). Also, $6.5 of Berkshire’s dollars were committed as part of the Wrigley (WWY) LBO led by Mars.

His latest move is probably the timeliest. In order to capitalize on the Bull Market in Volatility, Berkshire is starting to write put options more aggressively. This week Berkshire disclosed it has written put options on Burlington Northern Sante Fe (BNI).

Berkshire sold put options that will force it to purchase 1.95 million BNI shares between $77 and $80 per share. The contracts were sold for a total value of $12.76 million and will just defray the costs of buying more BNI…which they were probably going to buy anyway. Berkshire also sold put options for 1.3 million shares of BNI earlier in the week.

Jeremy Grantham

Equities:

(Barron’s, Lawrence C. Strauss, October 13)

(Grantham speaking) In a nutshell, we are as conservative as we can possibly get. One bet that has been very successful for us, touch wood, has been long high-quality, blue-chip stocks, particularly in the U.S., and short risky companies. We have been screaming against risk-taking for a long time, and in recent weeks, it has paid off enormously…

Going forward, you can think about slowly moving back into the cheapest pockets of global equities. So the next move that we make will be back to moderate neutral in emerging-market equities and small-cap international value. I can’t say we are going to be in a great hurry, but that will be our next move. We had finished selling almost everything except emerging markets two years ago. We finished selling emerging market equities three months ago.

But the next move will be buying, and we are encouraged that there are a few pockets that are cheap on an absolute basis. We are not encouraged that they will rally immediately. But we will be looking to buy the cheap pockets of global equities as our next move some time in the next several months.

(Morningstar.com, Russel Kinnel, October 14)

Nonetheless he’s now more constructive about equities because he believes they are trading at severely depressed prices. He said that at the end of Friday, global equities were trading as cheaply as they had been since the 1980s. In fact, the U.S. had traded below GMO’s fair value estimate–though as we spoke Monday morning a rally had brought it back to around fair value. Specifically, he prefers blue chips to small caps or highly leveraged companies.

“We’re buying carefully and slowly,” Grantham notes. Why slowly? “When bubbles correct, they usually overcorrect so that the market is selling well below fair value.”

Interestingly Grantham also says he’s now neutral on financials–a sector he has long disliked. He notes that most of the credit crisis is likely behind us and that the newest plan of worldwide governments to inject capital into banks in exchange for shares is a big improvement on past plans.

Commodities:

(Barron’s, Lawrence C. Strauss, October 13)

(Grantham speaking) Commodities have a great long-term future, now that the long-term trend has shifted from falling commodity prices to rising commodity prices. Having said that, the next couple of years will be quite different. We are in a global slowdown, which I think will be worse than expected even today, and it will be longer than expected — so this is not a healthy environment for commodities. Over a shorter horizon, I would be getting out of the way of commodities or I would be short commodities. I’m personally short oil; the firm is short copper.

(Morningstar.com, Russel Kinnel, October 14)

Grantham expects that slowing growth will also keep commodity prices falling. “I would keep out of commodities for the near term,” he said.

Currencies:

(Barron’s, Lawrence C. Strauss, October 13)

(Grantham speaking) I’m speaking for the asset-allocation unit at the firm. We have been substantially long the safe-haven currencies. We have been very long the yen and somewhat long the Swiss franc and short sterling, which is one of our favorite bets. We have been short the euro for three months, and slightly long the U.S. dollar. One of the paradoxes is, if the world is worse than people expect, the U.S. dollar will outperform.

Mark Mobius

Equities:

(Reuters, George Georgiopoulos, October 13)

“We are buying stocks with single-digit price-to-earnings ratios, price-to-book little more than one, dividend yields of around 5 percent. Tupras refiner in Turkey, for example, now has a dividend yield of around 20 percent,” Mobius said. Templeton’s favourite emerging markets include China, India, Russia, Turkey and South Africa. Its funds also invest in Greek companies that have a lot of their earnings in emerging markets, such as National Bank and Hellenic Bottling.

Jim Rogers

Bonds:

(Bloomberg, October 14, Wes Goodman, Anchalee Worrachate)

“The U.S. government is taking on gigantic amounts of debt,” Rogers said in an interview in Singapore, where he lives. “They’re printing gigantic amounts of money. Printing money has always led to more inflation. The last bubble in the world that I can find is long-term U.S. government bonds.”

Rogers said he is “shorting” 30-year debt, or betting prices will fall.

Sources:

“What The Smartest Money Is Doing Now”
GuruFocus.com, October 13, 2008

“Still Holding Back”
Lawrence C. Strauss
Barron’s, October 13, 2008

“Grantham: Stocks Haven’t Been This Cheap since 1987”
Russel Kinnel
Morningstar, October 14, 2008

“UPDATE 1-Mobius sees markets close to bottoming”
George Georgiopoulos
Reuters, October 13, 2008

“’Long Bond’ Favored as Investors See Waning Inflation (Update1)”
Wes Goodman, Anchalee Worrachate
Bloomberg, October 14, 2008

With all the turmoil going on in the financial markets these days, how is legendary investor Jim Rogers playing his cards? From India’s NDTV this past weekend:

NDTV: Will you buy when there’s blood on the street?
Jim Rogers: If the US and other world stock markets did have a selling climate then I would go for it.
NDTV: But what will you buy in terms of equity asset class?
Jim Rogers: Well, it depends on what goes down the most. I would probably buy stocks of airlines, water treatment, agriculture, and other recession proof companies. The way you are going to get rich in the side market is define by the companies that come through hard times with good results. Those are the companies when you have next bull market that you make a fortune.

The Globe And Mail’s (Canada) Brian Milner also talked about Rogers’ recommendations last Friday:

As for his own investing strategy in these tumultuous times, Mr. Rogers said he is “mainly watching” and recommends that other investors do the same.

But that doesn’t mean he’s sitting on his cash.

Recently, he has been adding more agricultural products, has resumed selectively buying Chinese stocks, invested in the Japanese yen and Swiss franc (he likes the Canadian dollar, too, but doesn’t own it) and shorted the long U.S. government bond. He has also bought some Asian and European airline stocks, as well as Canada’s WestJet Airlines Ltd.

2,000 Yen Banknote

Finally, Peter Koven of the Financial Post (Canada) wrote that same day about whether or not the Singapore-based investor believed the commodities’ boom was still alive:

Mr. Rogers, who famously spent three years driving around the world, argued that most people still “don’t know anything” about commodities despite the boom of the last five years (even saying that less than 100 of the world’s 70,000 mutual funds are focused on them). He pointed out that other resource booms have lasted 15 to 23 years, and there is no reason to think this one will be any different. He figures it could run to around 2018 or 2020.

Of course, the main reason he cited is China. He said the 21st century belongs to the Chinese the way the 20th belonged to America, and practically pleaded with the audience to teach their kids Mandarin. He added that three billion people in Asia want to live like we do, and this will continue to constrain supplies well into the future.

Source:

“Commodity bull run not over yet: Jim Rogers”
NDTV (India), October 4, 2008

“U.S. bailout ‘welfare for the rich’”
Brian Milner
Globe And Mail (Canada), October 3, 2008

“Jim Rogers: Commodities have another decade or longer to run”
Peter Koven
Financial Post (Canada), October 3, 2008

On Friday, legendary bond investor Bill Gross appeared on CNBC. Reuters’ John Parry and Chris Sanders reported:

The manager of the world’s biggest bond fund said on Friday he is raising cash and waiting for asset prices to become more appealing.

Bill Gross, chief investment officer of Pacific Investment Management Co. or Pimco, said he was raising cash for a time when prices are attractive enough.

Source:

“Pimco’s Gross says he is raising cash and waiting: CNBC”
John Parry, Chris Sanders
Reuters, October 4, 2008

William Hanley of the Financial Post (Canada) caught up with legendary investor Jim Rogers while he was in Canada this week. Despite the U.S. government’s growing interventions in the financial system, the CEO of Rogers Holdings is still skeptical of a positive outcome. Hanley wrote:

“I’m pessimistic because America is in recession and that’s having an effect on Europe and Asia,” he says, adding that the recession will last longer than most and be deeper than most because the U. S. government keeps making mistakes by bailing out one entity after another.

“The 29-year-olds on Wall Street and Bay Street have been driving Maseratis,” Rogers says. “That’s about to change. All these guys are going to have to learn to drive taxis.”

The former partner of George Soros in the Quantum Fund believes there will be quite a few brokers-turned-cabbies due to changes taking place on the financial landscape. Hanley wrote:

“The new financial centre could be in Shanghai or maybe in Singapore,” Rogers says. “I really don’t know where, but it’s shifting from New York and London toward Asia.”

Rogers shared his investment strategy with the Financial Post reporter. From the piece:

He continues to own the commodities themselves, not commodities stocks, because the current drop in natural-resource prices is just a correction that could last a quarter, a half or even a year…

He has been buying shares in some airlines, “a disaster area that’s close to a bottom,” and some beaten-up Chinese stocks… Meanwhile, he is monitoring auto stocks, which may become the next disaster area over the coming years…

Rogers is holding on to the Canadian dollars – “one of the soundest fundamental currencies” — he began buying years ago when he saw the commodities boom unfolding against a much-improved Canadian fiscal backdrop. “And I will be buying more along the line.” But recently he has been buying Swiss francs and yen.

He has been shorting the U. S. long bond in the belief that the growing mountain of U. S. debt and the necessity to print money to finance it means bonds have made a long-term top. “Bonds will be a terrible place to be for many years to come.”

And for years to come, Rogers says, water treatment, agriculture and Chinese tourism will be good places to be. China and India, especially, have huge water problems, food inventories are falling even as farmland is taken out of production and 1.3 billion Chinese are now able to travel freely in the world.

Those are the next big things. The best thing to do now in these clamorous markets, Rogers tells a reporter, might be to do nothing unless you have to. “You might just want to head to the beach.”

Sanya, China
“The Hawaii of Asia”

CEP News’ Christine Wong also got the chance to talk to the Singapore-based investor a few hours ahead of his scheduled speech to the Toronto Chartered Financial Accountants Society. She wrote yesterday:

“The American government is getting it wrong… and bailing out the wrong people.” He accused the U.S. lawmakers behind the bailout plan of trying to “bail out their banking friends.”

He predicted that in two years, when other problems crop up in the U.S. financial system, “the American government will be out of bullets.”

Rogers pronounced that “America is in a recession and the world is in a recession.”

Wong also noted that Rogers isn’t too impressed by the Republican and Democratic candidates for the White House. She wrote:

U.S. presidential candidates Barack Obama and John McCain were also in Rogers’s firing line.

“Neither one of them has a clue. Both would be disastrous” for the U.S. economic recovery, he said.

Sources:

“Contrarian becomes pessimist”
William Hanley
Financial Post (Canada), October 3, 2008

“Canada Will Feel U.S. Problems, But Won’t Suffer as Much, U.S. Investment Guru Says”
Christine Wong
CEP News (Canada), October 2, 2008

Marc Faber, also known as “Dr. Doom” by the press, lived up to his name while talking to CNBC this morning about what’s in store for the U.S. economy. From the CNBC website:

Liquidity will dry up even more, volatility will stay high and financial assets are going to suffer as the crisis continues to unfold. The bailout plan is unlikely to work and the global economy will take the hit, he predicted.

“People rely on the people in Congress, at the Fed, at the Treasury, people that brought us into this trouble, to take us out of trouble. I don’t think they will succeed,” Faber said. “We can have recovery rallies but a new high on the S&P is practically out of the question for a very long time. In real terms, equities are still very high and economically, I think the world will go into a slump.”

Dr. Faber, who publishes the monthly investment newsletter The Gloom Boom & Doom Report and is the author of several books, talked more about where he sees financial assets going. From the piece:

“Next year, if the economy in the U.S. is as weak as I think it would be, the trade and the current account deficit will continue to contract,” Faber said. “When global liquidity contracts, it’s not a good time for financial assets.”

Other sources of funding, such as foreign reserves of resources-rich countries, are also likely to dry up, Faber said. “I think sovereign wealth funds are going to be very busy supporting their own markets, they won’t have much money to buy assets around the world.”

The head of Marc Faber Limited also shared a disturbing prediction with CNBC viewers. The Swiss-born investor said:

The next emergency measure will be that Americans are not allowed to buy foreign currency and transfer money overseas, and the next measure will be not permitting Americans to buy gold and so on and so forth… It creates even more uncertainty in the market place when you continually change the rules.

Evangelos Vlasopoulos, stock.xchng

Source:

“Fed Acted Like a Liquidity Drug Dealer: Economist”
CNBC, September 23, 2008

———

FREE 5-MINUTE VIDEO FOR TRADERS: “Where gold is headed in the next 6 months”

Dr. Doom, Marc Faber, spoke to India’s CNBC-TV18 this morning. Here are some notable excerpts from the exchange:

CNBC: Do you expect a bigger slide in commodities from here after what has happened already?
FABER: Over the last six weeks or so, the dollar has been very strong and commodities have been weakening including gold. Some foreign currencies have been very weak like the New Zealand dollar, Australian dollar, euro, pound sterling. Now the dollar is overbought, the S&P 500 and commodities are oversold and we can have a counter trend rally. In other words, the S&P 500 can recover 100-points or so and the dollar could correct here from 1.40 against the euro to 1.50. The pound could rebound the Australian dollar, New Zealand dollar. At the same time, we can have rally in commodities but new highs in commodities won’t happen anytime soon.

The contraction of liquidity in the world will continue. We will need a base building period around this level before we start recovering in asset markets or at worst we will have another major slide in 2009, 2010.

CNBC: In the past few weeks and months there have been a lot of growth concerns. What is the likelihood that both equities and commodities underperform over the next few months?
FABER: Most countries I visit are in recession. In other words, growth is still there but it is not as strong as it was a year ago. A lot of countries have negative growth rates at the present time. But, the markets are already down very substantially. India is down from 21,000 to 14,300 or so. So to some extent, the markets have already discounted slower economic growth or a recession. The question is to what extent have they discounted profits that are not going to recover for several years and the market has not discounted that. Having said that when I look at markets in the US and also in Asia, we have reached a relatively oversold condition right now and sentiment is quite negative and the news coming out of the US is very negative. So in general, when the news is very negative, markets can temporary bottom out and rebound.

CNBC: When you say that we may not see new highs for commodities in a hurry, is it crude that you are referring to?
FABER: You may not see a new high for many asset classes including the Indian Sensex for many years. The oil price is unlikely to go up very substantially unless you have a geopolitical confrontation, which is really possible once Mr. McCain is elected in US.

CNBC: The earlier feeling was that if commodities get into a bear market then equities will get out of theirs. Is it possible that both these markets remain in bear phases?
FABER: If you look at the direction of asset classes since 2001 and October 2002 then equities and commodities have moved in the same direction. All other asset classes like real estate in developed markets, emerging markets and even bond prices have moved up and that is the very famous Bernanke bubble. You can say Thank You to Bernanke, he has created the greatest bubble in the history of mankind. Now the consequences will be felt and they will be felt for quite some time because credit growth has de-accelerated in an unprecedented fashion and that leads to falling asset prices and recession.

CNBC: What commodity looks most likely to rebound form here between precious metals, base metals and even what’s been happening with crude?
FABER: A lot of commodities have become oversold because they are down 50% or more in some cases but I don’t think a new bull market is getting underway any time soon. Commodity prices will be higher in 2015 because all Central Banks are money printers and they do nothing else but print money. When their economies don’t do well, they just go out and print more money and cut interest rates which leads to competitive devaluations. So, if the US dollar is strong then the likelihood is that the Fed will cut interest rates increases and if the US dollar is weak, their hands are tight. If the Australian dollar or the pound sterling is very strong, then the tendency for these Central Banks is to cut interest rates.

At the end of the day, the whole world will end up with interest rates around zero and we will get into a very highly inflationary environment. When everything goes up, the price of TV, bread, and stocks but in real terms the stocks will go down.

Source:

“Sensex may not see a new high for many yrs: Marc Faber”
Moneycontrol.com (India), September 12, 2008

Jim Rogers, the CEO of Rogers Holdings who correctly predicted the start of the commodities rally in 1999, spoke with Bloomberg’s Betty Liu from Singapore yesterday. Rogers talked about his investment activity regarding U.S. financial stocks, crude oil, airlines, and long-term U.S. Treasuries.

U.S. Financial Stocks

I am still short all the investment banks. I haven’t covered any investment banks. I short them through the ETF. This chaos has further to go…

I’ve covered Citigroup. So, I’m no longer short it…

The balance sheets of many of these financial institutions are still terribly impaired. And there are more problems to come. Betty, we had the worst credit bubble we’ve had in world history. You don’t clean that out in a year or two or three. I wish you could, but it’s not going to happen.

Crude Oil

The bull market will not end until somebody finds a lot of oil, or unless we have worldwide economic collapse, perpetual economic collapse…

I will tell you I’ve not sold any oil. Even if it goes to $75, I don’t plan to sell any oil.

Airlines

I have not sold a single airline. I would hope to be able to buy more airlines if I can find some more that are cheap enough or they go down for some reason.

Long-Term U.S. Treasuries

I am still short Treasuries. Long-term U.S. Treasuries.

You can listen to the 9 minute 7 second interview here.

Source:

Jim Rogers Interview
Bloomberg, September 10, 2008

As you’ve probably heard by now, yesterday the U.S. government seized control of U.S. mortgage giants Fannie Mae and Freddie Mac in what could be the biggest government bailout ever in an attempt to stabilize the U.S. housing and financial markets. Legendary investors Warren Buffett and Jim Rogers both spoke to CNBC about the occasion. From the CNBC website this morning:

In stepping in to bail out and recapitalize collapsing home mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Hank Paulson “did exactly the right thing,” said billionaire investor Warren Buffett.

“I wouldn’t change anything in the plan myself,” Buffett said in an interview on CNBC. He said he expects this step will go a long way in calming the market and resolving the ambiguity surrounding the two companies.

“It’s best deal and the most sensible deal available now,” he said…

“If Bear Stearns was an 8.5 on the financial Richter scale, this was about a 9.9, or something of the sort,” Buffett said. “The government really had no choice but to do something. And then the question is: did they do the most sensible thing, and they did do that.” Buffett said.

On the flip side, Jim Rogers told CNBC this was just another example of American taxpayers being stuck with a huge bill, courtesy of Wall Street and their cohorts in Washington. According to CNBC:

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is “more communist than China right now” but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

“America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions,” Rogers said…

“This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I’m not quite sure why I or anybody else should be paying for this,” Rogers told “Squawk Box Europe.”

And just how does the CEO of Rogers Holdings plan to adjust his investments as a result of this bailout? From the CNBC website:

“It’s rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I’ll just sit and watch,” he said.

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don’t have good loans on their books, because “everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie,” he said.

From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

“That’s going to also ensure that house prices continue to go down. It’s going to be harder and harder to get a mortgage.”

Sources:

“Buffett: Treasury ‘Did Exactly the Right Thing’”
CNBC, September 8, 2008

“US Is ‘More Communist than China’: Jim Rogers”
CNBC, September 8, 2008