Echoing the views of his old partner in the legendary Quantum Fund, billionaire investor George Soros predicts that the People’s Republic of China is well on its way to replacing the United States as the world’s dominant economic power. Pravda Online (Russia) talked about his recent interview with Germany’s Die Welt, and posted the following on their website earlier today:

China will be the biggest winner of the current financial crisis, US billionaire and philanthropist George Soros said. The financier gave an interview to Germany’s Die Welt, in which he told of the roots of the crisis and said that the mortgage bubble only triggered the process, which entailed the economic collapse…

The United States and a part of Europe will have nationalized banks and huge debts. China will become the new global financial empire.

“The USA’s influence has already begun to decline. For the past 25 years, we have been running a constant current account deficit. The Chinese and the oil-producing countries have been running a surplus. We have consumed more than we produced. While we have run up debt, they have acquired wealth with their savings. Increasingly, the Chinese will own a lot more of the world because they will be converting their dollar reserves and US government bonds into real assets. The power shift towards Asia will occur as a result of the sins which America committed during the recent 25 years,” Soros said.

Shanghai, China

The belief that China will become the next economic superpower is a view also held by legendary investor Jim Rogers, who co-founded the Quantum Fund with George Soros in 1970. Over the next 10 years, the fund gained 4,200% while the S&P advanced 47%.

Source:

“America pays for 25 years of sin, China becomes new financial empire, Soros
Says”
Pravda Online (Russia), October 16, 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

Legendary investor Jim Rogers appeared on CNBC Friday, and talked about a number of topics, including what he’s doing with his money right now. The CEO of Rogers Holdings said:

Well, I have an enormous amount of cash, and I’ve been using it to buy more Japanese yen, more Swiss francs, more agricultural products, and, there’s a liquidation phase going on… where everything is being liquidated. I bought agriculture last week and it’s down this week. You know, they’re selling everything in sight. I’ve covered some shorts, I’ve covered a few shorts here today. That’s what I’m doing with my money now.

Swiss francs

The Singapore-based investor, who correctly called the beginning of the latest commodities boom back in 1999, also discussed investments that perform well during a recovery. Rogers told CNBC viewers:

I’m not sure I want to buy equities when the market caves in. I don’t think equities are going to come out of this on top. Normally when you have a panic, the way you make money is you buy the things where the fundamentals have been unimpaired, and they will lead the market coming out. Most equities, I mean Morgan Stanley, isn’t coming out of this unimpaired. So, I’m buying commodities. Commodities are the only thing I know that are coming out of this unimpaired where supply and demand are still terribly out of balance. And the Japanese yen. And the Swiss franc.

You can view the 6 minute 49 second segment here.

Source:

Jim Rogers Interview
CNBC, October 10, 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

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

Warren Buffett Now Second Richest American

From CNBC Executive Producer Alex Crippen this past Wednesday:

After six months as the reigning “World’s Richest Billionaire,” Warren Buffett has lost his title, and a few billion dollars.

The Forbes 400 list of the richest Americans has just been released, and Buffett’s friend Bill Gates, the former Microsoft Chairman, is at the top of the rankings, with an estimated net worth of $57 billion.

That tops Buffett’s $50 billion, although he’s still number two out of 400 on the Forbes list of the nation’s super-rich.

The magazine notes that Berkshire Hathaway shares are down 15 percent since Buffett was named the world’s richest billionaire six months ago with an estimated $62 billion. They had soared to an all-time high late last year, lifting him into first place.

Jim Rogers Working On New Book About Commodities

From Commodity Online (India) on September 14:

When it comes to the finest books on commodities, people always turn to Jim Rogers, the global investing legend on commodities. Some of the books that he has written are worth reading, if you want to play in the global commodities market.

Jim Rogers continues to write on commodities. May be we can expect another great book on commodities from him soon. When Commodity Online met Jim Rogers in Singapore recently, he said he is working on a new book on commodities.

“Reading, traveling and writing are my passion. I write about everything I do on commodities,” he told Commodity Online.

Sources:

“Warren Buffett Loses Title of World’s Richest Billionaire”
Alex Crippen
CNBC, September 17, 2008

“Jim Rogers and his books on commodities”
Commodity Online (India), September 14, 2008

Earlier today I came across an interview of Jim Rogers that was posted on the CNN International (Europe) website. In “Will markets get worse?” the former partner of George Soros talks to CNN’s Andrew Stevens from Singapore about what’s ahead for the world’s financial markets— and what he’s investing in.

You can access the 2 minute 39 second video here.

Source:

“Will markets get worse?”
Jim Rogers Interview
CNN International (Europe), September 18, 2008

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Veteran investor Jim Rogers says he knows who’s responsible for the latest carnage on Wall Street. From Commodity Online (India) earlier today:

In an exclusive interview to Commodity Online, Rogers- who is regarded as one of the top global commodities investors- said that “gigantic amounts of leverage caused by a few totally incompetent people within the firms” have led to the collapse of Lehman Brothers and problems plaguing Merrill Lynch and AIG.

Rogers said investment firms like Lehman used to invest heavily on commodities and as the funds have moved out of commodities, it has hit the markets hard.

“Commodities and everything else are being sold in forced liquidations because of the financial situations at many firms,” Rogers said.

As for the economic effects of the financial crisis? From the website:

He predicted that the US economy in particular and the economies in several countries across the globe will continue to suffer thanks to the crisis. “After this panic and forced liquidations, the economies will continue to worsen, but the sound investments will recover first after the panic,” Rogers added.

Source:

“Incompetent people forced Lehman collapse: Rogers”
Commodity Online (India), September 17, 2008

Jitendra Kumar Gupta from India’s Business Standard caught up with legendary investor Jim Rogers, who was in Mumbai for the launch of the Birla Sun Life Commodity Equities Fund. From the Standard’s website yesterday:

At the conference and in an interview with Jitendra Kumar Gupta, he shared his outlook on commodities and the world economy. Excerpts:

What is your view on global economy and inflation?
The world economy is in recession and the inflation is going to stay here, it is going to get worse. Some countries lie about it. But, inflation in all countries is going to get worse. The next decade is going to see lot more inflation, which is not good.

In this light, how can one beat inflation and generate higher inflation adjusted returns?
Commodities are the best inflation hedge, better than real estate better than anything else. Nothing can assure you better than commodities, but only if you are good at it. You have to pick the things that go up the most to make more money. Inflation does not cause prices to rise, price rise causes inflation.

Frequently, since the prices of the commodities go up before the inflation numbers, one can stay ahead of inflation. But, if you get it wrong you might do worse. So, investing in those commodities, which are going to go up first or selecting the right commodities, is the key to stay ahead of the inflation and make a lot of money…

Do you think Asian economies are decoupling from the rest of the world?
If you deal with the largest economy you are going to get affected by what is happening in America. If you are in the other sectors in Asia, such as water treatment and agriculture you have decoupled. You do not care what is happening in America.

But, if you sell to Wal-Mart, which is the largest retailer in America, you are going to suffer badly. So, some will decouple and some may not. Since India is such a closed economy, which is a negative as far as I am concerned, in this particular short term, India will suffer less probably than other countries which are more integrated with the world economy.

What is your view on the dollar?
Fundamentally, dollar is a terribly flawed currency. I am pessimistic about the future of the dollar; I expect it to continue to deteriorate over the next two or three decades.

The dollar is rallying at the movement because there are so many pessimists including me. But, I hope to use that rally some time in next year to get better of rest of my dollars. I do not want to own any US dollar. Also, I would not urge you to buy US dollar. Dollar is going to loose its status as world reserve currency.

Some of the OPEC countries have already started and no longer take dollar, like Venezuela no longer accepts dollar. Other countries, like Gulf, are already looking and may be taking a package of basket of currencies instead of dollar. I am not the only one who knows the dollar is in trouble. Anybody who watches the TV knows that the dollar is in trouble.

What is you assessment of the crude oil prices in the short and longer term?
I do not have idea as to where the oil prices are headed in the short to medium term. I do know over the course of the bull market, which perhaps has another 10 years to go, the crude oil price will be much higher.

Your bets in the commodity space?
Agriculture is one thing I will be looking for the next decade or so. Within commodities, I would not say these are the best, but may be sugar, coffee and cotton. I am also starting to look at some of the base metals they are down a lot; starting to look at some of these like silver, copper, zinc and gold.

Also, if you want to invest in Asia, commodities are the best way. Because, no matter what happens, the commodities have to be better, Asia has three billion people and is now involved in the world economy. Besides, in commodities you do not have to worry about corporate governance, central banks, unions, politicians or anything.

With gold prices correcting, do you still advocate buying gold?
I am trying and want to buy some gold. However, whether this is the low in the gold, I have no idea, but if gold goes lower, I will add some more. Gold is something I do not plan to sell. Gold is something I will gift to my children.

How will alternative fuels play?
Many politicians around the world are advocating bio fuel now. It is going to happen whether it is good or bad. There is going to be much more demand for the bio fuel going forward. This is also a reason that I am optimistic about the outlook of agriculture.

Your views on the water potential in Asia?
India and China have huge water problems. Water could be the next big investment. And, the best way is to invest in water companies which clean it, transport or pump it. Find the water companies that solve the water problem and you could be the richest person in India.

Source:

“’The US dollar is in trouble’”
Jitendra Kumar Gupta
Business Standard (India), September 15, 2008

India’s CNBC-TV18 spoke to well-known commodities investor Jim Rogers this morning. Rogers, the author of Hot Commodities, correctly predicted the rally in hard assets that began in 1999. Here are some notable excerpts from the exchange:

CNBC: We have seen commodities decline in the last couple of months, do you think it’s a moment to buy or there is more decline left in the market?
ROGERS: It is better to buy when things are going down rather than when they are going up but I have no idea whether this is the best time. Normally September and October in investment markets are weak months so you are at the right time to start investing in commodities if you have it.

CNBC: What would you buy? Would you buy commodities or funds or into mining companies, what seems best to you?
ROGERS: It depends on your ability. If you know a lot about commodities, you can invest in commodities and that’s difficult in India. If you are a good stock picker then you are much better investing in commodity companies or commodity funds. If you know a good stock picker who runs a fund buy that fund, you will make more money.

CNBC: What are you betting on the non-agro or the agricultural commodities?
ROGERS: I bought agricultural commodities recently. They have gone down and everything has been going down for the last couple of months. I would rather buy agriculture than most things these days.

CNBC: You have never liked US dollar but we have seen a resurge come in to that? How long do you think this would stay?
ROGERS: We are having a rally in the dollar because everybody is bearish on it including me and that always leads to a rally. I don’t know how long it’s going to last but I plan to sell this rally sometime in the next month or a year. I don’t know how long this is going to go but I know that US dollar is a terribly flawed currency and it has got terrible problems down the road.

CNBC: Gold prices have come down from USD 1,034/oz to USD 730/oz, do you think there is more downside left here or would you buy at these levels?
ROGERS: I am going to try to buy little bit of gold today here in India, not a major position. If it continues to go down, I hope I am smart enough to buy more. Gold could go to USD 500/oz and could have a big correction. All markets do that, they have big corrections and they scare everybody but a 50% correction is normal. If it goes down 50%, I hope I am smart enough to buy a lot more.

CNBC: What would you buy as of now?
ROGERS: I recently bought airline stocks, agriculture, Renminbi, Swiss Francs, and Japanese Yen.

CNBC: Do you still believe we are into a bull commodity market and we might see more highs going on from here?
ROGERS: Over the next decade, we are going to see more highs. The world is in a recession now; you may see lower prices for some commodities for a while just as you may see a lot lower prices for a lot of stocks. Of the two classes, I would rather own commodities than stocks because when the economies revive, commodities are going to revive first and go up the most.

Source:

“Invest in commodities now: Jim Rogers”
Moneycontrol.com (India), September 12, 2008