Commodities guru Jim Rogers is predicting that “poor man’s gold” may outperform the real thing in the future. According to a Bloomberg piece that appeared on BusinessMirror (Philippines) yesterday:

Silver, down 35 percent this year, will outperform gold as investors turn to the metal as a hedge against inflation, investor Jim Rogers said.

“Silver will do better than gold,” Rogers, chairman of Singapore-based Rogers Holdings, said on Monday in an interview in New York. “It’s been beaten down horribly. If you put a gun to my head and said you have to buy one, I would buy silver rather than gold.”

Still, that doesn’t mean the former partner of George Soros is turning his back on the yellow metal. From the piece:

Gold may drop as central banks and the International Monetary Fund (IMF) sell the metal to raise cash, said Rogers, who correctly predicted in April 2006 that gold would reach $1,000 an ounce. The IMF in May ratified a plan that included proposals to sell 403.3 metric tons of gold to reduce a budget deficit.

“The IMF has gigantic amounts of gold,” said Rogers, a cofounder with George Soros of the Quantum Hedge Fund. “Maybe gold is going to go down for a while. If gold does go down, I’m going to buy more.”

Source:

“Silver likely to outperform gold as inflation hedge, Rogers says”
BusinessMirror (Philippines), November 4, 2008

Templeton Asset Management executive chairman and emerging markets veteran Mark Mobius believes that China and Asia might escape the worst of the ongoing global financial crisis. Drazen Jorgic of Citywire (UK) wrote last Friday:

On Tuesday, China slashed its interest rates by 27 basis points to 6.66% – a third such cut in six weeks. And while the reason behind lower rates is widely believed to be fear of slowing global demand, Mobius points out that China has not suffered as much as expected.

‘There’s no question there will be a hit to the export market’, Mobius conceded. ‘We have seen that in a number of countries around the world but the actual exports of China have not come down yet. Some of the demand for Chinese products is ever-lasting because China is the only place that can make these products for these prices,’ he says.

Mobius believes that the Chinese economy will continue to grow at around 6-8%. ‘They’ve diversified their exports to emerging markets around the world and been pumping up domestic demand. So we see a surprisingly low decline in their exports but it remains to be seen how long the slowdown lasts,’ he says.

Mobius thinks that the fate across wider-Asia in the financial crisis will largely depend on Japan and China. However he stresses that China is creating further demand by enacting substantial reforms for the country’s farmers who make up some 750 million of the population. These reforms will give farmers the rights to their land.

‘They are going to generate an incredible increase in wealth in the countryside and that will translate to consumer demand,’ he says.

Chinese outdoor mall

Source:

“Mobius buying stocks as EM approaches bottom”
Drazen Jorgic
Citywire (UK), October 31, 2008

Legendary investor Jim Rogers was in the Netherlands last week and stopped by ABN Amro Netherlands. RTL Z (Netherlands) was at ABN headquarters on Friday and got the chance to interview the CEO of Rogers Holdings. Notable excerpts from the interview included:

Obama or McCain?

Neither. I’ll vote the protest vote because neither one of them has a clue.

Inflation or Deflation (Near Future)?

We’re going to have serious inflation. Because governments around the world are printing money. Whenever you’ve had lots of money printed over the past few hundred years it’s always led to higher prices, it’s always led to inflation. I mean, these are simple things. Right now, everything is going down because there’s forced liquidation of everything. But in the end it’s going to be an inflationary nightmare.

Brazil or India?

Brazil. Brazil has got a lot of natural resources and is a reasonably well-run country. At the moment, India doesn’t have many resources, and even the resources they have, they manage badly. No, I would never want to put my money in a badly-managed country or company.

Mexico or Germany?

Germany… Germany’s a much better place, of those two, I’d rather be in Germany.

Iceland or United States?

I’m shorting the United States’ government bonds… I’m selling short the long-term government bond in the U.S. I’m not doing anything in Iceland.

Dollar or Yen?

Yen… I would not buy the dollar now, I’d buy the Yen.

Gold or Gold Mines?

Thousands, tens of thousands of gold mines have gone bankrupt over the past 150 years. Gold is still gold. I’d rather own the gold than the mines. I mean, if I happen to know the mine, and I knew the guy was a genius, then maybe I would buy the mine stock. But no, definitely buy the gold.

Commodities

Commodities are going to be in a bull market for another decade or two. Whether oil is selling at $45, or $145, it doesn’t really matter to me— today. Ask me in 10 years— it will matter… I don’t have any trouble sleeping, because I know we’re in a long-term bull market.

The segment runs a little over 14 minutes, but is definitely worth viewing.

RTL Interview Link

Source:

Jim Rogers Interview
RTL (Netherlands), October 31, 2008

Legendary emerging markets investor Mark Mobius predicts that China, not the International Monetary Fund, will provide financial relief to Pakistan. From Drazen Jorgic of Citywire (UK) earlier today:

The IMF may be on the verge of offering Pakistan a loan to stave off bankruptcy, but Templeton’s veteran investor Mark Mobius believes China will proves to be the ‘white knight’ for the country’s economy.

Within the last week, there has been growing concern about the economic situation in Pakistan. This has fuelled worries about the security situation since political instability has been increasing in recent times. Mobius, however, says Chinese investment is likely to aid Pakistan and stabilise the surrounding countries.

‘I think China is going to invest in Pakistan and help them through their balance of payments problems so we can be a little bit more positive about the situation there. Pakistan is going through a slow transition back to parliamentary democracy and in the process some very tough economic decisions are required.’

Karachi, Pakistan
Photo by Steve Evans

Source:

“Mobius buying stocks as EM approaches bottom”
Drazen Jorgic
Citywire (UK), October 31, 2008

Legendary bond investor and managing director of the PIMCO family of bond funds Bill Gross made an appearance on CNBC yesterday and talked about what investors should be considering these days. According to the CNBC website:

Gross also said bond investors want to buy what the government is buying.

“The Treasury is buying agency mortgages in the secondary market as well as bank capital preferred stocks via the TARP,” he said.

The government may extend the reach to subprime mortgages and insurance and auto companies, Gross said.

Companies like Ford Motor and General Motors, for instance, are attractive, he said.

Source:

“Pimco’s Gross: Rates To Hold Steady Or Decline More”
CNBC, October 29, 2008

The “Oracle of Oil,” T. Boone Pickens, Jr., appeared on CNBC this morning and talked about crude oil. From the CNBC website:

“We’re out of the market, and have been for several weeks,” Pickens told CNBC’s “Squawk Box.” “I want to see a little more (from) the market before we move back in again; we’re not going to be in any rush.”

According to the Chairman and CEO of BP Capital, the price of crude oil should recover next year. From the CNBC piece:

Pickens predicts that price will recover to about $100 per barrel during 2009.

“This is the worst credit crunch I’ve ever had,” he said, adding, “We’ve been through them before; you just work your way through it.”

He predicts consolidation as the oil industry struggles to cope with the price plunge.

“I guess I’m kind of anxious to see the first offer for a company,” he said. “We may be a few months away from it.”

He declined to name names.

Source:

“Pickens: I’m On Sidelines … $100 Oil in 2009”
CNBC, October 30, 2008

Legendary investment adviser Jeremy Grantham feels he and his firm are in a position to make a lot of money in stocks. Douglas Appell of Pensions & Investments recently interviewed the chairman of Boston-based GMO LLC, and wrote:

“U.S. pension funds are crying in their soup now, but they can at least find some solace in the fact that, for the first time in 20 years, we’re looking at all global equities being modestly cheap,” said Mr. Grantham. Some are substantially cheap, which has left GMO looking to add to its holdings, he said. “Catching a falling knife is never without pain, (but) the prime directive is to buy cheap assets.”

There’s no need to rush, however. CFOs should phase back into equities “with all deliberate slowness, as opposed to all deliberate speed,” Mr. Grantham warned. Even though the S&P 500 is trading below GMO’s fair value estimate for that index of 975, markets typically overshoot on the downside by 20% or more, he noted. If the market panics, that bottom could be reached in days or weeks. If it’s a more orderly affair, it could take until 2010, as investors digest a likely stream of wretched economic news, he said.

The British investor, who has a proven track record of calling market turns, shared GMO’s latest investment strategy with Appell. From the piece:

Going forward, Mr. Grantham said GMO will be “steady buyers as the market goes down.” The firm risks being too early, but will be in position “to make a ton of dough” when the inevitable recovery comes, he said.

Source:

“GMO’s Grantham licking his lips over hot bargains in the markets”
Douglas Appell
Pensions & Investments, October 27, 2008

Dr. Doom, Marc Faber, says global financial markets have run aground. The Xinhua News Agency (China) wrote yesterday:

The world financial market will stay at low levels for a long time to come, and government injection of capitals into the market will not help, Swiss financial guru Marc Faber said on Tuesday.

“We’ll stick at this low point for a long time. Anyone who thinks that everything will soon be rosy again is naive,” Faber, known as Dr. Doom for his prophecy of earlier economic crises, told the Swissinfo news website in an interview.

According to the investment adviser, no single catalyst could lead to a new bull market in the world.

He said government injection of huge capitals into the market could not actually save the market. To the contrary, those state measures can cause massive budget deficits.

Other measures have increased market volatility. On Monday, Greg Brown from the Internet news site Newsmax wrote:

“Now that deposits are guaranteed, basically I as an investor have no incentive to hold equities, so I sell them and put my money in bank deposits,” Marc Faber, author of the “Gloom, Doom and Boom Report,” told CNBC Monday.

“The interventions, they actually have increased volatility. It’s impossible to forecast market movements when you have interventions,” Faber said.

The Swiss-born investor, who is now based in Thailand, sees inflation down the road for the United States. From the Xinhua piece:

He added he fully agree with the view that there would be a U.S. state bankruptcy.

“The U.S. government will in future have new debts of at least 1 trillion U.S. dollars,” he said.

“That’s on top of the current state debt of 10 trillion U.S. dollars. And that doesn’t take into account state programs to stimulate the economy,” he added.

According to Faber, the U.S. government will in future have no other choice than to print money, which in the long term will lead to inflation.

Sources:

“Swiss financial adviser sees hard times ahead for world financial market”
Xinhuanet.com (China), October 28, 2008

“Faber: The Bailout Is the Problem”
Greg Brown
Newsmax, October 27, 2008

PIMCO’s Bill Gross is a big fan of bonds for U.S. commercial banks that are due to receive money from the federal government. Dan Weil from Internet news site Newsmax.com wrote yesterday:

What to do when the government invests in banks throughout the land? Join them, says bond fund manager Bill Gross.

Bonds for commercial banks included in the Treasury’s equity-purchase program are particularly attractive, says Gross, chief investment officer of bond giant Pimco.

KeyCorp, Ohio’s third-largest bank, and Regions Financial, Alabama’s biggest bank, are members of that club. KeyCorp will sell $2.5 billion of stock to the Treasury, while Regions will provide a $3.5 billion equity position.

After doling out $125 billion to nine of the nation’s biggest banks, the Treasury is now sending $34 billion more to 15 regional banks.

“We like the ones that are submitting applications,” Gross told Bloomberg TV. “The government is investing 10 to 15 percent of the banks’ total capital themselves into the company. So why not be a partner with the government at a higher yield than the government is giving?”

“It’s a slam dunk,” Gross says.

Source:

“Gross: Bank Bonds a Screaming Buy”
Dan Weil
Newsmax, October 28, 2008

Billionaire investor George Soros believes the heyday of hedge funds has passed. Reuters’ Scott Malone wrote yesterday:

The global financial crisis will reduce the hedge-fund industry to as little as a third of its current size, billionaire investor George Soros said on Tuesday.

“The hedge-fund industry is going to move through a shakeout,” Soros, one of the world’s first hedge-fund managers and still among the best known, said on Tuesday in a speech at the Massachusetts Institute of Technology.

“In my estimation (the industry) will be reduced in size by anywhere between half and two thirds,” he said. He did not specify if he was talking about the number of funds or the amount of money invested in them.

Many of the ultra-wealthy investors who fueled a doubling in hedge-fund industry assets to about $1.9 trillion (1.1 trillion pounds) across roughly 10,000 of the loosely regulated funds worldwide in the last three years have been pulling their money out, fearful of hedge-fund failures.

To stabilize the economy, regulators should oversee credit markets, which will make some aspects of the financial services business less profitable, said Soros, one of the first voices to proclaim the severity of the current financial meltdown.

“You must regulate credit as well as money and that does require more regulation,” he added. “Undoubtedly, the financial business will not be as profitable as it has been in the past 25 years.”

Source:

“Soros sees ‘shakeout’ downsizing hedge fund world”
Scott Malone
Reuters, October 29, 2008