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Japan debasing Yen: Jim Rogers


Business Intelligence

Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers says contagion risk is increasing as high food prices trigger more social unrest and political turmoil in the next few years.

Speaking exclusively to Investment Week, Rogers said: “The price of food will go through the roof, and as this happens you will see more social unrest, more governments fail and more countries failing. If people do not understand that they should not be investing”.

“There is going to be a lot more political turmoil in the world in the next few years,” he added.

In various interviews this week, Rogers reiterated long held beliefs that commodities are the best place for investors to put their money, and recommended buying physical commodities and oil. In a reversal of previous positions, the legendary investor is now considering buying the US dollar as the currency faces its “moment of truth”.

Oil prices will rise

“Commodities themselves are the best way to play the oil price. I have an exchange traded note (ETN) that combines oil, natural gas and fuel oil. That is what I prefer, but I may be biased,” he told Investment Week.

“The world is running out of known reserves of oil and this will not change unless somebody finds new discoveries of oil quickly in accessible areas. The International Energy Agency (IEA) keeps telling people this but no one will listen.”

Speaking in an interview with India’s Economic Times, Rogers elaborated on his views on oil noting that supplies are being curtailed and the world is running out of known reserves.

“Libya has closed down some of its oil production, while Egypt is having problems with its production. There is turmoil in many countries and this is causing supply problems,” he said.

“These may be temporary problems, but the world, in the mean time, is losing some of its inventory. So, if there is calm and peace tomorrow, we may have oil go down for a while, but the basic problem that the world is running out of known oil reserves continues”.

“I do know that the price of oil is going to continue to rise for years to come,” he said, adding “the world is running out of known reserves of crude oil”.

Rogers said demand for commodities will not be hit by the current situation in Japan and sees this as a good buying opportunity for both soft and hard commodities.

Demand will increase “because with the nuclear power plants being closed down or damaged or under duress, Japan will have to import more oil, everybody in the world will now look at their nuclear power plants again and probably have more demand for oil and natural gas. Japan is now going to rebuild, that is going to cause big increases in demand for copper and other things,” he told Economic Times.

“This is the new source of demand for copper and lead and things that nobody expected of new demand coming out of Japan, now there is a lot of new demand coming out of Japan. If the rest of the world goes into an economic slowdown because of this, then governments around the world are going to print even more money, that is the wrong thing to do but that is what they will do and whenever they print money, it is good for real asset, commodities,” Rogers added.

US dollar’s moment of truth

In a reversal of previous positions, Rogers said he is now considering buying the US Dollar. “We’re at a moment of truth for the dollar,” he told Yahoo Finance tech ticker.

The legendary investor noted that the dollar has been falling despite events that would normally cause a flight to safety.

“There’s been a lot of good news for the dollar. You have the Middle East erupting, supposedly good news for the dollar,…all of these people are supposed to be fleeing to the dollar as their currency for safety, but it’s no happening,” Rogers said.

“When you start seeing good news for something and it’s going down, it is usually a sign to get out fast”.

I am thinking of buying it because if it doesn’t go down, it could rally up to 20%,” he explains. ”

“If it goes down 3%-4% from here, I would have to sell and get out and hope I’m still solvent.”

Rogers suggested at some point there will be a “tipping point” for the dollar. “I thought it will happen in a few years but it could happen in a few weeks,” he said.

Concerned about the Japanese yen

Rogers who is long the yen said he’s concerned about his position after a recent surge in the Japanese currency.

“I own the yen – more yen than most things,” he said in an interview with MarketWatch today.

“I’m concerned. What do I do now? Obviously the yen cannot continue to be a good long,” Rogers said. “Japan seems determined to debase the yen, which they may be about to do”.

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