‘Bernanke Is Crazy’
Jim Rogers Made a Lot of Money, Thinks Highly of Vienna and Not Much of the Fed
Jim Rogers is known in Austria for having "kissed the Vienna stock exchange awake," and internationally for being one of the savviest investors around. Born 1942 in Wetumpka, Alabama, Rogers co-founded the Quantum Fund with George Soros in 1970. The fund gained 4,200% in the following ten years. In 1985, he wrote a very positive article about the Vienna Börse in the renowned financial periodical Barron’s, triggering a bullish business for years. He toured several continents on his motorbike in search of good companies to put his money in (which also resulted in his book The Investment Biker), then went on a three-year long worldwide trip with his wife in a custom-fitted station wagon.
The Rogers’ moved to Singapore from New York City for business reasons, and have established a second home in Vienna "because we love the city." Recently, Rogers has been investing less in stocks, more in commodities and currencies, mostly in China. The following interview was held at Café Sluka, half-way between the Parliament and City Hall.
Vienna Review: The economic crisis we’re currently having: what would you call it?
Rogers: America is in a recession, there’s no doubt about that. Housing, automobile and finances are in worse than a recession.
Vienna Review: What’s the lesson to be learned?
Rogers: It was partly caused by the worst credit bubble we’ve ever seen in American history. It’s as bad as it can be. What’s to be learned? Don’t give loose credit! Don’t give away houses, don’t give away anything! I know that people in the lending business will now start to be circumspect. They will cut back dramatically, which will make the recession worse for a while.
Vienna Review: You warned of the current situation as long ago as last spring. Do you feel vindicated, like saying I told you so?
Rogers: Well, I did tell you so (laughs). I was always ridiculed for saying this was going to happen. But the more ridicule there is, the better – then I know I’m right. It has all come true. What I regret of course is that people didn’t listen. Otherwise they wouldn’t hurt so badly.
Am I happy that I’m making money? Yes, of course.
Vienna Review: So who else is in fact learning from this, in terms of policymaking?
Rogers: Maybe some of the central bankers around the world. To my delight, the chancellor of Austria is on the record as saying, We’re not going to do the same thing (lowering the prime interest rate).
I think he’s right. It was a terrible mistake that the Fed lowered the rate, a disaster. This is going to lead to higher inflation, to a lower dollar, eventually to higher long-term interest rates, to a worse recession. We’ve had recession every five or six years. There is nothing wrong with that. Some people certainly get hurt, but not very badly, because of all the safety nets.
Frequently it costs more to try to prevent a recession than just having the recession. Look at what happened to Japan. For the last 18 years, every time something was going wrong, the said, Well, we’re gonna stop it. And the Japanese economy still hasn’t recovered the way it should.
Vienna Review: What is your relationship with chancellor Gusenbauer?
Rogers: Informal talks on financial and economic matters. And again, I’ve been excited that in Davos he said he hopes the ECB will not be doing what the Fed had done. Because if Europe makes the same mistake, it’s going to have the same problem. And, by the way, Gusenbauer is also starting this effort to make Vienna a strong financial center again, like it has been long time ago. I think it’s a great idea.
Vienna Review: You helped with the first phase, by writing a very positive article about the Vienna stock exchange in Barron’s in the mid-eighties.
Rogers: I know. Maybe I can contribute in a small way to the second phase.
Vienna Review: Many commodities are still priced in US dollars. For how much longer?
Rogers: Eventually the dollar will lose its status as the world’s reserve currency. People are turning away already, America’s enemies especially, like Venezuela or Iran. And some of America’s friends are now also saying, Hey, wait a minute, maybe there’s something wrong with America, maybe we should diversify.
Vienna Review: Do you see America in general moving in the right direction?
Rogers: America is certainly a mature society, but it is overextended – geopolitically, militarily, financially, in nearly every way. So yes, relative to the rest of the world, America’s position as a beacon is in decline; certainly compared to Asia, probably compared to Europe as well.
Vienna Review: What would you tell the next president?
Rogers: Resign (laughs). Listen, the problems can be addressed. It takes a long time to solve them. But no country that has gotten itself into this position has gotten out of it without a crisis. But if you ran on a platform saying that we have to change the system, you wouldn’t be elected.
You’d have to change the tax code dramatically – in America we tax savings and investing; successful countries tax consumption. You’d have to change the education system, with the masses of administrators instead of teachers. And medical care: We spend four or five times the amount that everybody else does, and the standard of health care winds up like 22nd or 23rd – we don’t have the results of better health care in the U.S. We have all the lawyers litigating and suing everybody, and that’s adding enormous costs. You’d also have to open the borders for more immigrants.
But listen, you think that anybody who ran on a platform like this could win? They’d be laughed out of town the first day. That’s why democracies don’t change unless there is a crisis. Oh, and America has troops in 120 countries. Bring them home! We’re only making enemies and not making America safer, and it’s costing us a fortune.
Vienna Review: What about the currently likely presidential candidates?
Rogers: I would not vote for any of them. In every American election, I’ve never voted or a winner, always a protest vote. Because if we keep voting for turkeys, they’ll keep sending us turkeys. Maybe some day we’ll understand that we shouldn’t vote for these turkeys.
Vienna Review: Last November on Bloomberg TV, you called Ben Bernanke (head of the Fed) "either a total madman, a charlatan +or a complete liar". Do you still stand by this characterization?
Rogers: I don’t think he’s a liar. I think he’s just a fool. He does not understand economics, markets, currencies. I’m afraid he’s not a very smart person. And what he’s done since November confirms my view. By god, he’s crazy! He is sending a signal to the rest of the world: We don’t care about the value of the dollar! Anybody who understands what he’s saying is getting out of the dollar. Well, I’m getting out of the dollar.
Vienna Review: By propagating this move, and by actually moving yourself out of the US and settling in Singapore and shortly perhaps also in Vienna, are you occasionally accused of being unpatriotic or the like?
Rogers: The lunatic fringe would periodically say something like that. My response to this is, Wait a minute, I thought this is America, and that as an American you can live anywhere you want to.
Vienna Review: You advocate investing in China, just as once you favored the Vienna exchange.
Rogers: I am still a fan, although I don’t have many investments in Austria right now, but not in stocks in other countries either. Vienna is still doing better than many other exchanges. But I prefer commodities and currencies.
Vienna Review: The gist of your new book is very positive about investing in China. What about the risks of getting burned?
Rogers: But this is true of India, of America, of every country in the world! That’s part of being an investor. America skinned a lot of people. Whenever you have huge amounts of money, somebody is gonna cheat somebody. One thing about China: If you do this sort of thing and you get caught, you get executed. They don’t ask questions. You get shot.
Vienna Review: In your career, who taught you the most valuable lessons?
Rogers: The most valuable lessons I learned from making mistakes.
Vienna Review: Which one was the worst?
Rogers: How many do you want to go into? Well, the worst was early in my career. I thought that America was entering as serious bear market in 1970, I put all my money in a negative position, the market collapsed, within five months I had brilliant results, tripled my money.
I said, Gosh, this is easy, I’m really a smart guy. A couple of months later I did it again – only this time I got wiped out. That was pretty painful. I learned that I didn’t know much about the market, that I was inexperienced, didn’t know much about myself, how to deal with this experience. Then I had to start over. And I did.
Vienna Review: What pace of life do you like more? Being on the road like you’ve done for many years, or living a more settled-down life?
Rogers: I yearn to settle down, but so far I haven’t done one minute of it. I am frequently requested to make speeches, and I love doing it and accept more than I should. I raised my fees, and my wife says, Let me take the calls, and she wants to raise the fees so much that when I accept, even she’s happy.
Vienna Review: What makes you happy the most?
Rogers: My little girl. She brought out emotions in me I didn’t know I had. I’ve cried more out of happiness than in my entire previous life. It’s just pure joy.
Jim Rogers’ most recent book, A Bull In China, 2007, will be published in German this month. (Investieren in China, FinanzBuch Verlag, Munich).