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Old December 31st, 2009 #1
Alex Linder
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Alex Linder
Default Investor analysis

Shorting the Economic Recovery


A Q&A WITH KEVIN DUFFY AND BILL LAGGNER: Two hedge-fund managers predict the economy's next leg down. Shorting Goldman Sachs.

PERHAPS ONE OF THE greatest failings in the run-up to the financial meltdown was a lack of perspective -- an inability by many market participants to see the big picture. Not so with Kevin Duffy and Bill Laggner, principals of the Dallas-based hedge fund Bearing Asset Management. With the help of their proprietary credit-bubble index, developed in 2004, the managers sounded early warnings on housing and credit excesses, and capitalized handsomely on their forecasts by shorting Fannie Mae, Freddie Mac, money-center banks and brokers, builders, mortgage insurers and the like.

Students of the Austrian school of economics, which espouses a free-market philosophy that ascribes business-cycle booms and busts to government meddling with interest rates, the pair is solidly in the contrarian camp, believing that the worst for the markets may be yet to come.

The two established Bearing in June 2002 after running their own money and, before that, a stint by Duffy at Lighthouse Capital Management and by Laggner at Fidelity. Bearing now has about $60 million under management, and they have returned on average an impressive 18.28% annually since setting up shop. They hold refreshingly against-the-grain views on what's ahead.

Barron's: You've said that perhaps the most redeeming feature of capitalism is failure. Please explain.

Duffy: Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.

Capitalism is primarily attacked by two groups: utopians who wish to impose a more "compassionate" system, and political capitalists who want to enjoy the fruits of success without bearing the pain of failure. They use the coercion of the state to gain privileges, at the expense of everyone else.

As a country we've become less tolerant of economic failure. The result has been a series of interventions, such as meddling in the credit markets, promoting homeownership and creating a variety of safety nets for investors. Each crisis leads to an even greater crisis. The solution is always greater doses of intervention. So the system becomes increasingly unstable. The interventionists never see the bust coming, then blame it on "capitalism." [Many, many WN do not grasp what he is talking about, but he is correct.]

What would you have done differently as the credit bubble was bursting and the Fed and the Treasury were declaring that the world would come to an end without an $800 billion bailout package?

Duffy: Allow those who essentially bet wrongly to fail, instead of bailing out people with friends in high places. [Correct again.]

What about the argument that a financial panic would have ensued and crushed the little guy?

Duffy: The little guy actually has been crushed. Nobody is asking where this money is coming from. And the money has to essentially flow into the political economy at the expense of the real economy. [Correct again.] The little guy is always going to be the last one in the soup line. So he will get a bone tossed to him, like cash for clunkers. But if you are Goldman Sachs or if you have got essentially the red bat-phone to Washington, D.C., you are first in line. [ZOG/politics bails out ZOG/bankers if they fail. Bails them out with money stolen through inflation from White earners.]

Laggner: AIG made sure its creditors received 100 cents on the dollar. Essentially you have the socialization of risk [and the semitization of profits], but the survivors are still highly leveraged. There is still a multi-trillion dollar shadow banking system that FASB [the Financial Accounting Standards Board] wants to address next year. The central planners have already spent $3.15 trillion on various bailouts [holy fucking shit!], credit backstops, guarantees, etc., and given approximately $17.5 trillion of government commitments [wowza!], etc., while allowing many of these institutions to remain in place, with the same people running them.

What else could have been done?

Laggner: We could have isolated the money centers and put them in temporary receivership. Then, we could have created -- with a mere $100 billion -- a thousand community banks. If you believe in fractional reserve lending [in which banks lend multiples of their deposits], something we don't support, they could have created a trillion dollars in new credit that would have flowed to small and medium-sized businesses. Those are the parts of the economy that are choking. Because there has been no reform, it looks like we are going to be spending more money. We are going down this very treacherous path, where debt continues to skyrocket. Private-sector debt is being offset by the public sector. Meanwhile, the cost of funds for small and medium-sized businesses has gone up, while the cost of borrowing for the survivors is little to nothing, and they are speculating with that money, as opposed to letting it flow through into the real economy.

What kind of financial reform would you like to see?

Laggner: We don't believe in a central bank. [Correct again.] The idea that banks can speculate with essentially free money from the [Federal Reserve], which ultimately is the taxpayer, and that when they lose money the Fed bails them out and then passes that invoice to the taxpayer -- that whole model is broken and needs to go away. [Correct again.]

How would you refashion the system?

Duffy: To get to the heart of the problem, we need to address fractional-reserve banking, which is causing the instability. We have essentially socialized deposit insurance and prevented the bank run, which used to impose discipline on this unstable system. At least it had some check on those who were acting most recklessly. Until we address the root of the problem, we are going to have a series of crises, greater responses and intervention, and more bubbles -- and the system will keep perpetuating itself. [Instead of allowing individual banks together, ZOG ties them thru the FDIC, which produces a noyade - look it up.]

Where are we in the deleveraging process?

Laggner: We had a massive real-estate bubble and credit growth, thanks to off-balance-sheet banking that went to four or five times gross domestic product in the latter part of this decade -- and of course it burst. Because of huge government commitments, we now have rolled the credit bubble into a sovereign-debt bubble.

The question is, how is the government going to service all this debt? As the real economy contracts and as the political economy expands, this coordinated global debasement strategy ultimately fails.

How do you play that?

Duffy: The immediate risk is the economy. We've had a nine-month rally. We think it's a false rally. Some sentiment levels have returned to the extremes of optimism of 2007. We are essentially doing a long-short strategy -- long physical gold, short the Standard & Poor's 500. At the 1980 peak, the ratio of the gold price to the S&P was about six times; at the low in 2000, it got down to 0.2; today it is at about one. We can go to two, three, four times.

Do you see the S&P 500 retesting its lows of this year?

Duffy: It's difficult to know. It depends on how much money gets printed. In real terms, can we get cut in half from here? We think so. S&P earnings are distorted because of accounting changes for banks and brokers; if banks were marked to market, S&P earnings next year could fall to $45 a share. Bullish sentiment is rivaling the 2007 top, and volatility has fallen dramatically. We like the VXX, an exchange-traded note that's based on S&P 500 short-term volatility as measured by the VIX index. It's down 67% this year, and fits into the whole idea that complacency is very high.

Indeed. Are there any sectors of the market that you do find attractive?

Duffy: We are long consumer staples, discount retailers and pharmaceuticals. One way to participate is through the Gabelli Healthcare & Wellness Trust [ticker: GRX]. It holds roughly half health care and half global consumer brands in high-quality names like Danone [DA], Nestlť [NSRGY] and CVS Caremark [CVS]. It trades at a 20% discount to net asset value, though it has a fairly high expense ratio of 2.16%. If you look at Big Pharma, during the tech-stock and growth bubble of 2000, these companies traded as growth stocks, with an enterprise value to annual research and development spending of about 50 times. Today they're trading at 10 to 15 times. We like fallen growth stocks that are cheap, like Wal-Mart Stores [WMT]. The stock has gone nowhere in the last decade, but gross profits have grown 2.7 times.

What are your other themes?

Laggner: We are heavily short Japanese and U.S. government long-term bonds. Greece's deficit to GDP is approaching 15%. If you look at the proposed debt-ceiling increase in the U.S. [the Senate voted Thursday on a near-term increase to $12.4 trillion from $12.1 trillion] and at the current administration's planned spending, we are probably going to be at roughly 13% deficit to GDP this fiscal year, so basically we are Greece, where 10-year-bond yields rose 160, 170 basis points. [A basis point is a hundredth of a percentage point.] U.S. bonds are down about 20% this year, so we see a process in which creditors just shy away from funding our long-term obligations, and long-term rates keep creeping higher.

The Fed has controlled the long end by monetizing Treasuries and mortgage-backed securities. If they see the long end getting away and decide to come back into the market and buy, that will result in a much lower dollar and higher gold prices. Gold is reflecting not just inflation but instability around the world related to these business models that have been adopted by governments.

Yet the EU said it won't bail out Greece.

Laggner: Maybe we're at a turning point, where the bailouts have been so extreme that both our central bank and the ECB say we just can't continue to do this, otherwise we are going to have currencies evaporate overnight. But we haven't seen much of anything in the way of just cutting government spending, either here or in Europe.

What about the big banks? When do we see the denouement?

Laggner: There is some deleveraging in the consumer space, but little or none in the professional-speculator space, the bank money-center space. Credit Suisse is apparently allowing its hedge-fund clients to return nearly to the leverage levels at the peak, in '07. Assuming financial-accounting regulators reinstate off-balance-sheet rules on securitizations early next year, Barclays estimates it will bring roughly $500 billion in off-balance-sheet assets back onto bank balance sheets in 2010. That is going to force the banks to raise capital. A lot of structured finance is carried on the books of banks at close to par.

The FDIC [Federal Deposit Insurance Corp.] took over Corus Bank and Guaranty Bank and liquidated their books, and that debt is going for anywhere from 33 to 37 cents on the dollar. Until the regulators force banks to realize these losses, it's like the entire financial sphere is in suspended animation. A large chunk of CMBS [commercial-mortgage-backed securities] aren't being serviced. The same with residential mortgages, whether in the loan-modification-market program or not: Banks are able to carry a lot of these loans as performing loans, even though they are not performing. Japan tried the same thing, and it just lengthened the process. And we are going down that Japanese road.

That can't be good for the banks.

Duffy: We're essentially short the political economy, and the most politically connected firm is Goldman Sachs [GS]. It has two sides: a highly secretive and profitable trading operation, and a more pedestrian public business. Our suspicion is that their secret sauce is access to friends in high places, and that the model breaks when it either flies too close to the sun or a public backlash opens them up to scrutiny. Trading and principal investments account for 67% of net revenue this year, the highest level ever. Goldman, aggressively plying the risk trade, is vulnerable to the next leg down.

Speaking of a backlash, we now have Goldman managers toting guns to protect themselves from populist rage. At what point will society demand some sort of change from the government?

Laggner: A client sent me an e-mail the other day in which the tea-party demonstrators are getting a higher approval rating than the Democrats or Republicans. There is a backlash building, and that's a very good thing. But it's a process. As the arrogance level of central bankers or the money-center banks continues to grow, 2010 and the mid-term elections will be very exciting.

Duffy: Last year, 70% of the people were opposed to the bailout [another good example of how what the mass of responsible people wants is usually ignored, as politics serves the interests of the top elites]. And so far, through these massive interventions, government has been able to stabilize the financial system. But you have this divergence between the real economy and the political economy [good way to conceptualize it - political vs real economy]. People are still hurting. Consumer confidence has not rebounded like investor confidence has. [People are doing the right thing - saving. Government is doing the wrong thing: printing and spending.] If we are right, and we are heading for the next leg down, that's when I think all bets are off. If the political economy and some of those who got bailed out are back asking for another bailout, that's when the backlash really starts to heat up.

For bear markets to end, they have to teach lessons. But the people who didn't see this bus coming 2 years ago -- they're back in droves, and they're bullish. We haven't changed behavior, and this bear market will not end until we do.

E-mail comments to: [email protected]


Last edited by Alex Linder; December 31st, 2009 at 07:28 PM.
Old December 31st, 2009 #2
Alex Linder
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Alex Linder

This thread is for solid analysis only, per my determination. If I see bad stuff in here, I'm deleting it. As it says, this thread is for general overviews mainly, altho that might include some specific stock picks or other investment choices. Articles related to Fed or other specific entities should be posted in those threads - i.e. gold, stocks, Fed, housing, etc.
Old January 11th, 2010 #3
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Default Chart of the day

“In the just-so story of the evolution of our economy, our old manufacturing based economy has been replaced by an innovative knowledge economy. That’s not quite true.

“In fact, the decline of the jobs in goods producing sectors of the economy - construction, manufacturing, mining and agriculture - has largely been met with an increase in jobs on the government payroll. We’ve gone from providing jobs in profit-making private industry to providing jobs in profit-eating government work. Toward the end of 2007, the total number of government jobs exceeded the total number of goods producing jobs. Welcome to the government payroll economy.”

Source: John Carney and Kamelia Angelova, Clusterstock - Business Insider, January 5, 2010.

Note productive jobs are at mid 1960's level.

Last edited by remnant; January 11th, 2010 at 02:30 AM. Reason: addition
Old January 11th, 2010 #4
Rick Ronsavelle
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(From above)
The ratio of the blue line to the red line:


The great replacement- Producers replaced by bureaucrats, gold replaced by paper, contract replaced by edict, Whites replaced by jews and mexicans.
Old April 22nd, 2012 #5
Walter E. Kurtz
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Default 60 Minutes: Jew Lehman Brothers Fraud and Collapse;contentBody

Look at all these disgusting, rich, fraudulent jewish financial crooks on Wall Street and the jewish-led SEC, the govt regulator that's in bed with them.

This is a must-watch video for the average Kwan to see juist how crooked these big, jewish investment banks and their jewish government supervisors operate to deceive and defraud them.

First it was jew Madoff being exposed for running the world's largest ever Ponzi scheme, to the tune of over $100 billion. Then Lehman Brothers collapsed - the largest ever US bankruptcy. Watch the video to see Lehman CEO - jew Dick Fuld - lie to Congress on whether or not he knew that his own investment bank was committing fraud. Lying kike cocksucker. Of course he knew and so did the jewish-run SEC. Watch the video to see jew David Koch of the SEC trying to appear "concerned" about potential fraud on Wall Street. Effin' cry me a river.

Then, of course, last year we were treated to the collpase of MF Global, the 8th largest US bankruptcy, where CEO jew Jon Corzine claims he doesn't know where $1.2 billion of client funds "disappeared".

Watching the 60 Minutes video, please note that Steve Croft, apparently a gentile, and Mr. Lee, the non-jew British accountant at Lehman who got fired for sending a memo to Lehman executives warning of apparent fraud, and Judge Anton Balucas appear to be the only ones with any honor.

Disgusting, criminal, jewish financial crooks.
I'm so depressed about outsourcing I called the suicide hotline and got a call center in Pakistan. They got all excited and asked me if I could drive a truck.
Old April 22nd, 2012 #6
Rick Ronsavelle
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We need some tough jews to regulate these kikes.
Old May 15th, 2012 #7
Alex Linder
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Alex Linder

Legendary Jim Rogers: Brokers Going Broke, Farmers Will Become Rich - Very Rich!

Jim Rogers is a renowned international investor. In 1973, he co-founded the Quantum Fund with George Soros. After a fantastically successful decade, he retired to travel the world. He is the author of Investment Biker: On The Road With Jim Rogers and A Bull in China: Investing Profitably in the Worldís Greatest Market, among other books. He also runs the Rogers Global Resources Equity Index. Recently Rogers sat down with Steve Forbes to talk about why the global economy is moving to Asia, where heís putting his money and what the U.S. can do to right the ship. Video and a transcript of their conversation follows.

Steve Forbes: Jim Rogers, thank you for joining us.

Jim Rogers: My pleasure.

Forbes: Letís go through a little bit of history. You teamed up in the early 1970s with George Soros. Had a great fund, got out in the early 1980s. Quickly recapture what you did and how you did it at such a young age.

Rogers: Well, we had a successful ten years. I didnít want to wake up at 75 and still be looking at a computer screen. Iíd always wanted to have more than one life, so off I set to have more than one life. And Iíve had more than one life. I retired. I was 37. And set off to have more than one life.

Forbes: Any motorcycle trips in the offing? Any more books on the exotic places of the world?

Rogers: No. I went around the world in a car, 1999 to 2001, and I really havenít been on a motorcycle much since then. It grieves me that you ask, because some of the finest times of my life were on motorcycles, including the trip around the world on the motorcycle. But now Iím doing other things. Iíve got two little girls. Iím living in Singapore, which is not a great motorcycle place. Now Iím doing other things.

Forbes: I canít imagine you speeding there.

Rogers: No, no. I mean, the speed limit is 90 kilometers an hour! Itís not a great motorcycle place.

Forbes: Not to be negotiated.

Rogers: Right, and not negotiable. Youíre right. Exactly.

Forbes: Talking about Singapore, when you moved there you decided to have three dates: 1807, youíd move to London. 1907, youíve got to go to New York. 2007, youíre in Asia, specifically Singapore. Why?

Rogers: Well, the 20th century was the century of the U.S. The 19th century was the century of the U.K. The 21st century will be the century of Asia, and itís becoming more and more evident. And especially of China. I wanted my children to grow up knowing Asia and speaking Mandarin. I think the best skills that I can give two girls born in 2003 and 2008 is to know Asia and to know Mandarin. So there we are. I couldnít do it in New York. I tried. I tried doing it in New York. But it was not possible. So there we are.

Forbes: What do you see as the problem with the U.S.?

Rogers: The main problem is the staggering debt. We are the largest debtor nation in the history of the world, Steve, as you undoubtedly know, because you probably read Forbes. Itís amazing how high the debt is, and itís going up by leaps and bounds. Itís just mind boggling how fast itís going up. Nobody seems to understand or care what the significance and the consequences will be. Itís not good. Itís not good news.

Forbes: In the past, weíve had some rough periods Ė I remember the malaise of the 1970s Ė and the U.S. has come back. You donít see that happening again? Are we just digging the hole so deep weíre not going to be able to get ourselves out?

Rogers: There will be rallies. The U.K. in 1918 was the richest, most powerful country in the world. There was no number two. In three generations, they were bankrupt. Now in that period of time, they had some rallies, as you well know. They won the Second World War, for instance. So they had some big rallies. But basically, they were in decline.

I would like to think that thereís something which is going to save us. I can think of some things which will give us rallies. But I cannot see anything Ė I mean, look at Japan. Japan has staggering internal debt. They still are externally a creditor nation. They still have a balance of trade surplus. Weíre the largest external debtor nation in history and the largest internal debtor nation in history. Weíll have rallies. But Steve, I donít see what can cause us to repeat, perhaps, the í70s. Weíre in relative decline. Maybe you would like to debate that. I donít think so. I donít see that that relative decline will stop.

Forbes: Now in terms of investing, commodities. You have the Rogers Global Resources Equity Index. You donít see the dollar eventually getting strong again? Do you think commodities replace Ė

Rogers: I actually own the dollar. I actually own the dollar, as we stand here. I bought the dollar 15-16 months ago. 17.

Forbes: Thatís just a bear market rally?

Rogers: Itís a bear market rally, yes, in my view. Although when I walk out of here, I may buy more. No, I donít see it as anything more than a bear market rally. But I own several currencies around the world. There may be a time, Steve, in the foreseeable future, when all of us are going to be getting rid of our paper money, because itís being debased all over the world. One reason I own the dollar is because everybodyís panicked about the debasement of these other currencies. Paper money is suspect.

Forbes: So itís just the best house in a bad neighborhood?

Rogers: Iím not even sure itís the best house in a bad neighborhood. But itís a good house in the bad neighborhood, for the moment.

Forbes: Getting back to commodities, what makes you bullish on commodities?

Rogers: Well, thereís been a huge dearth of investment in productive capacity for 30 years now. The last lead smelter built in America was built in 1969. No gigantic elephant oil fields discovered since the 1960s. I could go to agriculture. Steve, you should start an agriculture magazine. Because the profits in agriculture Ė

Forbes: Share with us the observation you made about somebody majoring in public relations and agriculture.

Rogers: Well done. More people in America study public relations than study farming. We have no farmers. You went to Princeton; nobody you went to school with became a farmer. I went to Yale; nobody I went to Yale with became a farmer. The average age of farmers in America is 58 years old. In Japan, the average age is 66. In Australia, itís 58. Hundreds of thousands of Indian farmers commit suicide every year. Itís a disastrous business. In the U.K., the highest rate of suicide is in agriculture. Itís been a horrible business for 30 years. Prices have to go up Ė have go to up a lot Ė or weíre not going to have any food at any price.

Unless youíre going to become a farmer.

Forbes: Then we truly starve. But you pointed out we have 200,000 PR graduates, 20,000 farmers coming out of our schools. And you have a wonderful phrase, ďYou canít eat press releases.Ē

Rogers: Thatís exactly right. You cannot eat press releases. It was actually 200,000 M.B.A.ís we have coming out. Thatís even worse. We have more people doing M.B.A.ís than doing PR.

Thereís going to be a huge shift in American society, American culture, in the places where one is going to get rich. The stock brokers are going to be driving taxis. The smart ones will learn to drive tractors so they can work for the smart farmers. The farmers are going to be driving Lamborghinis. Iím telling you. You should start Forbes Farming.

Forbes: In the 1970s, we heard the same thing, and it didnít happen. Why?

Rogers: Well, farmers did make a lot of money in the 1970s.

Forbes: And then lost it all in the í80s.

Rogers: Yeah, but it actually started before. Thatís my point. These things go in cycles. There has never been any bull market which has lasted forever. No bull market in the history of the world has lasted forever. These commodity cycles come and go. On average, theyíve lasted 18 to 20 years in the past. I have no idea how long this will last. But itís not over yet.

Forbes: Thoughts on gold? You were suspicious in the late 2011, not without reason. Where does that go from here?

Rogers: Well, I own gold. Iím not selling my gold. Iím not even hedging my gold, at the moment, although Iím thinking about it. Goldís up 11 years in a row, which is extremely unusual, as you know, for any asset class. Itís correcting right now. I would suspect itís going to continue to correct.

There are some things going on in the world. The Indians are coming down hard on gold, and theyíre the largest consumer of gold in the world. So it may continue to correct. If so Ė if it goes down further Ė I hope Iím smart enough to buy more. To buy a lot more. The bull market in gold is not over yet, Steve.

Forbes: Now going back to Asia, China. You have not been a big fan of stocks. You are of the currency. How do you play China now?

Rogers: The best way to play China is commodities, because they have to buy commodities. If youíve got cotton, they will take you to dinner, they will pay for your dinner and theyíll pay you on time. You donít have to worry about corporate governance or any of that kind of stuff. They donít care who the head of The Federal Reserve is if you have cotton. Because cotton is its own world. And many other commodities, as well.

I own the Renminbi, as well. Itís a good way to play China. I donít buy Chinese shares, except when they collapse. They collapsed last in November of 2008. I bought more Chinese shares. If and when they collapse again, Iíll buy more. My Chinese shares are for my children. Theyíre not for me.

Forbes: Now looking at China itself, can they become (as the U.S. has been) an innovative economy instead of a catch up economy? Are they going to do the real value added stuff? Do you see the changes coming on that?

Rogers: The first time I went to China, 25 or 30 years ago, there was one radio, one TV, one newspaper, one way to dress, one everything. Thatís changed dramatically, as you know. In China now, they produce something like, I donít know, 20 times as many engineers every year as we do. They didnít in the past. It was a very closed and traumatic society and autocratic society. Thatís changing rapidly.

I suspect, yes, some of these engineers are going to turn out to be hotshot engineers. I donít know when. I donít know where. But China has a long history of entrepreneurship and capitalism. Theyíve been disastrous, at times, in their history. But theyíve also been spectacularly successful, at some times in their history. So teach your children Mandarin, teach your grandchildren Mandarin.

Forbes: Youíre not a fan of India?

Rogers: No, no, no. Iím short India as a matter of fact. I love to go there. If you can only visit one country in your life, Steve, for whatever reason, I would urge you to go to India. Thereís nothing quite like it from a tourist point of view. But as far as a bureaucratic maze, itís the worst bureaucracy in the world. They donít like foreigners. They donít like capitalists. They donít like people making money. Itís a fabulous country to visit, but I wouldnít try to do business there.

Forbes: So whatís happening in high tech is just an outlier?

Rogers: Yeah, very much so. You can probably name four or five companies Ė I doubt if you could name four or five, I could probably name two or three high technology companies. Steve, there are a billion people in India. We hope that somebodyís successful. And most of the outlying outliers that are the successful Indians that you know live in Europe or America. There are very few great success stories in India itself. There are. They exist. Out of a billion people, of course.

Forbes: Japan? Are they ever going to get out of this rut?

Rogers: I own the currency. And when they had the tsunami, I bought shares, as a matter of fact, as they collapsed. Itís always been a good thing to do when thereís a huge natural disaster. Itís usually a good thing to do, to buy into the market. I doubt in five years I will own them. I doubt if Iíll own the currency or the shares. Japanís got staggering problems. Theyíve got the highest internal debt in the world and theyíve got a declining population. Theyíve got serious problems.

Forbes: Talking about debt, Indiaís piling on debt, too.

Rogers: I know. Thatís why Iím short India. Thatís one reason Iím short India Ė because theyíve got this huge debt. For some reason there are all these bulls walking around that donít seem to understand that India has a debt to GDP ratio of 90%. Theyíre still bullish. They donít do their homework.

Forbes: You going into Myanmar?

Rogers: Iím extremely optimistic. If I could put all of my money into Myanmar, I would. I cannot, because you and I are citizens of the land of the free. In the land of the free, we cannot invest in Myanmar. Everybody else can. The Japanese, everybodyís pouring into Myanmar, except all of us from the land of the free.

It is so exciting. It is like going to China in 1978; itís exactly the same place. It might be more exciting, because itís been such a disaster for 50 years and now theyíre opening up. Theyíre right between India on the left, China on the right Ė huge natural resources, 60 million people, disciplined, hard work, educated. Oh my gosh, itís such an exciting opportunity. But all you and I can do is I can read about it in Forbes. I canít do anything.

Forbes: Where else are you doing things?

Rogers: Well, the other place that I see wildly exciting things is North Korea, but we canít do anything there. Thereís no market in North Korea either. But thereís going to be a merger soon of North and South Korea and thatís going to be a very, very exciting place. Then youíll have a country of 75 million people, right on the border of China, huge labor pool, lots of natural resources in North Korea. Theyíre going to run circles around the Japanese. The reasons the Japanese donít want it to happen is because they donít want a huge new competitor. They got their own problems.

North Korea, I wish I could find Ė Iím looking for ways to invest. I have a couple of ways. But theyíre not of great interest. These are the places that I find the most exciting. But as far as stocks, for the most part Iím short stocks. I donít own many stocks in the world. I own commodities. I own currencies.

Forbes: Vineyards?

Rogers: Not in vineyards. No, thatís a good idea. I donít own any. No, I donít own any vineyards. No, I drink the stuff, I donít grow it. It takes too long to grow it, so Iíd rather drink it.

Forbes: So to sum up, the U.S. Ė long term, secular decline.

Rogers: Certainly relative secular decline. Thereís no question about that. We may have a lot of oil. When the U.K. had a big rally, went bankrupt in the í70s, it had a big rally because the North Sea oil started flowing. I know Margaret Thatcher takes credit for it Ė it was the North Sea. North Sea oil started flowing in 1979, the same year Margaret Thatcher came to power.

If you give me the largest oil field in the world, Iíll show you an extremely good time, as you can imagine. We may have the largest oilfield in the world, with all this oil shale and natural gas, shale gas if they can solve the environmental problems. That would cause a huge rally in the U.S. Weíre very good at agriculture or have been. That could cause a big rally in the U.S.

So donít give up on the U.S. I own the dollar. Iím a U.S. taxpayer, U.S. citizen. So donít give up on the U.S. But Iím afraid itís nothing more than a secular rally, because weíre the largest debtor nation in the world and nobody cares, except me and you. I know you care. But other than the two of us, nobody seems to care.

Forbes: So why arenít you running for president?

Rogers: No, no, no.

Forbes: Might do better than I did.

Rogers: No, thatís why Iím not. Because I know I wouldnít. And second of all, you think I want to spend my time being nice to people I donít want to be nice to? You tried that. I canít imagine itís a lot of fun, going out day to day being nice to people you donít want to be nice to. I donít want to do that.

Forbes: Jimmy, thank you.

Rogers: Thank you, Steve. Good fun, as usual.


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