Barrons Jim Rogers Interview

Barrons conducted an interview with Jim Rogers last week and if you are a fan of Jim Rogers, check out the interview. It's a very good interview so even if you are not a Jim Rogers fan, you may find it interesting. Here are some excerpts along with my thoughts:

(source: Light-Years Ahead of the Crowd: Interview With James B. Rogers, By LAWRENCE C. STRAUSS, MONDAY, APRIL 14, 2008. Barron's.)

Barron's: Why not live in China?

Jim Rogers: The pollution is so horrible and, at least in the cities where we wanted to live, we just couldn't bring ourselves to move there. Singapore is a terrific place. They don't speak as much Chinese here as we would like, but they speak plenty of it.

Out of the top 10 most polluted cities in the world, China has 3 or 4 of them (depends on definition of pollution.) Not that I am anywhere near Jim Rogers in terms of wealth or ability to move, but I would never move to a totalitarian country like Singapore. Jim Rogers is basically sacrificing his American freedoms for wealth. As long as you keep your mouth shut and don't dissent, you'll be fine in any of these countries. Most businesspeople are like that anyway.

B: Why are you so bullish on China?

JR: China is going to be the next great country. The 19th century was the century of the U.K. The 20th century was the century of the U.S. The 21st century is going to be the century of China. Even if I'm wrong, there are 1.5 billion people who speak Chinese every day, so it's not as if our daughter is learning Danish. Even if she winds up working in a Chinese restaurant, she is going to be the maitre d' -- not the dish washer.

B: What else intrigues you about China?

JR: China was in decline for 300 years and then around 1978 Deng Xiaoping said, "OK, let's find something new." He reintroduced entrepreneurship and capitalism to a country that has had a long, long history of both. In China they save and invest more than 35% of their income; in America we save less than 2%. The Chinese work from dawn to dusk. When they come to work, they don't say, "How many holidays do I get?" They want to live like we do in America and they are willing to work hard, save and invest for the future.

The Chinese work ethic is one thing that will propel China far beyond most other countries. They have a lot of issues in front of them (environmental pollution and degradation for example) but China will probably become the largest economy within a hundread years.

Here is what he is investing in:

JR: Perhaps the safest investment is the renminbi, the Chinese currency. I don't see how the renminbi should not go up against the dollar, anyway, for the next several decades. Commodities, of course, are a great way to invest in China...

Agriculture...The same goes for power generation. Another growing industry is tourism...

...short the U.S. investment banks by using the Amex Securities Broker/Dealer Index [ticker: XBD]...also been short Citigroup [C] and Fannie Mae [FNM]. I'll short some more if we get nice rallies in any of them. I am still short some of the U.S. homebuilders like Lennar [LEN].

I, as well as others, have mentioned these positions before. Elsewhere in the article he states that he is still bullish on commodities. The most interesting thing to me is the following tactic:

B: Anything you like?

JR: The airlines, mainly international airlines like Lufthansa [DLAKY], Austrian Airlines [AUA.Austria], SAS [SAS.Sweden], Iberia [IBLA.Spain], Japan Airlines [JALSY] and all the Chinese airlines. I fly a lot and see that the planes are filling up and that the fares are going up. I also realized that Boeing [BA] and Airbus are sold out and that you can't get a new plane for five to seven years. Rising oil prices are a problem, but the airlines can pass on the cost increases.

I find his airline strategy quite interesting. Airlines historically are poor investments. In fact, four of them declared bankruptcy a few week ago. They also tend to struggle when oil prices are high, which Jim Rogers is calling for. Yet, Jim Rogers expects that the airlines can pass on the costs.

One of the death knells for the airline industry in the past has been overcapacity. Jim Rogers suggests that this may not be a problem this time around because the airline manufacturers are sold out and can't build more airplanes.

It'll be interesting to see how this plays out. I personally don't see much future in this sector, even for the Asia-oriented airlines.

B: Why have you sold most of your emerging market holdings?

JR: ...Having said that, right now there are probably 15,000 MBAs on airplanes flying around the world looking for emerging markets, some of which are now called frontier markets. I've been investing in these markets for many years and all of a sudden they have a name. That's why I have sold all my emerging markets except China and Taiwan.

But I hope I'm smart enough that if and when there is a big correction, I'll be able to buy back some of those holdings.