Wednesday, March 19, 2008
His phone interview the other day was such a big hit, Bloomberg brought Jim Rogers back again today, this time with a video feed.
Some highlights on the Federal Reserve bailout for Bear Stearns, 29-year old cotton farmers, and the commodities boom.
On what other choices the Fed had for Bear Stearns:
In the month of January, the top five firms on Wall Street paid themselves $39 billion dollars - with a "B" - in bonuses. And now we have to bail them out? What about all the poor school teachers and fire department people in America who are not getting $39 billion in bonuses and then getting bailed out. What is this?On why he doesn't buy the "spiraling out of control" argument:
Why can't investment banks go bankrupt? It's been happening for centuries that investment banks have been going bankrupt. And why my tax money and your tax money has to be used is beyond me.
If you don't let them go bankrupt, you let the dollar continue to collapse, you let inflation go through the roof, you let commodities go through the roof - ultimately you have a much worse recession. The bond market, eventually, is not going to buy it anymore. Long-term rates are going to go up and we're going to have a worse recession.On excesses in investment banking:
This is the same mistake that they made in the 1970s when what's his name came in (
William McChesney MartinArthur Burns) and spent all sorts of money, printed money, tried to keep the economy afloat, inflation went through the roof, the dollar collapsed - they had to bring in Paul Volcker to raise interest rates to over 20 percent and throw the economy into a serious recession in order to solve the problem.
That's what we're going to do again. The Japanese did the same thing - they kept printing money in the early 90s. They said, we're not going to let anybody fail. Japan still talks about the "lost decade" because their central bank wouldn't let anybody go broke. You can keep propping it up, but you may lose a decade, you may lose fifteen years. Who knows how long you're going to lose.
The biggest excesses in world markets that I've seen in the last few decades have been Wall Street investment banks. You don't see 29-year old cotton farmers driving around in Mazeratis and getting into private planes and flying off to exotic places, but you see lots of 29-year old investment bankers doing so.On where we are in the commodities bull market:
And now we - the tax paying public - are bailing them out so they can continue to drive their Mazeratis off into the countryside. That's where the excesses are.
If this is a nine inning baseball game, we're in the fourth inning and we have a long way to go. Mr. Bernanke may make it last longer and longer. Remember Mr. Bernanke has taken $400 billion onto his balance sheer - he's taken mortgages, car loans. You know, soon, Mr. Bernanke is going to be in his helicopter, flying around collecting rent from people and collecting car payments. He's going to be selling used cars soon. This is insane.On being at the "head of the herd" investing in commodities:
There are over 70,000 mutual funds in the world for the public to invest in stocks and bonds - there are fewer than 50 for the public to invest in commodities. I bet you don't know anybody who's ever bought a commodity.
You know, everybody you know, everybody watching your show, everybody who works at Bloomberg has bought lots of stocks and bonds and lots of mutual funds - I bet none of them have bought commodities. There's nobody buying this stuff yet. Yes, it's up, but wait until you have 5,000 mutual funds or 10,000 mutual funds.