In a wide-ranging closing keynote address at the 64th CFA Institute Annual Conference in Edinburgh, noted author, commentator, and global investor Jim Rogers discussed China’s ascendency, the commodities bull market, and why he thinks many attendees in the audience of investment professionals should consider another line of work — especially those who invest in or manage bonds.
China, he explained, “will be the next great country, whether we like it or not, and this is why Mandarin is the most important language on Earth.”
Rogers acknowledged that China would experience setbacks as it continues to develop — just as the United States experienced a Civil War and a series of financial crises during its rise to dominance — but that the country’s position as the world’s largest creditor would attract the necessary talent and capital to continue to grow. “Throughout history, smart people have been drawn to where the assets are,” not to debtor nations, Rogers observed. He expects the so-called Chinese real estate bubble to burst, but believes many parts of China’s economy will continue to do well even in that scenario.
Asked what he thought the biggest risk to Chinese development might be, Rogers cited a growing water crisis that, if not addressed, could threaten the China story.
Regarding commodities, Rogers believes that the bull market, which began in 1999, has further to run. “It’s based on supply and demand,” he said. “You would think after 12 years of rising prices people would bring in new [production] capacity” — but the credit crisis in 2008 put a halt to many of those efforts, Rogers added, resulting in continued supply shortfalls.
He suggests that an economic recovery will only make commodities more attractive. In a downturn, Rogers said he would still prefer hard assets like commodities and farmland over financial assets because of likely continued “money printing” on the part of the U.S. Federal Reserve.
“Did you know the American dollar is made of cotton?” Rogers asked. “That’s why I’m long cotton!”
He also believes we are approaching a major inflection point in U.S. bonds, which have experienced a 30-year bull market. “This is coming to an end,” Rogers said, citing the status of the United States as the world’s largest debtor nation. “I don’t like saying it, but the situation is dire and I expect it to get worse. If you own bonds, sell them. If you’re a fixed income portfolio manager, I suggest you look for other work.”
More specifically, he urged members of the audience to “think about becoming a farmer, or a miner, or a lumberjack” to help ensure their continued prosperity.
“Agriculture will be the next huge industry in the decades to come,” Rogers added emphatically.