Jim Rogers Sees Bond Market Bubble Developing

Published: Thursday, 1 Jul 2010
4:44 AM ET Text Size By: Antonia Oprita
Web Producer, CNBC.com
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Bond markets are a bubble waiting to burst because the world economy is facing even worse problems after central banks flooded markets with cash to try to get out of the crisis, famous investor Jim Rogers told CNBC Thursday.
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On Wednesday, banks borrowed less money than markets expected from the European Central Bank, in what investors saw as a reassuring sign that Europe's banking system is not as weak as previously feared.
"I don't quite see that myself," Rogers said, adding that the problems are worse now than at the beginning of the crisis. "Markets are looking ahead to more difficulties."
And he said he does not see why investors look at bonds as safe havens.
"I'm watching the bond market, I have no longs and no shorts," Rogers said. "It is a bubble which is developing; it's one of the few bubbles in the world which is developing."
"I think it's going to be a disaster and I plan to be selling them short sometime in the foreseeable future," he added.
Some economists have been calling for more stimulus money to be poured into the economy, but Rogers said this would be bad as it would help only certain categories and will have to be paid for by others.
"The people who receive the money think things are better, and they are better for them, but the rest of us have to pay the price," he warned.
'We Have Inflation Now'
In the US, officials and pundits recently said the bailout of Fannie Mae and Freddie Mac may end up costing taxpayers $1 trillion.
Prices are creeping up all over the world but some governments "lie" about inflation, according to Rogers.
"We have inflation now. Everybody who shops knows there is inflation… prices are going up," he said.
The US and the UK are among governments who "lie" about inflation, while Australia, China and Norway – countries that tightened monetary policy – are facing up to it, he added.
"My investment outlook is I am long commodities and short stocks. I don't own stocks in any place at all," Rogers said.
Geographically, he said he prefers assets in the countries that have the cash, rather than in the ones that have the debt.
"The creditor nations are all in Asia now … I'd rather be invested with the creditors than the debtors," Rogers said.
Food Prices Rising
Printing money has been good for hard assets and food prices "are going through the roof," he added.
"You should all become farmers. Agriculture's been a disaster for 30 years. We have a shortage of farmers now," Rogers said.
He said he is long the US dollar, despite the fact that there are huge negative feelings in the markets about the greenback and currencies are "suspect" everywhere.
"We now know that Greece is bankrupt. We know now that many companies and states in the US have been lying about their finances," Rogers said.
"Governments have poured huge amounts of money in the system… that money has to come from somewhere. This is not over yet. The debts have gone higher," he added.
The recent data on China showed signs of economic cooling as the central bank tightened policy.
"The Chinese government realizes they have problems in real estate and they're trying to solve these problems," he said.
But even though China's economy is in better shape than the euro zone and the US economies, the country can not pull the world out of recession, he added.