Well this isn’t my theory, of course. Legendary investor Jim Rogers thinks that the US dollar is heading towards doomsday. And so is the British pound. In fact, he thinks the pound is headed towards more doom than the US dollar. On the contrary, I’ve read recently that since the pounds has come down in its rates domestically, many people are buying into them.

If you want to look long term and get a little clue as to how to go about your investments, read between the lines in the exclusive interview with Jim Rogers by DailyMarkets.com.

Exclusive Interview: Jim Rogers Says If He Were China, He Would Scale Back On Buying US Bonds

By Grace Cheng on January 15, 2009 | More Posts By Grace Cheng | Author’s Website

In this DailyMarkets.com exclusive, I spoke by phone with legendary investor Jim Rogers who made his fortune with the Quantum Fund, a hedge fund he co-founded with George Soros in 1970. Over the next 10 years, Quantum gained 4200% while the S&P 500 index rose about 47%.

He is also author of the best-selling books “Hot Commodities”, “Investment Biker” and “Adventure Capitalist”. Rogers, who created the Rogers International Commodities Index (RICI) in 1998, is one of the most closely watched investors. If you are fed up with the Fed, you are not alone. Recently, Rogers said that Paulson and Bernanke should resign for keeping “zombie banks” alive as they should be allowed to fail.

His uncanny accuracy in predicting the recent commodity bull run as well as the financial crisis has made the media, as well as private and institutional investors, sit up and listen to what he has to say about the markets.

Grace Cheng: Do you think the period of forced liquidation has ended or does it still have a ways to go?

Rogers: I’m sure it has not ended. It certainly has not ended for many asset classes and it probably has not ended for most. It may be over for a few things but it still has a long way to go.

As you’ve said many times, the US government is printing a lot of money right now, when do you think inflation will come around and bite us?

Rogers: Well there is inflation now in many things. There’s temporary deflation in raw material prices and in some property. But throughout history, whenever you’ve had gigantic printing of money and spending of borrowed money, it has always led to higher prices. Unless something is dramatic, it’s going to happen again. When I don’t know. It’s already happening in some things. I don’t know if you’ve bought any sugar recently or some other things, prices are up and that will continue and it will get worse.

You’ve been bullish on commodities for a long time, recently you said you’re buying the Rogers Metal Index. Do you think that the Obama stimulus plan will create more demand for commodities?

Rogers: Well of course, anything that causes a revival of economic activity causes a revival of demand for everything including commodities. I mean if you’re gonna build bridges you’ve got to build them out of something you cannot build virtual bridges you have to build real bridges, etc.

You’ve said that over the long term, the US dollar is doomed. What are your thoughts on the British Pound?

Rogers: More doomed. It will disappear sooner. If it weren’t for the North Sea, the British Pound would have already disappeared. It’s more doomed. The UK has been exporting oil for 26 years; within the decade, the UK will be a net importer of oil again, and they have nothing else to sell to the world once the oil dries up.

Do you think China will scale back on buying US bonds? And if that happens, how will it affect the US economy and the US dollar?

Rogers: Well if I were China, I would scale back. If I were everybody, I would scale back. The US bonds yield virtually nothing, the dollar is a flawed currency, inflation is coming, higher interest rates are coming. I would think everybody would be scaling back including China. We’re going to have higher interest rates down the road because somebody’s gonna scale back. If not China, Japan or Korea, or who knows, somebody.

You’ve been buying Chinese stocks for many years already, now that China’s economy is doing badly and exports are decreasing significantly, what sectors are you looking at in China?

Rogers: Agriculture, water treatment, people who build power generation, people who build infrastructure, tourism. Many areas of the Chinese economy will continue to do well no matter what happens to the world economy. Many will suffer; anybody who sells to Wal-mart (WMT: 51.56 +0.21 +0.41%) or retailers in America is going to suffer, others will do extremely well no matter what.

My last question, on a personal note, do you miss traveling around the world for fun like you’ve done several times before?

Rogers: No, because now I have two little girls and they’re more fun than anything. I hope someday that I will travel around the world with them for fun. But at the moment, watching them grow up and helping them grow up is more fun than anything I can imagine.

Source: DailyMarkets.com

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US dollar and British pounds are doomed

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Gold was thought to be a perfect hedge against the stock market because it moves in opposite directions. Since the market came crashing down with the downfall of investment banks, this theory held true and the price of gold shot up almost immediately as Dow Jones slipped. However, we now see both the stock market and gold moving in tandem, both heading in the same direction.

There are two main reasons for gold being driven downwards. Firstly, gold and the US dollar have a negative correlation. The worldwide economic downturn has ironically cause the US dollar to appreciate as it is still the currency of choice in international trades. Whilst the market stocks up on the dollar, it becomes clear that it is a better investment tool than gold, thus the opposite directions taken between the two.

The other reason is due to the sudden influx of gold supply in the market. Many fund managers are increasingly needing to liquidate their investments to face massive investor redemptions. As such, there has been a lot of sell down of holdings in gold.

How then does the future of gold look like? Many analysts believe that over time, the US dollar will eventually face devaluation. And when this happens, the price of gold will see an uphill trend (remember that they are negatively correlated?). It is only a matter of time. If you subscribe to this theory, then this will be a good time for you to pick up gold and wait for the dollar to fall.

On the local front today, the price of gold has dropped to RM84.80 (buying price from Public Bank’s Gold Investment account). It remains to be seen if it will drop further, but it is as low as it gets for now.

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With uncertainties looming in the world financial market and the recent developments in US, Malaysia is once again been urged to consider re-pegging the Ringgit in the hope of stabilising the economy in the wake of falling US dollar against other currencies. Back in 1997/1998, the Ringgit was pegged to the US dollar at RM3.80. Since the unpegging, we have been floating at a rate of RM3.459 against the US dollar. It is said that the pegging of the Ringgit will help to sustain the economy amidsts the global economic crisis.

Will it? I’m not sure how it’ll work but if the pegging is to be anywhere near the RM3.80 some ten years back, then it’s definitely not helping much. It was mentioned that a revaluation of 10% should be looked into and if that’s the case, then we are going to be pegging the Ringgit almost at RM3.80 to a US dollar again. Is that going to help?

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Lately there has been a surge of demand for the British sterling pounds. Just go around to money changers and banks and you will find that you are unable to get much of the currency. Apparently this has been going on in the last couple of weeks.

It can’t be that there’re lots of holiday-makers heading that way, neither would a large student intake on the UK’s side cause such a big demand for the currency. So is it investment related?

Does anyone know what’s going on with the Pounds?

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