Rogers still bullish on China, wary of housing
(MSN Money’s Michael Brush offers this item on where Money manager Jimmy Rogers is expecting solid returns and upcoming corrections.)
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Money manager, author and iconoclast Jimmy Rogers would be the first to reject "guru" status, but he does have a knack for posting solid returns and seeing around the corner. Rogers co-founded the Quantum Fund and worked side by side with George Soros for ten years. More recently, while everyone was fixated on tech stocks in 1998 he quietly started the Rogers International Commodity Index fund. It’s up 155% since then.
So what’s he doing now? Rogers remains long commodities. And he’s still bullish on China, a country whose prospects he explored in his most recent book "Adventure Capitalist."
But Rogers cautions both may be due for a correction. China’s economy faces a potential crash landing as the government fumbles to put the brakes on growth. And that may be what it takes to spark a correction in commodities. "When you see headlines about turmoil in China, pick up the phone and buy all the China and all the commodities you can, because that is going to be your last great buying opportunity," says Rogers.
Historically, bull markets in commodities run for 15 to 20 years, and this one is only six years old – suggesting there’s a lot more room for more upside.
Beyond that, Rogers sees plenty of areas to avoid or short. First, he’s worried about the housing sector. "People are speculating in Park Avenue condos and in second and third houses. It is all the rage at cocktail parties," says Rogers. That’s created a housing bubble, which he thinks is going to "break hard." So he’s short Fannie Mae (FNM, news, msgs) and home building stocks.
Next, Rogers is bearish on the dollar. Huge federal deficits will make foreigners wary of holding assets in the U.S. – which reduces demand for dollars. And the current administration has a policy of letting the dollar drift down to spur exports. Rogers is also bearish on bonds – partly because interest rates are headed back up, but also because the high level of government debt worries fixed income investors.
Finally, he’s leery of the U.S. stock market. True, stocks may hold up through the election. But 2005 and 2006 will be bad years for equities, he predicts. That’s because the recovery will sputter soon after the elections, and there’s not much room to provide even more stimulus. The Federal Reserve has little leeway to cut interest rates. And the federal government has no more room to borrow and spend to spur growth. "The government has shot its wad," says Rogers. One way Rogers is betting on over stock market weakness: short positions in money management firms. |
