India a great invst place minus the Govt: Jim Rogers

Excerpts from Bazaar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: You see the US housing market having an impact on the US economy. What does that mean for interest rates in the US?

A: You are going to see worse conditions in American housing during the next four years. You will see many mortgages go bad in the US, you are going to see many of these financial products, financial papers, which are being created on the housing market, going bad. Now interest rates will go higher, because I expect rates to continue to go higher. You have to remember that with inflation getting worse and worse, it is going to cause higher interest rates no matter what the Fed tries to do.

Q: In interest rates, what would you expect to see? A couple of bips in terms of a move or do you think by the end of this year, we would genuinely have a tighter market across the globe?

A: By the end of this year, yes, we will have a tighter market. Will we have a tight market? No, I suspect not. We are not about to have a credit crunch this year, unless something unexpected happens. But within the next couple of years, you are certainly going to see tighter conditions in the financial markets and you are going to see eventually, tight money. Right now we have excess liquidity. Eventually, we are going to have too little liquidity.

Q: What do they mean for flows into emerging markets?

A: Always in the past, when excess liquidity has dried up, it comes out of the marginal markets first. In this case, it will start coming out of many of the emerging markets, as well as the major developed markets.

Q: The equity markets, especially, though have surprised by their performance until now, because for many they were expecting emerging markets to have a much more quiet session. Do you think any of the caution that you have just outlined is in the system at this point?

A: No, you have rightly pointed out, many markets are doing well this year, especially places like China. In other places, you see stocks going through the roof. Now I would suspect that I hope that the Chinese market cools off somewhere along the way, that government is trying to do something to prevent a full fledged bubble. If they do that would calm some of the Asian markets down and that might affect some of the other markets as well.

Q: You track the crude market very carefully, how have you read the developments there and do you think we have seen a cap with 70 or will there be a big blow out any time soon?

A: The surprise for most people, including me, is going to be how high the price of oil stays and how high it eventually goes. There have been no major oilfields discovered anywhere in the world for 40 years and the world's reserves are declining. There maybe a lot of oil in the world, but we don't know where it is yet. So if somebody discovers a lot of oil, very quickly and in a very accessible area, you will see very high crude prices over the next decade or two. You will see oil over USD 100-150 per barrel before this bull market is over.

Q: How about gold? You have been bullish on gold since 2001. It has dropped from USD 730 to USD 640 - what's the view from here?

A: I own gold and I don't plan to sell my gold ever. But I think, I will make more money in other commodities in the next 2-3 years. Certainly agriculture - I expect to make more money in cotton, coffee or sugar than I will in gold in the next few years. But I am not selling my gold, I own gold and I am still bullish on it.

Q: On your last visit to India, you went back with the impression that it has possibly got the worst bureaucracy in the world. You said that India would be a spectacular opportunity. Has anything changed since the last time you were here?

A: No, in fact the Indian government goes from bad to worse. As you probably know, the Indian government recently put limits on people buying commodities. They said that commodity prices going up is causing inflation. That's not what's causing inflation. It's excess liquidity, which is causing inflation. So they said we are not going to let you buy commodities any more. What kind of absurdity is that? You can't deny the free market, it just won't work. I love India; I love most Indians that I have met. But your government just goes from bad to worse as far as I am concerned. They say the right things and then turnaround and do the wrong things - it's amazing.

Q: So you are certainly not investing in India?

A: I do not have any investments in India.

Q: Not even those few shares of Indian Hotels that you have bought?

A: I still own those few shares of Indian Hotels, that is all, but that is not even enough to talk about. But as I have said last time, I will say again, if your government means what they say and if India really is going to change, then India is going to be a spectacular investment. I just don't believe if I've heard it before.

And if and when you find a smart Indian, by all means, you should invest with him, because there are a plenty of very smart Indians and there are some great success stories in India and of Indians outside of India. So it is a wonderful place and many smart people, if you get involved with, you will make money, but you have wind at your face when you are facing your government. 

Q: Aside from the agri commodities over the next 6-8 months, if you have to distribute your portfolio across these commodities - base , precious and crude, what would you pick?

A: I prefer agricultural commodities. I have been putting more money in the agricultural commodities recently. Of those three, it'd have to be precious metals, because gold and silver has gone up much less than the base metals so, of those three, that's where I will put money.