Food inventories at their lowest in decades: Jim Rogers

Q: What is your sense of the China scare over the last few days? On atleast a couple of occasions in the last ten days that market has gone down 4-5% in a single session and there has been so much talk about overheating and a bubble like situation, are those concerns justified in your eyes?

A: The Chinese market is doubled between October-November and now so any market that doubles in ten months should slow down, should have a rest. I don’t pay too much attention to day-to-day or even week-to-week fluctuations. I am watching China, China is still going to continue to grow during the future and I haven’t sold anything in China.

Q: How do you read the regional data which is coming in now? Yesterday you saw the Singapore gross domestic product (GDP) numbers which were quite a big improvement quarter-on-quarter (QoQ). Sitting there do you get a sense that things are definitely on the uptick?

A: You certainly see that things are better but last year everything just stopped especially at this time of year August-November last year, everything just stopped. People didn’t know what is rice or beans or anything else. Now if nothing else, if you run out of rice and you have to order some of the rice or some of the beans, things look better, things are better, they look better, government is spending huge amounts of money, so the people getting the money think things are better and they feel better.

Is it going to last? I would suspect not. I am sure we will have more problems again and again in 2010-2011 because this is just papering over the problems, it is not solving the problems.

Q: To go back to China for a second, the Chinese industrial data at more than 10% continues to be robust but there is a lot of concern about whether there has been overlending by the Chinese financial institutions and whether they might start to tighten now for the rest of the year. Do you think those concerns are overblown or legitimate?

A: I don’t pay too much attention to government figures. I know the US government lies, I presume that most governments just try to make things look as good as possible. So I suspect that is what is happening in China and elsewhere as well.

However, the Chinese saved up a lot of money for a rainy day, now it is raining and they are starting to spend some of that money. So some parts of the Chinese economy will continue to do extremely well no matter what happens in the rest of the world.

Places that deal with the US or Europe, retailers for instance, are suffering and will continue to suffer. There was a lot of lending and some of that money apparently has been going into real estate, property and the stock market which is not good ofcourse but some of the growth in China is certainly legitimate because they are spending a lot of money.

Q: The commodity market got a bit worried after a dream run because of the Chinese market correction. Do you see commodities or the hard commodities like copper etc extending their gains even from here or do you think it is time for a pause there?

A: Some commodities obviously will have to pause others will continue to rise nothing goes straight up, every day, every week, every month. Oil markets - as you know better than most – do have corrections along the way, some are overdue. But as far as I can see, the only sector of the world economy where the fundamentals are improving are commodities. Many farmers cannot get loans for fertilisers even though agricultural inventories are the lowest in decades. Nobody can get a loan to open a mine; it takes ten years to open a mine, so mine reserves continue to decline. So the fundamentals for commodities continue to improve and that is the best place to invest.

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