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Quantum Funds Co-Founder Jim Rogers on Gold, Russia-U.S. Proxy War, U.S. Dollar

— James West

Jim Rogers, legendary commodities investor and co-founder with George Soros of the Quantum Fund, joins us by phone from Alabama to discuss the United States vs Russia proxy war being waged on two fronts in Syria and Ukraine, and how its escalation may just be the antidote to the commodities mailaise.

Midas-Letter-financial-radio-podcast-thumb[four_fifth_last padding=”0 0 0 20px”]Listen to the interview with Jim Rogers:

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Full Transcript:

James West:    Mr. Rogers, thank you for joining us today.

Jim Rogers:    I’m delighted to be here.

James West:    Now Mr. Rogers, your outlook on the global commodities scene is the stuff of legend. How do you see the conflict and the geopolitical instability in Syria, now that Russia has entered the conflict, affecting commodities globally?

Jim Rogers:    Well, I will tell you, the whole Middle East situation is unbelievable. I cannot think of many times in history where you have so much just pure, pure chaos by so many people. I mean, it’s not as though there are one or two people making mistakes in the Middle East, there must be a dozen people making mistakes in the Middle East, and unfortunately, they are coming together more and more.

I’ve got to sit down and figure out how this is going to end, because it looks like it could end in a very, very bad way for all of us. Wars start when bureaucrats make mistakes and then other bureaucrats react to those mistakes and then next thing you know, you have eight or ten bureaucrats sending 18 year old kids to kill each other, and it’s very worrisome what’s happening.

Having said that, to answer your question, war is not good for anything, anything at all, except commodities. I’m not going to say buy commodities because you don’t want to start a war, but if there’s going to be a war, it usually means commodity prices go higher.

James West:    Okay. Well so, Joe Biden has suggested that the US and Russia are sort of, for all intents and purposes, fighting a proxy war in Syria right now, and coincident with that, we’re certainly seeing some rise in oil prices and in gold prices, two commodities that normally reflect geopolitical instability with increased prices. Would you categorize the situation in Syria as a proxy war right now between Russia and the United States?

Jim Rogers:    Well, let’s say it is, and certainly there’s going to be a war developing. The question is bombing our people, and our people are fighting the ISIS people, and the ISIS people are fighting us…I mean, this is just pure madness what’s going on. Whether it’s a proxy war or a real war or the beginning of a war, it doesn’t matter, it is turning into a more and more convoluted problem for all of us. And I cannot figure out why. Proxy war for whom? Why? I mean, why do we need a proxy war? Why do we care about Syria? Why does anybody care about Syria? If they want to kill each other, let them kill each other. What business is it of ours, or of the Russians, for that matter?

James West:    Okay. So it’s been suggested in other quarters that the Russian involvement in Syria is really a political tactic on their part to extract a favourable outcome in the form of tacit cooperation from the United States on their position in the Ukraine. In other words, the US would sort of turn a blind eye to what they’re doing in the Ukraine, if they extract a promise from Russia to get out of Syria. What do you think of that?

Jim Rogers:    Well, I mean, we can make all sorts of suggestions, and maybe so, but the problem is, and unfortunately, for all of us who are American, you know, we started this thing in Ukraine. You know, we started the thing in Syria. And now it’s costing us money and treasure, and perhaps lives, and I hope somebody can figure out a way to get out of both of these situations, because they’re madness in both cases, and it’s none of our business. Why is some bureaucrat in Washington, what was her name? Victoria Nuland? Bring the world to war and massive amounts of money and lives being lost? It’s beyond me, and now the fact that we’re getting involved in Syria is beyond me. Who cares? Let the bureaucrats fight amongst themselves if they want to, but don’t make us pay for it.

James West:    Sure. So on that sort of line of thinking then, would you concur with the idea that perhaps American bureaucracy is embracing the welcome distraction of a proxy conflict in Syria to distract the US from the fact that they’ve sort of exhausted the abilities of their policy tools to ameliorate the economy, and so war is good for commodities and war is good for public image in terms of politics. So do you think that’s a realistic viewpoint?

Jim Rogers:    Well, it is true that throughout history, war has been declared by politicians or bureaucrats have used war to distract people from other problems. I’m not sure that it’s a conscious act, they sit down and say ‘Ah, we’ve got a problem, so let’s start a war’, or whether it just happens naturally, but in either case, there is no question at all that this is distracting a lot of us from the fact that the economy is not doing well. The economy worldwide is not doing well, and this is certainly distracts people, making them think about other things, and it might even revive – it would revive, some parts of the world economy. Not a good way to revive world economies; in the end, you destroy more capital, as well as lives, than you develop, but it has happened this way many times in history.

James West:    Sure. Okay, so given that possibility, how are you playing the market at this time?

Jim Rogers:    Mainly I’m sitting and watching, not doing much of anything, because if anything I would think that the market should be going down, because we’ve had a six-year run with virtually no corrections in the United States and therefore most of the world. So I’m mainly sitting and watching and trying to figure out what to do. I have a few longs, I have a few shorts, but for the most part, I have to figure out what to do. I’ve bought some Russian shares recently; not much. Bought a few shares in Africa recently, not much. Mainly, I guess, it’s just that I’m confused, and part of the reason that I’m confused is because of what’s happening in Syria. Now all of a sudden, the Russians are bombing us, bombing ISIS, who knows how this is going to work out?

James West:    Okay. So I guess in that, you’re mostly sitting on the sidelines. Do you see the participating of the larger capital pools in the world adopting a similar sort of ‘let’s get out of the market, keep our powder dry for once this situation resolves itself’? Are we going to see, essentially, an incremental deflation in the amount of capital at work in the world right now?

Jim Rogers:    Well, I’m not as smart as those other people you’re talking about; I have a lot of cash, and I have a lot of US dollars, US dollars are my largest currency position on the long side, and the reason for that is not because I’m keen on US dollars or anything; US dollars are terribly, terribly small currency. We’re the largest debtor nation in the history of the world. But having said that, if there’s going to be more turmoil in the world, in times of turmoil, people flee to a safe haven, and these people think the US dollar is a safe haven. It’s not, it’s not a safe haven, as I said, we’re the largest debtor nation in the history of the world, but because they don’t know what else to do, they’re not going to buy the yen, they’re not going to buy the Euro, they’re going to buy those US dollars. So I’m sitting here with a lot of US dollars on the long side.

James West:    I see. So in your view, then, is gold any longer a safe haven?

Jim Rogers:    Well, I own gold, I own some gold. I don’t think that’s what’s going to be the safe haven at the moment; it could be, I mean, if war breaks out, of course, a lot of people are going to flee into gold, and I’ll be buying more gold at 1,500 or you pick the number, and happy to get it. No, if the world reverts to the US dollar, the US dollar goes higher, often, not always, but often, gold goes down when the dollar goes up. People be fleeing to the dollar, they think it’s the better safe haven. So I would prefer – I own more gold than I do dollars, at the moment, I’m not sure I own more dollars than I do gold, at the moment, expecting the dollar to go higher, which will put more pressure on gold. But I’m not selling my gold; I am hedged with my gold. I’m doing nothing at the moment.

James West:    Okay. So recently, you joined the board of a Russian potash producer or phosphate producer, rather. Does that indicate that you’re more or less bullish on agricultural commodities still?

Jim Rogers:    Yes, yes, and that’s a mistake – it is a phosphorous company, not a potash company. It’s called PhosAgro OAO (MCX:PHOR). And to my astonishment, Phosagro has been one of the best-acting stocks in the whole world this year, in US dollars, so it’s at least one thing that I got right this year.

I am very bullish on agriculture; I was bullish on Russia because it was beaten down and very, very, very cheap with vast assets and agriculture is very cheap with a great future, if you ask me, so it all came together. Fertilizer and Russia both being cheap.

James West:    Okay. And finally, do you have any other books in the works?

Jim Rogers:    No, no. I never thought I’d do any books, and all of a sudden, I’ve done six. I don’t think there anymore, but who knows, I’ve learned never to say never.

James West:    Okay, Mr. Rogers, thank you so much for your time today.

Jim Rogers:    Thank you.

James West:    Bye-bye.

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
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