WorldCity Business Magazine

(2) Q&A: Jim Rogers - A Bull in Miami

by WC

_Dubbed the Indiana Jones of finance by Time Magazine, Jim Rogers is one of the most colorful, contrarian and respected minds ever to emerge from Wall Street. Following degrees at Yale and Oxford, and a stint in the army, the precocious Alabama native joined the investment firm Arnhold and S. Bleichroeder in 1970, where he met George Soros. Together, they co-founded the Quantum Fund, one of the first global investment funds. Over the next 10 years, the fund soared 4,200 percent. At the age of 37, Rogers retired to travel the world and to learn first-hand where to invest and where not to. His entertaining and irreverent travelogues Investment Biker, published in 1994, and Adventure Capitalist, 2003 were bestsellers. So, too, is his latest
book A Bull in China, which hit bookstores late last year._

Rogers, 65, is as unconventional as they come. But he has been right so many times about the commodity boom, the collapse of the Argentine economy, among other things that his prophecies are taken seriously by investors the world over. His next book is titled Letters to My Daughter. It includes some investment lessons, but they are life lessons, too don t follow the crowd, don t do what other people do, think for yourself, that sort of thing, said Rogers.

Just before Christmas and days after selling his multi-million dollar Manhattan home, Rogers stopped in Miami for a few hours to open an office to manage the affairs of his two U.S. companies Beeland Enterprises and Beeland Interests before moving his family to Singapore. WORLDCITY publisher Ian McCluskey shared a ride with him to the airport and quizzed him about some of his favorite topics.

*WorldCity: When we met in Santiago, Chile, in 2001, you were already talking about moving to China or perhaps even to Bolivia to take advantage of the commodity boom
that you were forecasting. I suspect that you would not consider Bolivia to be as good a bet today as China.*

Jim Rogers: Sure, choosing between those two is not difficult. But if youre 19 years old and looking for a new life, Bolivia might not be a bad place to go. Its such a disaster right now that it can only get better.

WC: Why pull up stakes now and move to Asia?

JR: One of the reasons is my 4 1/2 year old daughter. She speaks Chinese and I want to make sure it continues to develop. No matter how hard you try in New York, its virtually impossible. My wife [Paige Parker] and I have another daughter coming in March. And I think the best skill that
I can give someone born in 2008 is to be completely fluent in Chinese. So, I said Lets move to Asia. We wanted to move to Asia anyway. Asia is the wave of the future. Moving there in 2007 is like moving to New York in 1907 or to London in 1807.

WC: I thought you were planning to move to Shanghai, not Singapore.

JR: The problem with Shanghai is that the pollution is so horrible. And its chaos. Of course, thats part of the attraction, too. Shanghai is so dynamic. But the pollution is just too much. In Singapore they have the best healthcare, the best education. They speak English and Chinese. Its the
best combination of everything we need.

WC: There is so much hype these days about China that you would think that it had already overtaken the U.S. as the worlds largest economy.

JR: Far from it. And you should be skeptical about all the hype. There is no question that there are going to be huge setbacks in China. In America in the 19th century, we had a horrible civil war, we had presidents regularly assassinated, we had very little rule of law, you could buy and sell Congress you can still buy and sell Congress today, but in those days it was cheap blacks couldnt vote, women couldnt vote, and Asians couldnt own property. China, too, will have huge setbacks. But they will be temporary and that is the place to be.

WC: When the World Bank recently updated its purchasing power parity tables, they found that the Chinese currency doesnt go nearly as far as once thought. If their revised calculation is correct, Chinas economy is actually 40 percent smaller than previously thought.

JR: Thats great news. It just means that theres that more room to grow. Look, when I first went there, they were still wearing Mao Tse Tung suits. It has boomed since then. But it is not The Netherlands, it is not Japan, it is not Singapore, I assure you. Pollution is horrible, there are lots of problems there.

WC: Lets talk about limits to growth. The Chinese economy has grown 10 percent annually for 25 years. Can that continue?

JR: Probably not. There has been potential overheating in the economy. The government has been trying to pull it back. Theyve raised interest rates, theyve raised reserve requirements. Theyre doing their best to cool things off. And I hope they succeed. It will be better for China and for the world. Maybe after they have their consolidation maybe from 2008 or 2009 on, whenever the bottom [of the economic correction] is they might continue to grow at 10-11 percent. But of course, nothing can grow at 10-11 percent in perpetuity.

WC: Are there are other limits to growth?

JR: Sure. One is commodities, the raw materials. As long as Asia and not just China; remember, there are 3 billion people in Asia tries to live like we do here, the world has
got to find a lot more tin, a lot more oil, a lot more wheat, and its got to find it quickly. The last time we had a commodities boom, in the 70s, Mao Tse Tung was still running China, India was being ruined by Indira Ghandi and Nehru, East and West Pakistan had just split, Vietnam had been destroyed by war. So none of these countries were in the game. Now we have 3 billion people who have all seen Dallas on TV and they want to live like that. Theyre working and theyre saving. They are no longer in a subsistence economy, but a booming economy. Thats the major limit to growth worldwide, because there is not enough of this stuff [commodities], not at current prices anyway, and prices will continue to go up.

WC: Anything else that could derail China from its current growth path?

JR: The main thing to worry about in China and I dont worry about war, epidemics, economic setbacks or government upheaval because they are all temporary is that northern China is running out of water. By the way, the problem in northern India is even worse. There are 2.3 billion people in India and China. If they dont do something about their water problem, thats the end of the story. I have been around the world twice and I have seen whole cities, whole cultures disappear because the water disappeared. The Chinese are trying to address the problem, but thats what worries me the most.

WC: Some China critics say that corruption will be Chinas Achilles heel and this is where India has an advantage over China.

JR: There is corruption, but theres corruption in America, too. For goodness sake, do you know anywhere where there isnt any corruption? But even if India does have less corruption, it still has the worst bureaucracy in the world. I have seen all the bureaucracies, and I am telling you, India
is the worst. They are anti-capitalistic. They are chauvinistic. They are anti-foreign. Indian bureaucracy is a nightmare. It takes you 10 times as long to open a company in India as it does anywhere else. Its illegal for foreigners to open retail stores in India because they say its a security risk. Wal-Mart has stores all over China, but none in India. Thats the mentality that permeates the whole country.

WC: Whats your prognosis for Latin America?

JR: As long as the commodity boom continues, and its going to continue for another 10-15 years, Latin America is a much better place to be than most places. But ask me in 20 years after the commodities boom is over and well see. Brazil is fabulous during commodity booms. But you know how it goes Brazil is the next great country in the world, always has been, always will be. Every time they have a commodity boom, they get more open, they get more democratic, they get more successful, everything works. But then the commodities collapse and they collapse, too. Still, for the next decade or so, Latin America, for the most part, is a good place to be.

WC: Besides China, what countries are you excited about?

JR: Vietnam has many advantages, but if I was going to do anything in Asia right now, I would start in Myanmar because its the worst. Its the biggest disaster. But its trying to open up, its trying to change. Or North Korea. I was in North Korea recently, and I think one of the major surprises of the next few years is that reunification is going to come much faster than people expect. North Korea has a huge, disciplined workforce. Its unbelievably cheap and has a lot of natural resources. North Korea, Cambodia and Myanmar are places where there are fortunes to be made, but thats because they are disasters. Whenever you have a disaster that is trying to change, you have massive opportunities.

WC: You mentioned the pollution in China. How big a challenge is that going to be?

JR: Pollution in Shanghai, even Hong Kong, and both of those cities are on the water is horrendous. If they cleaned it up, Id move there right way. They are trying. By the way, someone is going to make a fortune cleaning up pollution in China. The government is committed to cleaning it up. And when China starts to do something, the numbers are in the hundreds of billions of dollars because its such a gigantic country. Here [in the U.S.] we might try to attack something with $20 billion dollars. Thats not the way they do things in China. They throw everything they have at it.

WC: In your latest book, you write a lot about energy in China and potential investments, but you dont pay much attention to biofuels.

JR: Biofuels has a huge future, theres no question about that. The politicians adore it. As you know, [corn-based] ethanol is not going to solve our problems because it takes as much energy to produce it as ethanol puts out. And when sugar goes to 25 cents [a pound], as it will, thats not going to be competitive either. Ethanol is corrosive. You cant transport it in pipelines. It takes huge amounts of water. It causes the price of other food to go through the roof. There are lots of problems. But forget all that because the politicians love it. Thats because they can buy so many votes from farmers and the people who produce the ethanol. And, of course, they love it because it allows them to bash the Arabs. This is the perfect way to bash the Arabs. Ethanol is not good. Its going to cause many, many worse problems, but its going to happen.

WC: So what brings you to Miami? Why open an office here?

JR: My accountant and my lawyer, like most northeastern accountants and lawyers, know that Florida is set up to attract people, especially from the New England where the tax laws are pretty oppressive. Since I am leaving for Singapore, this was the most efficient way to do things.

WC: Now that were talking about Miami, what do you think of the place?

JR: This is probably the most dynamic city in America right now. Miami is the Spanish center of the world. Its no longer Madrid. Theres just so much happening here. I cannot think of another city in America, including Las Vegas, that can compare.

WC: Whats your take on the U.S. economy?

JR: I expect the U.S. to be in recession in fact, I think it is in recession right now but I dont think that Miami will suffer too much. The real estate will suffer, of course, and it already is.

WC: And yet the Europeans are now moving in with their strong euros.

JR: Ive heard that before. When theres a real estate boom, no matter where it is, people always say Dont worry, the foreigners are coming. Spain, Netherlands, England, New York. Doesnt matter where it is, they always say things are going to be great because of the foreigners.

WC: What are you going to be doing in Singapore?

JR: Im often invited to make speeches, so if they pay enough, I would do that.

WC: Whats your fee?

JR: Depends where it is. If its in Singapore and I only have to go around the corner, it would be 50 grand, but if I have to fly to Tokyo, it would be 100 grand. Its the time. Im paid by the hour. Im just an hourly employee.