Friday, March 16, 2007

Jim Rogers on Russia, emerging markets

Noted investor Jim Rogers is making some headlines this week, as he warns of a bubble in the Russian stock market and an end to the global "liquidity party".

Let's focus on Russia first. Rogers does not like what he sees in Russia, and thinks that the overvalued Russian stock market could be headed for a bust, "sooner rather than later".

Reuters article quote:

"I wouldn't put a nickel of my own money in Russia, and I wouldn't put a nickel of your money there either," Rogers, a long-time commodities bull, told Reuters by telephone from New York on Wednesday.

"Everything about Russia is one big bubble, and it's going to pop. It's going to happen sooner rather than later," said Rogers, who co-founded the Quantum Fund with George Soros in the 1970s and has focused on commodities since 1998.

"When that happens, people will look around and say, how did that happen? That's when we'll find out about all the skeletons in the cupboard."

The article goes on to mention the Russian state's intervention into business deals with foreign companies and state confiscation of assets. Rogers also calls into the question the quality of many recently listed Russian companies, and says many of the shares trading on the Russian market could decline significantly or disappear in the event of a shakeout.

So I guess the question here is this: is Rogers short the Russian stock market? I know that he's always had a bearish view of their "outlaw capitalism" and has stayed away from their market in the past. Maybe he's just taking the time to voice his concerns again, now that a bust seems closer at hand.

He's also been out front this week on the possibility of a crash in emerging markets and the US property market. In fact, Rogers says the fallout of a real-estate bubble could lead to a financial crisis.

The fund manager, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s and has focused on commodities since 1998, said the crisis would spread to emerging markets which he said now faced a prolonged bear run.

"When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess," he said.

"Right now, there is huge speculative excess in emerging markets around the world. There will be a lot of money coming out of emerging markets.

Rogers says that he's sold off his emerging markets investments, except for shares in China, where he is willing to sit out a potential 30-40 percent decline.

"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."

He's definitely sticking his neck out here, but it's always interesting when you're reading or quoting Jim Rogers. His latest call is reminiscent of Marc Faber's recent cautionary stance against over-inflated asset markets worldwide. We'll keep our eyes peeled.