The dollar and U.S. Treasuries are both likely to slide as soaring government debt in the world’s biggest economy undermines confidence in its assets, according to Jim Rogers, chairman of Rogers Holdings.
“The government is printing lots of money and borrowing even more; that’s not the basis for a sound currency,” he said in a telephone interview today from Singapore. “The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me.”
Rogers, the author of books including “Investment Biker” and “Adventure Capitalist”, said he holds fewer dollars than a year ago and plans to “short U.S. government bonds someday.” A short bet involves selling a security you don’t own with a view to buying it back after the price has fallen.
The U.S. is stepping up debt sales to fi
nance a record budget deficit as it tries to spend its way out of a recession and that’s causing the supply of the securities to balloon. After more than doubling note and bond offerings to $963 billion in the first half, another $1.1 trillion may be sold by year-end, according to Barclays Plc, one of the 16 primary dealers that are obligated to bid at Treasury auctions.
U.S. debt lost 4.46 percent through June, according to Merrill Lynch & Co.’s U.S. Treasury Master index.The yield on benchmark 30-year notes reached 4.84 percent on June 11, the highest since 2007, and was 4.31 percent as of 2:02 p.m. in Tokyo. It sank to 2.51 percent in December, the lowest since sales of the security began in 1977, as the economic slump fueled demand for the relative safety of government bonds.
Swiss Franc, Yen
ICE’s Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, has declined 1.2 percent so far this year after gaining 6 percent in 2008. It reached a three-year high of 89.62 in March and was recently at 80.37.
Rogers said he recently bought the Swiss franc and within the Asia-Pacific region his currency holdings include yen, Singapore dollars, China’s yuan as well as the Australian and New Zealand dollars. The Swiss franc reached this year’s low of 1.1965 per dollar on March 13 and recently traded at 1.0869.
Rogers, who predicted the start of a global commodities rally in 1999, forecast resources will again climb, saying they are one of the few asset classes where “fundamentals are improving.” The Reuters/Jefferies CRB Index of 19 raw materials has gained 7.1 percent so far this year, after losing 36 percent in 2008. It almost doubled in the nine years through 2007.
Sri Lanka, China
Stocks in Sri Lanka are the only equities Rogers said he would consider buying at the moment, adding that he plans to hold on to his holdings in China for many years to come.
Sri Lanka’s stock benchmark, the Colombo All-Share Index, has jumped 60 percent this year as the government’s defeat of the rebel Liberation Tigers of Tamil Eelam ended 26 years of fighting on the island. Only China’s Shanghai Composite Index has done better in Asia, surging 70 percent as the government’s 4 trillion yuan ($586 billion) stimulus plan helped combat an economic slump.
“Selling Chinese shares in 2009 would be like selling U.S. ones in 1909,” Rogers said. “My children were born in 2003 and 2008 and I expect them to hold my shares someday.” Rogers said he last added to his holdings of Chinese shares in the fourth quarter of 2008 and has not bought any stocks at all this year.
To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net
Mr. Jim Rogers is usually correct. He is one of the best.
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