Legendary investor Jim Rogers talks to us this week about the latest major developments in the gold and silver marets, among other topics.
Rogers started trading the stock market with $600 in 1968. In 1973 he formed the Quantum Fund with George Soros before retiring a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.
In this interview, Rogers comments on two big stories that caught our eye this week:
- The S&P ratings agency downgraded the outlook on US bonds to “negative.”
- The University of Texas investment fund just parked a billion dollars in gold bars in a New York vault.
He also reveals what may be the best Asian investment that isn’t on the radar of most American investors.
Here’s an excerpt of our interview with Jim Rogers:
Financial Survival Radio: We just read that the second-largest university investment fund here in the US is buying physical gold. The University of Texas, which is where I live, is putting aside $1B worth of gold in a New York vault. Some have called this move a tipping point for the precious metals market. Do you agree?
Jim Rogers: Well, tipping point? Gold’s been going up for ten years in a row. I’d hardly call this a tipping point. Silver’s been skyrocketing…
FSR: Maybe a tipping point where we see more institutional mainstream demand.
JR: Well, again, that has been happening. If suddenly all the pension funds wake up and say, I’ve got to own gold, they may start thinking about it more and more. But the thing that’s been getting people’s attention is the fact that gold has been going up so much. That’s the wrong way to invest. Look, I own gold. I own silver. But where were these guys five, ten years ago? That’s when they should have been doing all of this. Unfortunately for all of us, most investors don’t notice something until there’s a good, nice bull market in place, such as with gold and silver. After ten years of price rises in gold, people are starting to notice. That’s what they’re noticing more than the fact that the University of Texas is buying gold. I’m glad they did, I own gold. And yes, there will be more people buying gold. Eventually, everybody’s going to be owning gold, and then we’ll all have to sell our gold. But that’s a long way from now.
FSR: Silver in particular has been of great interest to my family. It looks like $50 silver is going to happen very soon. But Jim, will we see a triple-digit silver price in 2011?
JR: If it does, we’ll all have to sell, because then you’ve got a bubble, a parabolic move and all parabolic moves end badly. I certainly hope it doesn’t happen because I own silver and want to buy more. My hope is, silver and gold and all commodities will continue to go up in an orderly way for another ten years or so, and eventually the prices will be very, very high. Yes, we’ll have triple-digit silver, but if it happens this year, Jay, I would probably start to think about selling.
FSR: But what we’ve seen so far, you wouldn’t consider parabolic?
JR: No, not yet. But I’m worried about silver. If silver continues to go up like it has been over the past 2 or 3 weeks, yes, then it would get to triple digits this year. And then we’ll have to worry. It’s not parabolic yet. I hope something stops it going up in the foreseeable future and we have a correction. You never know what might cause that correction. But if they turn into parabolic bubbles in 2011, all parabolic bubbles have popped in the end. There’s never one in history that hasn’t popped.
Now, maybe the US dollar is going to become confetti in 2011, and if that’s the case and silver goes to $150, then obviously I wouldn’t sell my silver. It would be the US dollar which is collapsing. But if silver goes up the way you’re talking about without currency collapse, I would be very worried.
FSR: So that’s the bottom line, those who have been holding on to precious metals for the long term need to watch where the Dollar is to decide whether it’s time to sell.
JR: That’s certainly part of it, yes. And you have to watch the price action. I remember when gold went parabolic in 1980. I shorted gold when it went parabolic in 1980, and it went higher for another two weeks after I shorted it. But it eventually collapsed. Silver eventually collapsed. All parabolic moves throughout history, there’s never been a parabolic move which hasn’t collapsed in any asset.
Silver and gold, yes, will be a bubble someday, Jay. There’s no question in my mind that all commodities will be a huge bubble someday. But I don’t think that bubble is going to happen in 2011. I think it’s going to be more likely 2017, or 2018…you know, a few years from now. I’m not picking a year, just saying it’s a few years away. It could happen sooner, but I hope not.
- News item mentioned during the show: University of Texas Endowment Holds $1 Billion Gold, 5% Of Its Portfolio and why Zero Hedge calls the move a “golden tipping point”
- Article mentioned during the show: Doug Casey says, ”We are in a financial no-man’s land”