By Jennifer Yousfi
Managing Editor
Investment guru Jim Rogers says the U.S. economy is headed for its roughest recession in years, counseling investors to invest in commodities and to avoid a greenback he expects will be under pressure for "years to come."
"It's going to be one of the worst recessions we've had in awhile because we had so many excesses going into it," Rogers, a noted commodities trader and contrarian investor, said during an interview with Bloomberg Television from Singapore yesterday (Monday). " It's going to be bad for all of us as currencies come under more and more stress and we have more inflation in the world."
Rogers, a best-selling author and the chairman of New York-based Rogers Holdings, was particularly tough on the U.S. dollar. He said that both the United States and United Kingdom governments have been lying about inflation, which is much worse than official statistics show. And the fact that the U.S. Federal Reserve has been cutting interest rates while other central banks have been tightening credit has likely fueled inflationary pressures, weakening those currencies even more, many contrarians believe.
"I hope by the end of this year all of my assets will be out of the U.S. dollar," Rogers said. "The dollar is a currency that's terribly flawed and it's going to be under duress for many years to come."
He added that he is buying China's yuan and Switzerland's franc while selling the U.S. dollar and U.K. pound. Rogers accused both countries of "lying" about the true levels of inflation that are weakening their respective currencies.
Money Morning Investment Director Keith Fitz-Gerald and Rogers both agree that commodities, a traditional inflation-sensitive investment are a good play for 2008. Rogers' commodities index - the Rogers International Commodities Trackers Index - has risen more than fourfold since he established it in 1998.
In the event of a global recession, agricultural commodities will be an outstanding defensive investment. And if growth continues abroad - especially with the emergence of such markets as China, India and Latin America - such investments will likely be highly profitable for years to come.
"If you're worried about a recession, you might think about buying agricultural commodities," Rogers said. "I suspect agriculture is going to do well no matter what happens to the world economy."
The PowerShares Agriculture Fund (DBA), operated by German giant Deutsche Bank AG (DB), is intended to reflect the performance of four commodities in the agriculture sector - soybeans (31.13%), wheat (28.87%), corn (23.43%) and sugar (16.58%). These include some of the key agricultural commodity plays that Rogers advocates.
Another is Van Eck's recently launched Market Vectors Agribusiness Exchange-Traded Fund (MOO). Like the PowerShares Fund, this reflects the agriculture industry but in a different way. Instead, the ETF's holdings reflect returns seen from agriculture chemicals (34%), agri-product operations (33.5%), agriculture equipment (24.3%), livestock operations (5.6%) and ethanol/biodiesel (2.3%).
"All commodities are going to be in much shorter supply for another decade," Rogers said. "So even if the dollar goes up, commodities are going to go higher."
Rogers also advised investors to look to such commodities as wheat, soybeans and corn, while staying away from oil, tin and lead.
[Editors Note: To see how you can obtain a free copy of Jim Rogers' latest bestseller, "A Bull in China: Investing Profitably in the World's Greatest Market," please click here.]
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