Baccardax: Just How Right Is Jim Rogers?

"If I were on your show 15 weeks in a row and was wrong, you'd probably never invite me back," -- Jim Rogers

It's pretty clear to me that investors outside of the institutional cadre are searching for direction.

Martin Baccardax
CNBC Economics
Editor

We're seeing small, but perhaps meaningful, signs of recovery in the global financial markets: economic data remains grim, but previous lows in equity markets have yet to be taken out. Investor "fear," in the form of options volatility and put call ratios, is abating, commercial paper markets are back up to levels last seen prior to the Lehman collapse and the TED spread (a barometer of banking health) remains firmly under 100 basis points.

But cautiousness prevails, and perhaps rightly so, as fund managers and salesmen tempt cash back into the market. With the average retail investors understandably wary of sell-side pitches, many are increasingly interested in the views of the "old school": Warren Buffet, George Soros and, of course, his former partner, Jim Rogers.

Love him or loathe him, you have to agree that Rogers wears his heart—and his market calls—on his sleeve. He's brave enough to appear on camera and take questions from pessimistic journalists (such as your correspondent) on a pretty regular basis.

Because of his passionate views, plain-speaking manner and easy-to-understand investment logic, Rogers' views are extremely popular with retail investors (as our email traffic during his appearances clearly indicates).

But he's often dismissive of contrary views and has, on more than one occasion, called for the resignation of Ben Bernanke and Hank Paulson and for the abolition of the Federal Reserve.

Which brings us to the quote at the top. He told viewers back in July that he was bullish on airline stocks, without being specific. "I am buying airlines, the capacity is going down and the demand is still there," he said. The Standard & Poor's airline index has fallen by 47 percent since then.

In October, he boldly warned against the folly of the bond-market rally and claimed short positions in long-term government bonds. Since then, 10-year Treasury yields have fallen by 65 basis points, 30-years yields by 55 basis points -- in the face of record supply announcements from the US government.

Attempts to contact Rogers late Tuesday were unsuccessful. Earlier in the day, Rogers told CNBC: "I was short long-term government bonds in the US, I had to cover a little loss because the head of the central bank said he was going to buy US long-term bonds, and he's got more money than I do."

"I plan to sell short US government long bonds sometime in the foreseeable future… I don't know when, whether it this quarter or this year," Rogers added.

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In October, Rogers laid out his broader investment theme. "I have an enormous amount of cash and I've been using it to buy more Japanese yen, more Swiss Francs, more agricultural products," he said.

Parts of that call proved better than others: Corn and wheat are down 6.5 percent and 9.5 percent respectively (even as China suffers its worst drought in 50 years) while soy is 2.5 percent to the good.

His strongest call, however, came in the currency market, although not in his favored whipping boy, the US dollar.

Long positions in the yen have gained 18 percent against the euro since his October appearance and 13 percent against the dollar. The dollar index, however, is up about 4.5 percent in that same time period, and 3 percent better against the Swiss Franc.

"There are huge short positions in the dollar, everybody is trying to cover. I'm not selling my yen yet, but it's an artificial rally too," Rogers told "Squawk Box Europe" Tuesday.

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I detail these views not to embarrass Rogers, who's clocked three successful decades in the business and one of the most prescient market calls in history, but to illustrate the difficulty in making investment decisions in the current climate.

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This is especially true when he chooses to use terms like "inflation holocaust" to describe the attempts at stimulating the US economy, predicts the break-up of the European monetary union and describes the UK economy as "finished."

Long positions in yen (where debt-to-GDP ratios could touch 225 percent this year and the economy has to grow at least 3 percent each year just to service current debt … a feat, mind you, it hasn't managed in at least a decade) are difficult to defend when you're torching Treasury Secretary Tim Geithner for possibly taking US debt-to-GDP ratios to 40 percent.

Inflation holocausts are hard to envision when broad money supply aggregates in the US have barely budged and Fed reserve balances have actually fallen 25 percent last month despite Bernanke's "printing press."

I will happily concede that Rogers has created far more wealth for himself, his investors and his followers than I ever will.

But that's not my job. My job is to challenge his calls for viewers that don't necessarily support them.

Right now, both market and economic data seems to be suggesting a turning point. We'll see who's called it correctly in a few months time.

And we'll be more than happy to invite Rogers back—even if he's on the wrong side of the trade.

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