Jim Rogers Sizes Up Two Global Bubbles
The euro is unlikely to still exist as a currency over the longer term, the pound will fall substantially in the next few years and US Treasurys and some real estate in China are the world's two current bubbles, legendary investor Jim Rogers told CNBC.com Wednesday.
"The euro will probably break up in the next 15 to 20 years," Rogers said in an interview. "Don't get me wrong, I own the euro."
"We've had currency unions in history, they didn't survive, this one won't survive either," he explained.
The euro has been under pressure because of Greece's sovereign debt concerns. But European Union finance ministers agreed to bail out Greece if it will need aid because of its growing public debt, which is forecast to exceed 120 percent of gross domestic product this year.
"If (the euro zone helps) the Greeks, that weakens the fundamentals of the euro," Rogers warned. "As the next government comes to demand concessions, they weaken the currency from within."
"I would let Greece go bankrupt because then everybody will say the euro is a serious currency," he told "Worldwide Exchange."
The UK pound's problems will be caused by Britain's "gigantic debt and huge trade deficit," he said, adding that he doesn't own sterling.
The country's two fortunes – North Sea oil and London's place as a financial hub – are dwindling and there is nothing on the horizon to replace them.
"Most Western currencies, most currencies everywhere are very suspect," Rogers told "Worldwide Exchange."
The Chinese renminbi may replace other currencies in 20 years, but it is "absurd" to think of this now, as it is still a controlled currency, he said.
"There are two bubbles in the world: one is in Treasurys, the other is in urban and coastal real estate in China," Rogers also told CNBC.com.
He added that he wasn't short Treasurys.
Commodities in Focus
Rogers said he started buying dollars last year in October and November "because everybody, including me, was bearish."
"I hope it's a short- or medium-term position," he added.
He said he has not bought shares since November 2008, focusing on commodities instead.
"I think that real assets are the best place to protect yourself going forward," he told "Worldwide Exchange."
"I had had no shorts for about 15 months so I started putting out some shorts recently," Rogers said. "But the fact that I've been putting out shorts means (the stock market) won't pull back," he joked.
He said many investors were skeptical about the stock market's rally.
Bill Smead, CEO at Smead Capital Management, said the recovery will "slowly and surely move along" although it will not be a spectacular on and major cash buyouts in the US as well as a dearth of new stock issuance meant stocks had further to got.
"What isn't there to like about the bull market in the US?," Smead said.
Rogers stood by his prediction that gold prices are likely to reach $2,000 per ounce in the next 10 years, because of "many things, especially the debasement of currencies around the world. It's a simple statement that gold will go up by 6-7 percent a year in the next 10 years."
Oil is another commodity to watch as the world is running out of known supplies, while cotton is 70 percent below its all-time high and sugar is 80 percent below, he said.
A bubble in commodities is likely to form, but probably not before 2019, according to Rogers.
As for the US economy, the housing sector is likely to stay around the bottom for a while as there is a lot of excess inventory, he warned. Another recession may hit over the next few years and problems would be much worse, he said.
"Yes we're going to have another recession, I guarantee you. Certainly by 2012 say, it's time for another recession," Rogers said.
"Next time it's going to be worse because we've shot all our bullets."