Jim Rogers: Oil Price Will Keep Rising; Silver to Fall
Oil prices are likely to continue rising because the world's oil reserves are dwindling, but silver is likely to come down because it rose too fast, famous investor and commodities bull Jim Rogers told CNBC Thursday.
In March, Rogers predicted that crude prices will rise over the next decade.
"Where is the oil? I still want to know where is the oil? You know why the price of oil is going up? Because there is no oil," he said.
But if the price is going too high, the race to find the last drops of crude will accentuate, before the search for alternative energy resources yields results, according to Rogers.
"At $300 a barrel they would be drilling for oil under Buckingham palace," he said.
The International Energy Agency "has come to the conclusion that the world's oil reserves decline by six percent a year," and that is an argument for the rising price of crude, Rogers said.
"Say they don't decline by six percent, say they decline by four percent. That means in 25 years there's no oil at any price," he said, adding that rising oil prices will "hurt some people very badly" and some companies will go out of business.
"We will certainly have dips (in oil prices), we will certainly have consolidation, I hope we do. If oil goes into a spike, if it goes parabolic, you have to sell it," Rogers said.
The world uses 86 million barrels of oil every day, he pointed out, adding: "we found some big oil fields in Brazil and let's say the bull estimates there are correct, that's still only two years worth."
Silver Has to Come Down
He did not comment on market talk that the firm of George Soros – his former colleagues at the Quantum Fund in the 1970s - has been selling gold , which rose from around $1,345 in late January to more than $1,500.
"I have no idea, that was 31 years ago, you might as well ask me about my first wife, I haven’t seen her either," Rogers said.
"I do know that silver went up 25 percent in a month and that can’t last so that’ll have to come down," he added.
"I hope we have a pull-back, I hope it goes down for a while, it’ll be good for the market," Rogers said. "In 1987 stocks went down 30 to 40 percent, smart people went in a bought more. If it goes down I hope I’m smart enough to buy move silver."
He reiterated his view that some countries in the euro zone are "just bankrupt" but said he owns the euro and is not looking to sell, due to the European Central Bank's policy of fighting inflation.
"I own the euro , I’m not thinking about selling the euro for fundamentally good reasons the ECB is dong a much better job than the US central bank," Rogers said.
"Nobody has ever been better off for debasing your currency and America is doing a terribly wrong thing. Britain debased its currency for decades and it didn’t help," he added.
"I as an investor would be even more bullish on the euro if the central bank takes action," Rogers said.
The Fed and Election Cycles
He reiterated his criticism of the Federal Reserve and of Chairman Ben Bernanke, saying he was not impressed by his first news conference.
"All he said was that he didn’t know much about anything. When he was asked about currency movements I nearly fell off my chair," Rogers said.
“What does he know about? He doesn’t know about currency movements, he doesn’t know about anything but he does know about printing money, he built his entire intellectual career around printing money and the government has given him control of the printing presses," he added.
The Fed will likely stop the second round of quantitative easing – asset-buying to keep interest rates low – in the summer, but it will step in again when the economy starts slowing down again, especially since 2012 is an election year, Rogers said.
“The Fed has always been aware of election cycles and tries to make the economy good ever since the 1980s; I don’t say that with admiration, I say that with scorn," he added.