July 7, 2009 (LBO) – Head of Rogers Holdings, Jim Rogers will only buy Sri Lankan stocks and he is getting out of dollar assets because the Federal Reserve is printing money and the US government is deficit spending, a media report said. Stocks in Sri Lanka are “the only equities” Rogers would “consider buying at the moment,” a Bloomberg newswire report said.
The benchmark Colombo All Share Index has risen 60 percent following the defeat of Tamil Tiger separatists.
Only the Shanghai Composite Index with 70 percent growth has outperformed Colombo in Asia, the report said.
Rogers was heavily into Chinese assets. Rogers had predicted the commodities bubble last year and is saying resources will climb again.
Bloomberg said Rogers may even ‘short’ the dollar some day, by running a ‘negative’ position.
“The government is printing lots of money and borrowing even more; that is not the basis for a sound currency,” Bloomberg quoted Rogers as saying.
“The idea that anybody would lend money to the US government for 3 or 4 or 5 percent interest is mind-boggling to me.”
Long-term US bond yields have spiked lately. The 30-year long bond hit 4.31 percent on June 11, after sinking to 2.51 percent in December the lowest since 1977, Bloomberg said.
The US dollar zoomed in the last quarter of 2008 despite Fed money printing due to a rare phenomenon economists call ‘central bank impotence’.
Though the US monetary base had doubled, about half of the freshly printed money is back in the Fed as ‘excess reserves’.
The US monetary base (reserve money) climbed to 1.8 trillion US dollars in the last week of May but 877 billion of that was parked within the Fed as ‘excess reserves’ by jittery cash hungry banks who were not willing to lend the money to their customers.
In June excess reserves (and the monetary based) eased somewhat.
The Fed is committed to head off deflation by printing enough money to create fresh inflation and increase house and commodity prices by debauching the US dollar.
“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply,” the current Fed chairman Ben Bernanke said in an earlier landmark speech.
“But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.
“By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.”