Thursday, July 05, 2012

James Stafford Interviews Jim Rogers on Oil Etc.

Jim Stafford of has conducted some very interesting and useful interviews with a number of energy-knowledgeable persons. Today we are presenting excerpts from a Stafford interview with global investor Jim Rogers, focusing on oil: It’s been an interesting period in the energy world as we’ve seen oil prices steadily decline over the past few months and with the problems in Europe and slowdowns in India and China do you expect this trend to continue?

Jim Rogers: Well, there is certainly a correction going on for various reasons. I think Saudi Arabia's trying to help re-elect Mr. Obama. There are also stories that JP Morgan has problems in its London office with a lot of unauthorized positions they're having to liquidate. I don't know what's going on, but I do know that corrections are normal in the industrial world. There's nothing unusual about it. If it continues, there’s an opportunity to buy more. I read a report by the Economist Phil Verleger who thinks that the Saudi’s massive increase in oil production along with other economic problems could cause oil prices crash to $40 a barrel oil and $2 a gallon gasoline by November. Do you think this is a reasonable forecast and we could see oil at these levels?

Jim Rogers: We could see anything. We certainly saw lower prices than that back in 2008 when there was a collapse. When things are collapsing, all sorts of strange things happen. We found that out in 2008 and we will probably find out in the future, as well. If oil does go to $40, that means it'll just be setting up an even more bullish scenario for the duration of the bull market. How do you see the energy markets reacting to the Iranian sanctions, which are going to be coming into effect on the first of July?

Jim Rogers: Oh, I don't see that having much effect at all. Everybody already knows about that - nothing new to the markets. They have long since adjusted to this news, whether it be stock markets, smuggling, etc. The Iranian sanctions are a non-event as far as I'm concerned. The Middle East Petocracy’s, along with Venezuela and Russia must be nervously watching the price of oil. Can you see potential problems developing in these countries and other oil producing nations if prices continue to fall?

Jim Rogers: That's part of what I was saying before. The lower prices go for the fundamentals, the price of fundamentals improve, but for these countries the money they have available to buy peace is running out and there are going to be problems, because a lot of people have been lead to believe that the government can solve their problems and if the government runs out of money, it makes people upset. Do you believe natural gas prices are near to a bottom, or do you think they have further to fall?

Jim Rogers: U.S. natural gas is somewhere near its bottom, in my view. The problem is I expect to see serious economic problems in 2013 and 2014 in the U.S. If and when that happens, we're going to see a final panic in the markets and the economy and everything will have a crescendo and a selling climax.

We're certainly a lot closer than we were. Although, when you have a selling climax in markets, you go to levels much lower than most people believe possible and that may happen. Whatever that bottom is, it's not too far from the recent lows in natural gas. The media has gotten behind shale gas and it’s being promoted as a worldwide energy saviour. What are your thoughts on shale gas? Do you think it’s been oversold or it really is the cheap and plentiful oil extender we have been hoping for?

Jim Rogers: I don't know how cheap it is. The technology's getting better, apparently. The cost too because the environmentalists and politicians are getting worried about it. But I don't know enough about the technology to know for sure. I do have confidence in mankind and someday we will have the technology and expertise to fully exploit these resources. Moving away from fossil fuels – I was hoping to get your opinion on renewable energy. Do you see this as a sector investors should be avoiding – or are there opportunities here in the future?

Jim Rogers: That is your premise, if oil stays high alternatives become more competitive. Most alternative energy is not competitive at this moment in time but that could change. If oil prices go down and stay down the subsidies for alternatives are going to have to be pretty massive to make it even viable. What are your thoughts on nuclear energy? Is there a future for this power source or due to public safety perceptions is it something politicians will feel forced to abandon or sideline?

Jim Rogers: I don't think people will abandon atomic energy. It is competitive, it is economic, it is very clean if controlled. If it's not controlled it's a disaster of course. I suspect you're going to see another revival of atomic energy. The French, the Koreans, the Chinese, many countries are going forward with their nuclear power development plans. I've seen in other interviews that you've predicted that 2013 and 2014 will be bad years for the economy. What is an investor to do? Are there any commodities, stock or instrument people can go to for safety and capital preservation?

Jim Rogers: No such thing as safe when you talk about it. Even if you put your money in cash, if you put your money in the wrong cash, you lose a lot of money. As the people in Iceland have found out, as the people in Europe on the Euro have found out. So, no such thing as safe.

What I have done is I own commodities on the theory that if the world economy gets better, I'll make money because of shortages. If the world economy does not get better, people will print money. The best way to save yourself when money printing is going on is to own commodities. _James Stafford Interviews Jim Rogers
A large number of today's investors have grown up in an era of bubble economics, when just about any stock on the board would earn them profits.

That we are now in an era of green government engineered energy starvation, demographic decline in Europe and the Anglosphere, and huge debt levels across the developed world. Government policies are growing more dysfunctional rather than less. In today's economic and political climate it becomes very difficult to prosper.

That may explain Jim Rogers' trend toward asset protection and preservation. Think it over.

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