Weekly on Stocks: Hi Mr. Rogers! It is a great honor to have youwith us for an exclusive in-depth interview on “Face to Face”.
Rogers:I’m very delighted to be here. I haven’t seen you for a long time, so I’mreally happy. In 2004, I participated in your first international MastersForum; I was much younger back then. That’s a wonderful experience, making meknow better about China.
Weekly on Stocks: We are grateful for the guidance and support youhave given us over the past 1decade as our honorary advisor at Weekly onStocks.
Rogers:Thank you, thank all of you.
Weekly on Stocks: First ofall, I would like to discuss with you about the global pandemic and the major correctionof global market. Has the outbreak of COVID-19 also affected your life?
Rogers: Indeed, the disease has become aglobal pandemic. My life is also affected. I have to stay at home in Singapore.I can’t go to China or anywhere else. There are some Chinese stocks I’m veryinterested in, but at present I can’t go to check them. Maybe I’ll buy themlater.
Weekly on Stocks: The global economy was hit hard by the outbreak,and you warned investors four or five years ago that “another global economiccrisis will be triggered in the next few years.” Is the current economic crisisas what you expected?
Rogers: What I said was, when we haveanother economic crisis, it is going to be the worst in my lifetime. The reasonwas, the economic crisis of 2008 was due to a high global debt. For what I cansee, the debt has been surging rather than reducing since then. So, if anothercrisis comes up, it will to be horrible. And it is.
Weekly on Stocks: Can we conclude that the decade-long bull marketin U.S. stocks is over?
Rogers:Yes, the bull market is drawing to aclose, or maybe it’s already ended. Since the US government and other nationalgovernments have been spending and printing huge amount of money, we’re havinga rally in shares on the stock market. This situation may go on for a while,because so much money has been pumped into the market. But this will be thelast rally before the emerging storm.
Weekly on Stocks: Buffett recently said that this year’s correctionof the stock market isn’t as bad as that in 1987 or 2008, which seems quite farfrom your point of view.
Rogers:No, this crisis is going to be worsethan that of 2008 before it’s over. It has not been yet, but it will be. Afterall, it’s only been six weeks. Now the turbulence of the market is onlytemporarily lessened.
Weekly on Stocks: So, will this global economic recession be assevere as the Great Depression in 1929?
Rogers:I doubt it will be as severe as the Great Depression, but it could be. First,the world is drowning in debt. Second, we had the Great Depression becausepoliticians made mistakes, and they may make mistakes again. As I can see,they’re beginning to make mistakes. Governments of the US and Singapore aremaking mistakes; other countries may follow them. As for China, it’s marketshould be more open. If politicians don’t make wise decisions, then we’ll havea crisis worse than the Great Depression.
Ofcourse, we haven’t gone that far by now.
Weekly on Stocks: The mistakesyou mentioned should include the continuous “liquidity injections” by centralbanks in various countries, right?
Rogers:That’s one of the mistakes. The US government approved the $2-trillion stimuluspackage while the central bank is printing another several trillion dollars.It’s staggering amount of money. The debt is soaring extremely high, so theconsequence will be terrible. Maybe we’ll be OK for a few months, because theelection is in November. We may be OK until then; but with all the debt, wewon’t hold out much longer. It will be a nightmare for the US and othercountries.
Weekly on Stocks: Would theconsequences be better or worse if let the market recover through aself-correcting mechanism instead of banknote printing?
Rogers:Itwill be better in the long run. The US government props the market up to avoida breakdown; but with the accumulating debt, the breakdown is unavoidable, andit’ll be much more worsened. In 2008, the market didn’t collapse, and now wehave an all-time high debt. Nobody paid the price in 2008 and 2009, so when wehave the next problem, it’s going to be more serious.
It would have been better to let things swelled up in 2008. Thoughit would be terrible, temporarily, but if we cleaned out the system, therewould be a new dawn. It’s what happened on the history. Many countries,including the US, have cleaned out the system. We had pain for a year or two,then we prosper. What the US government is doing is not good in the long run.
Weekly on Stocks: When do youexpect the real end of this correction?
Rogers:It will last long. Usually we need a year or a year and a half to tide over thestorm. We’ll suffer then start over. But remember, we are having an all-timehigh debt, so this time, it’s going to take long to recover. It’ll be very hardfor us.
Inthe crisis of 2008, China saved a lot of money for the rainy day. When it startedto rain,China saved itself and helped the whole world by those money.However,China is also in debt now. All the countries are drowning in debt, so thecrisis will be very hard to solve.
Weekly on Stocks: In youropinion, what are the factors or measures that will prompt it to end as earlyas possible?
Rogers:We need to stop intervening the market and owing so much debt. Let the markettake its own course. Let the competent people fill where they may fill. Thenwe’ll start over. That’s how the mechanism is supposed to work. When somepeople get into trouble, other competent people will come to take over theassets from them, reorganizing the market and making it start over from a soundbase. It has always been so. But now, things are going on the other way allaround the world. With too much intervening, the assets are taken away from thecompetent people and left for the incompetent people; the competent people haveto cope with their own money.
It’sabsurd. We can’t clean out the system by this way. What we need is a “forestfire”. A forest fire is horrible if you are in it. But it cleans out badwood and underbrush, then the forest can grow even better afterwards. That iswhat recessions do through history all over the world. However, theUS and the West don’t want to face a breakdown, so the problem is getting worseand worse.
Weekly on Stocks: As another “blackswan” in this market correction, the “oil price war” between countries such asSaudi Arabia and Russia is showing signs of mitigation. Would this help toaccelerate the market out of the bear market atmosphere?
Rogers: The oil price war is certainlygood for countries that use a lot of oil, such as Germany and Japan. It is alsogood for many countries in the world, including South Korea, but definitely notgood for Saudi Arabia and Russia.
Weekly on Stocks: The crudeoil price has dipped to $18/bbl. this year. What do you think of thedevelopment trend of crude oil price in the future?
Rogers: The current oil price is not thelowest in history, but it is the lowest for a long time. From the rule of crudeoil prices, affected by various complex reasons, oil prices hit bottom; thenafter being recovered for a while, it will dip to a lower point; then it willgo up slowly and keep going like this. Whether in 2008 or now, this is therule.
Weekly on Stocks: On Monday (April 20), NYMEX crude futures for May2005 closed at -$37.63 a barrel, the first time since trading began in 1983 that thetransaction has turned negative. What do you think causes the extreme situationof “negative price”?
Rogers:It’s very simple. This is an aberration in the futures market. You can’t buyoil at this price. In the futures markets, you have to deliver the oil on acertain day. When someone pays you, you deliver the oil. But now, all theplaces for oil storage are full; no one wants to buy oil even at a very lowprice. Most participants in the futures market just buy and sell oil, but notuse it. So, when there’s a truckload of oil going to come all of a sudden, wegot to get rid of it. They had to dump it hurriedly. In the end, they paidsomebody else to take the oil away, because participants in Chicago and othermarkets were in no position to take the oil. As mentioned before, many of theoil storage tanks were already full. It can happen again. But it’s obviouslymuch less likely to happen.
So,the lesson from this story is that you should go and start a company of storagetanks right away. You can rent out the tanks and make a lot of money (Laugh).
Weekly on Stocks: In fact, theBrent crude oil futures contract in June is to be settled in the near future.Is there any chance that it will fall again or even go negative?
Rogers:I don't know. Maybe your show can tell me the answer (Laugh). The market iscertainly better prepared now. “Negative price” came as a big surprise toeveryone. No one wants it, for it never happened before. But now exchanges,including those who might want to buy oil at low prices, have got ready. Ifthey see someone has to dump the oil, someone may buy it, and some people douse oil still. So, we’ll see. It’s good for you (reporters), because you havesomething to report.
Weekly on Stocks: Such extremesituation like “negative price” has occurred to crude oil futures, can weassume that the outlook for global markets has become more uncertain?
Rogers:Of course, this means that some oil companies and oil drilling companies aregoing to go bankrupt. It’s a very bad situation for the hydraulic fracturing(shale oil) industry, and some of the oil companies are heavily indebted andthey are going to have a hard time. As I said, in the countries like SaudiArabia, Kuwait, Sudan which depend largely on oil or the oil price, you aregoing to see more problems, such as bankruptcies. In the shipping industry, alarge Singaporean company has gone bankrupt because it did not expect the oilprice to fall. Thus, it’s having ramifications in the economy, and that willalso have a reflection in the stock market. But remember, there are some peoplewho love to see this. If you are Korean, you would think this is wonderful. Ifyou are Chinese, you will also think this is wonderful. It is also great forSingaporeans, except for the company that went bankrupt.
Weekly on Stocks: A swift endto “isolation” around the world could accelerate a recovery in oil marketprices, according to The Guardian. Is that over-optimistic?
Rogers:No, I don’t think that’s over-optimistic. In my opinion, isolation is amistake. We’ve had panics and epidemics before. You know, we had SARS. We hadthe H1N1 avian influenza in 2009. When we had the H1N1, the U.S. economy wasnot locked down. There is no denying that viruses do have an impact on people’shealth, but history shows that people have learnt to adapt. Singapore wascompletely isolated, but it got worse because everyone has packed in together.So, in my opinion, isolation is not a good thing.Andonce the economy reopened, the demand for everything would rise. We see, forexample, that Austria is lifting the lockdown, but Sweden never conducts the “lockdown”of the country and its cities. So, it doesn’t have to be a lockdown. There areother solutions as well.
Weekly on Stocks: In youropinion, is it the good timing to buy in crude oil futures? If you were to buy,when would you choose to buy it?
Rogers:Now the oil has crashed and the market is in chaos. Usually, in any market inany country, when such thing occurs, if you know what you are doing and you buyin, you might go through a turbulent period for a while, but eventually youwill be fine.
Panics and pandemics are not going to lastforever.Closures are not going to lastforever. So, we are going to drive again, we are going to take airplanes again.If you step in, I might do it. I’m not doing it today because I’m doing otherthings. But If I were not so lazy, I probably should be stepping in or figuringabout when and how to step in and buy, making investments in this sector. Because there is apanic and whenever you buy during a panic, you can always do well.
Weekly on Stocks: To be “greedy”in a time of fearful, as Warren Buffett said.
Rogers: He used the word “fearful”. I usethe word “panic”. Basically, it’s the same approach.
Weekly on Stocks: In youropinion, how will the collapse of crude oil futures affect the U.S. equity andbond markets?
Rogers:It’smainly terrible for oil companies and oil drilling companies, because obviouslythey are going to have a lot less money. It is good for American citizens,people who use oil for electricity, or cars, or air conditioning or whatever.It’s good for China. It’s good for Japan, Korea, and any oil consuming country.This is not good for oil companies or oil producing countries. But it is certainly good for everybody else.
A large part of the USstock market is made up of oil companies and oil drilling companies. So thatpart of the American economy will suffer. Since it’s a large part, it will havean effect on the overall market. However, the factors that make the Americanstock market going down are not just oil, but also the outbreak of the COVID-19.
Weekly on Stocks: According to U.S. government data, U.S. crude oilreserves continued to buy oil in March as the overall market began to fall.What do you think of the actions taken by U.S. crude oil reserves?
Rogers: Trump is doing that because hewants to get votes. As everyone knows, he’s losing votes in the oil producingareas. Although, it’s something that all countries should be doing. Oil hascollapsed. Oil prices have fell down. If China, Germany or any other countryhave not enough reserves of oil for emergencies, they should be stepping in andbuying oil now and putting it in their own storage tanks.
Weekly on Stocks: The epidemichas led to a new understanding of global supply chains in various countries,and some senior government officials in the US and Japan have encouragedmultinational companies to relocate their production lines back to their homecountries, which is understood by the market as "ReverseGlobalization". How do you think about this?
Rogers: Unfortunately, there have indeedbeen such moments in history. Sometimes countries become more open andinternational, sometimes they become more closed. I think after decades-longopenness, the world now has a tendency to be closed, which is not a good trend.Such state existed during the Great Depression of the 1930s, which led to war,among many other problems. There is also a trend towards this now. I hope itwon’t last long. Many US companies are moving back to the US, but the cost ofstarting a business in the US is quite expensive and the quality of the productmay not be as good. That may be the case with the current state of affairs, andit's bad, both for my children and for the world.
Weekly on Stocks: Someprofessional investors are beginning to worry about the potential risks ofrenewed escalation of trade frictions between the US and China following theepidemic, do you have similar concerns?
Rogers: The measures and actions of theUS are extremely poor and irrational. Probably Mr. Trump would think trade warsare good for the US, but trade wars have never been good for anyone and anycountry. Mr. Trump may not know this, and if he does, he is being arrogant.
I hate trade wars. I'm an American, soI'd hate to see the current situation. Waging a trade war is a completelyirrational act. It will hurt both countries. I wish the US government would bemore sensible. So far, China has been more restrained and cautious.
The market conditions are alreadyterrible now, and a trade war would make it even worse. As I mentioned before,if politicians started making mistakes consecutively, the economic situationswould be getting even worse! And it’s highly possible that their mistakes wouldcontinue. If Mr. Trump does start atrade war, later in the year or next year, the market conditions would be evenworse than my expectation. Just like what I said, this crisis would be theworst bear market of my life. Trade wars are absolutely no good for anyone.
Weekly on Stocks: You're afrugal person, so as your great friend John Templeton, a famous investmentmaster famous for frugalness. Do you think thrift is a necessary quality forsuccessful investors?
Rogers:Thrift is usually benefit success than anything. One of the first things Ibought for my daughters were piggy banks. I told them that money is to be putinto the piggy bank. I want to teach them that money is to be saved andinvested money is not used to be spent. After you save your money, if you wantto spend the money later, you can. So far, when my daughter get money, theyoften put it in their piggy banks. After the piggy bank is full, we go to thebig bank to put the money in the big bank. I try to teach my children to saveand to be thrifty. You can ask them after 20 or 30 years if I did it right. Iknow many people spend more money than they have, and many lives and marriagesget messed up because they have money problems. Money is to be saved, not to bespent until you have enough, if you ask me. That’s my way, you do it your way.
Weekly on Stocks: In youropinion, subscribing to excellent readings and reading them regularly isimportant for investing. And many of your trading decisions are also"inspired" from such readings. Could you share with us what’re thepublications that you’re reading most currently?
Rogers:I can only read in English, so I read Financial Times and English newspapersfrom other countries. Now everything is on the internet, so I can read thingsconveniently from all over the world; I don’t read newspapers anymore. I readabout China, Korea and Russia on the internet; I can read about any country andany industry I interested in.
Itry to teach my children that they should read from many sources. If you onlyspeak English, you can watch CGTN from China, BBC from England, RT from Russia,and KBS from Korea. On the internet, you can watch in English many sources ofinformation. I have taught my daughters that they should watch them all. Everyone of them thinks it’s correct. If you only watch CNN, you get information itdeems accurate, but this can’t be always true.
Thus,we need to get information from more sources. We can watch five or six TVnetworks from different countries, then we figure out what is really happeningby ourselves. It’s not easy. I have been doing this for 40 or 50 years. Now I’mtrying to teach my children to do the same. Media convey the information theydeem right. They all think they are right, but they can’t all be right. Weshould figure out what’s right by thinking independently.
Weekly on Stocks: What is your advice to professional investors inChina who want to continue exploration in the general situation and valueinvestment in terms of learning and improvement?
Rogers:As for me, I’ll try to get as many perspectives as I can. I love CGTN, aChinese English language network, but I know their information can’t beaccurate all the time. Thus, I will watch others to get more comprehensiveinformation and more sweeping view from other nations. Even then, I makemistakes. But it’s crucial to try to get as many perspectives as I can. I knowinformation on the network in China is not as open as in some other nations;nonetheless, I would urge all investors to get as many sources of informationand perspectives as they can. If you only watch CNN in America, you would bebiased; if you only watch RT in Russia, or any other media of a nation, youwould be biased, too. However, if you have enough sources of information, youmay get a better judgement on what’s really going on.
Weekly on Stocks: As we’re approaching to the end of the interview,could you please share more with our readers?
Rogers:Yes, please be careful of poor investment decisions. We are going to have somedifficult times in the next two or three years, maybe even longer. So please bevery careful about your investments. Do not invest in anything unless you’vegot good knowledge about it. If you can’t find a good opportunity to makeinvestment, just wait; put your money in the bank, because it’s safer. To putyour money in the bank, you won’t lose money, while in the investment market,many people will lose a lot of money in the next few years.
You have to keep learning and becomeknowledgeable, because you’ll probably keep your assets in the crisis, or evenmake more money only if you know what you are doing. In the 1930s, many peoplemade a lot of money despite the Great Depression. So, we can make money in badtimes if we are knowledgeable and cautious enough. Just be careful.
And, one more thing. Everybodyshould watch Weekly on Stocks.(Laugh)
Weekly on Stocks: Thanks againMr. Rogers for accepting the interview with Weekly on Stocks. So much for myquestions. I hope that I can still have the opportunity to have face-to-faceinterview with you like this. And good health to you!
Rogers: Thank you, I would like to see you in person when I’m in China again.