♠ Posted by Emmanuel in China,Credit Crisis
at 12/02/2011 09:56:00 AM
When I have some time, I do watch the financial news channels which regularly feature bears to counterbalance the more regular fare of bulls. Over the years, one of the more frequent guests have been Marc Faber of gloom, boom, doom report fame. Another fellow is Jim Rogers, co-founder of the Quantum Fund together with George Soros back in the day. Rogers has been bullish on both commodities and China for the longest time--which I've always found to be a counterintuitive combination insofar as the former would mostly feature as (rising) costs to China's import bill due to their limited domestic availability. That is, China is a net importer of these types of commodities and its terms of trade are hurt by rising raw material costs.At any rate, the debate between Faber and Rogers concerns China in general and its relation to commodities in particular. Whereas Faber sees the popping of the China bubble as the world's next disaster story, Rogers remains steadfast in his bullishness on the Middle Kingdom. However, Faber also relates China and commodities in a more intuitive fashion: China going bust will hurt what some have called the "commodity supercycle":
Jim Rogers thinks Marc Faber has got it wrong about China, when [Faber] says the country is possibly headed for a hard landing, which would lead to a devastating impact on commodities around the world. "Marc still does not understand China. There are going to be several hard landings in the next few years, but China’s will be less hard overall than others such as Greece, U.S., et al," Rogers told CNBC in an email.They also differ on the events of the global financial crisis and its relation to commodity crises:
Rogers says some parts of China's economy will have a "hard landing" but other parts will continue to boom. He says the commodity market will have a correction, but rebutted Faber's view that it would be devastating.
According to Faber, Rogers' bullish call on commodities is misplaced. "If I was always bullish about commodities and completely missed out on the crash in 2008, then obviously, having tied essentially my reputation to commodities, I'd continue to be bullish," Faber said.There's also the accusation levelled against Faber with being a perma-bear on China even during its run-up period:
But Rogers said Faber had got it wrong when it came to his call in 2008. "I proclaimed repeatedly far and wide that one should not buy commodities in the run up phase. I also explained that I was not selling mine since we were [and are] in a secular bull market," Rogers said.
According to Rogers, Faber is the one who has made many wrong calls, arguing that he "totally missed" the secular bull market in commodities that began in early 1999. "Also back in those days, he and his friends proclaimed often that China was a mess and would continue to be so," Rogers said. "They all were wildly excited about Russia. Some of his friends even left China to start operations in Russia. We all know how that resulted."I personally am more in line with Rogers' way of thinking. Of course China's rate of economic growth will taper off. There are manufacturing numbers that suggest the same. Will there be overinvestments in certain industries that lead to busts? Yes, those too have and will probably occur as they always do in a capitalist world-system--go ask Marx. However, the long-term outlook for China remains positive and I agree with Rogers on that, especially when compared to the economic cesspools that are modern-day Greece, USA, etc.
Think of Faber as being keener or timing the market and of Rogers as being more of a "buy to hold" sort. Their disagreements may ultimately boil down to their respective investment (or disivestment) horizons.
