Jim Rogers Shifts All Assets Out of Dollar to Buy Yuan

I´m not sure if the Chinese are happy with comments like this...... But there is little doubt that the Yuan is significantly undervalued. I recommend to visit Brad Setser´s Blog to read more about this topic. Lets be clear a rise of the Yuan will change the landscape for lots of regions and will have big implications for all asset classes for years to come. In the meantime the Chinese have to deal with lots of hot money that is chasing Chinese assets.

Ich kann mir vorstellen das die chinesischen Offiziellen solche Kommenate nicht gerne hören.... Aber es besteht kaum ein Zweifel das der Yuan deutlich unterbewertet ist. Mehr Expertise zu diesem Thema gibt es regelmäßig auf Brad Setser´s Blog. Ein schneller Anstieg dürfte zu einigen Verwerfungen führen und dürfte kaum eine Region oder Anlageklasse unbeeindruckt lassen. In der Zwischenzeit müssen die Chinesen damit leben das eine Menge "Hot Money" chinesche Vermögenswerte regelrecht jagt .

Jim Rogers Shifts Assets Out of Dollar to Buy Yuan Oct. 24 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

``It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros.

Reserve Currency
``The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange,'' he said. ``That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.''

The Chinese currency, known as the renminbi, or yuan, is ``the best currency to buy right now,'' Rogers said. ``I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''

> Here is short term outlook from Morgans Stanley on this topic Fasten the Seatbelt

> Hier ein aktueller Kommentar von Morgan Stanley zu diesem Thema Fasten the Seatbelt

China has followed a gradualist approach. In 2006, the renminbi appreciated against the US dollar by 3.4% but against the currency basket (i.e., the NEER) by only about 0.8%. As of last Friday, the cumulative appreciation against the US dollar so far this year was 4%, but against the currency basket only about 1.4%

Since I expect the pace of renminbi appreciation against the US dollar to accelerate markedly for the remainder of the year, I endorse our FX strategy team’s forecast that the USD/CNY rate will reach 7.30 by end-December (see FX Impulse, October 18, 2007). This year-end target implies about 2.7% appreciation of the renminbi against the US dollar for the remainder of the year and slightly less than 7% for 2007 as a whole.

Despite this seemingly aggressive USD/CNY forecast, I estimate – based on our FX strategy team’s forecasts of the exchange rates for China’s major trading partners – the cumulative appreciation of renminbi NEER for 2007 will be only about 3.9%

The yuan strengthened past 7.5 to the dollar today for the first since the central bank ended a fixed exchange rate in July 2005. The currency has gained 10.5 percent since the dollar link was abandoned.

China, growing faster than any other major economy, is ``going to be the most important country in the 21st century,'' he said. China's gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

> I recommend to read Is the credit squeeze a prelude to a China crash? from John Plender via the FT. I suggest to read the entire link.

> Hier ein weniger bullische Meinung von John Plender Is the credit squeeze a prelude to a China crash? via der FT. Ich empfehle den kompletten Link zu lesen.

The backcloth has invariably been a shift in global power whereby the growth of an immature creditor country wedded to protectionist trade policy has contributed to imbalances of savings and investment. Attempts to manage the currency volatility arising from imbalances have derailed monetary policy and created bubbles in asset markets, leading to crashes and financial distress.

Rogers also is buying Swiss francs and Japanese yen, which he said have been ``pounded down'' because of the so-called carry trades.

Unwinding Carry Trades
In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand.

The carry trades in yen and francs will ``unwind someday,'' which will send the currencies ``straight up,'' Rogers said. ``I'm buying the yen.''

The bull markets in bonds and stocks are ``over,'' he said. ``Bonds will be a terrible place to be for many years and will in fact be going down for many years.''

Rogers said he remains bullish on commodities because ``that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.''

Commodity Prices
Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.

``The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,'' Rogers said. ``Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.''

He added, ``I think I'm going to make more money in agriculture than I make in precious metals.''

Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,'' he said.