market folly

Legendary investor Jim Rogers recently appeared on television and voiced some of his latest opinions and investment maneuvers. We haven't talked about the former Quantum Fund manager for a while because, let's face it, he's on television all the damn time. But, some of his comments from this recent interview made us take notice.

Potentially the most notable bit of his conversation was when he said, "I had no shorts for about 15 months so I started putting out some shorts recently. But the fact that I've been putting out shorts means the stock market won't pull back." So, it's interesting to see Rogers fight the current trend. In his mind, it's the right play, but he knows he's going to potentially feel some pain first. Many investors out there will agree that the market is overdue for a near-term pullback. MarketClub voiced these concerns in their recent technical analysis video of the S&P 500. Additionally, Bespoke outlined that many stocks are overbought.

We've also noticed some other signs that the market might be getting overheated for now. If you hadn't realized yet, there's been an insane amount of secondary offerings hitting the market. As we tweeted earlier, these secondaries typically come in droves when there is complacency and it could be a contrarian signal. (You can follow us on Twitter here). It's been noted many times in the past that investors often buy the most at the top. Where were all these secondaries when the market was tanking and stocks were cheap? There was no demand; investors were too scared. Now that everyone feels 'safe' again, the secondaries are rolled out, the buybacks crank up, and the insiders start purchasing. So, you can't really blame Rogers for taking a stab here even though he's going against the current trend.

In his interview, Jim Rogers also talked about some other hot topics. He touched on the euro given the fact that European sovereign defaults have taken centerstage. Rogers notes that, "The euro will probably break up in the next 15 to 20 years. Don't get me wrong, I own the euro. We've had currency unions in history. They didn't survive. This one won't survive either." So, he's short-term bullish and long-term bearish on the euro.

He then shifted his focus to how potential sovereign defaults could have ramifications for the currency. Rogers said that, "If the euro zone helps the Greeks, that weakens the fundamentals of the euro. As the next government comes to demand concessions, they weaken the currency from within. I would let Greece go bankrupt because then everybody will say the euro is a serious currency." This stance of his is by no means new. He's a staunch supporter of the notion that markets should work things out on their own, even if it means something will fail. So, it's always intriguing to hear what Rogers has to say.

In the end, everyone knows market timing is a bitch. While Jim Rogers obviously isn't suggesting you go net short, it makes perfect sense to us to put on some hedges, take some profits on longs, and to identify companies that are now looking too frothy. And, it sounds as if that's just what Rogers is doing. Whitney Tilson of hedge fund T2 Partners has been doing the same. Lee Ainslie of hedge fund Maverick Capital said in his investor letter that he thinks 2010 will be a return to a stockpicker's market. He makes a great point that the decline in the price of risk equals opportunity for shorts.

Here's the video of one of Rogers' recent television interviews:



In financial markets, you can never be too cautious. After all, it usually hurts more to be reactive rather than proactive. We just wanted to highlight Rogers' new application of short positions since he's previously been long for many months. It's been a while since we last covered the legendary investor in detail, but those looking for more of his wisdom can head to our ancient post on Rogers' portfolio and an interview with his thoughts on commodities.