Jim Rogers 14-3-07

Top investor sees U.S. property crash
Wed Mar 14, 2007 12:59PM EDT
By Elif Kaban

MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.
"You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York.
"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.
"It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.
Worries about losses in the U.S. mortgage market have sent stock prices falling in Asia and Europe, with shares in financial services companies falling the most.
Some investors fear the problems of lenders who make subprime loans to people with weak credit histories are spreading to mainstream financial firms and will worsen the U.S. housing slowdown.
"Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said.
"When markets turn from bubble to reality, a lot of people get burned."
The fund manager, who co-founded the Quantum Fund with billionaire investor George Soros in the 1970s and has focused on commodities since 1998, said the crisis would spread to emerging markets which he said now faced a prolonged bear run.
"When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess," he said.
"Right now, there is huge speculative excess in emerging markets around the world. There will be a lot of money coming out of emerging markets.
"I've sold out of emerging markets except for China," said Rogers, long a prominent China bull.
Even in China, the world's fastest expanding economy, Rogers said stocks were overvalued and could go down 30-40 percent.
But he added: "China is one of the few countries in the world where I'm willing to sit out a 30-40 percent decline."
The last stock market bubble to burst was the dot-com craze which sparked a crash from March 2000 to October 2002.
When the last bubble burst in Japan, said Rogers, stock prices went down 85 percent despite the country's high savings rate and huge balance of payment surplus.
"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."

World market directions from Chris Lee

More along the lines of what I mentioned in last post... by Chris Lee.

The inevitable sharemarket shake-out, which will mean negative returns for most hedge and private equity funds, will not come as a result of the Chinese sharemarket falling.
For one thing China's sharemarket is largely irrelevant to the Chinese economy most of its real powerhouse companies being owned or controlled by government, and not listed.
Nor will the sharemarket shakeout be caused by the poor returns of leading world companies.
The shakeout is inevitable and will occur when the world reacts to the inevitable losses from those who have securitised debt, specifically sub-prime mortgages, and sold off this debt to banks and others.
In the US, the most over-borrowed place on earth, New Century either has filed, or is about to file for bankruptcy.
It has $16 billion lent in what is euphemistically called sub-prime home loans, and around $6 billion of its loans are in default.
It securitises its lending and sells them to others who fund them, one way or another, through retail investors.
New Century is the largest but only one of dozens of such lenders who, in our jargon, would be the South Auckland car lenders of this world.
The US sub-prime lenders are already in strife, and as they fold, several consequences are logical.
Forced house sales will rise; house prices fall; individual bankruptcies rise; investors cease to fund sub-prime lenders, all sub-prime lenders find it hard to fund their business; the public flee to quality; the second tier lenders cannot securitise their loans; as troubles spread, those who borrowed in low-cost currencies like yen, to invest in higher yield currences like AUD, South African rand, NZ dollar, or even US dollars, run for cover.
All of those currencies fall, except yen!
Over-borrowed people and companies and countries are paddle-less, up the creek.
Nothing changes an immutable fact; those who over-borrow lose their paddles sooner or later.
Those who lend to the over-borrowed make money only until the over-borrowed lose their paddles.
Moral to all of this; grandpa was right.
Debt-free is best!
Other moral to this story; the best banks and finance houses lend carefully and skilfully.