US Is "More Communist than China": Jim Rogers
-- - The nationalization of Fannie Mae and Freddie Mac shows
that the U.S. is "more communist than China right now" but its
brand of socialism is meant only for the rich, investor Jim
Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.
"America is more communist than China is right now. You can see
that this is welfare of the rich, it is socialism for the rich…
it's just bailing out financial institutions," Rogers said.
markets jumped after the U.S. government's decision to launch
what could be its biggest federal bailout ever, in a bid to
support the housing market and ward off more global financial
But Rogers said in the long term
the move spelled trouble.
"This is madness, this is insanity,
they have more than doubled the American national debt in one
weekend for a bunch of crooks and incompetents. I'm not quite
sure why I or anybody else should be paying for this," Rogers
told "Squawk Box Europe."
European stocks soared on Monday,
led by banks. UBS was up 11 percent,
BNP Paribas up 8 percent, Credit
Agricole up 11.1 percent and HBOS
up 13.8 percent.
"You certainly gonna see a huge
jump in any financial institutions which owned a lot of Fannie
] or Freddie
] … because they don't have to worry about going bankrupt all of a
sudden," Rogers said. (Watch the video on the left
for the full interview)
"Bank stocks around the world are
going through the roof, that's 'cause they've all been bailed
out. You don't see the homeowners in Kansas going through the
roof 'cause they're not being bailed out," he added.
"A Huge Mess"
However, despite the rally in Asian
and European markets, the decision to take over Fannie and
Freddie is likely to cause more volatility and needs careful
consideration by investors, according to Rogers.
It's rarely good to jump in a
moving bus and right now you got a lot of buses moving. I might
short some more investment banks in the US, depending on how
they rally over the next week, but other than that, I'll just
sit and watch," he said.
Rogers, who is short on U.S. bonds,
said these are likely to fall while commodities may rally. The
two government-sponsored enterprises don't have good loans on
their books, because "everybody else took the good stuff and
dumped the bad stuff onto Fannie and Freddie," he said.
Fannie and Freddie will have to shrink their portfolios by 10
percent a year until they reach $250 billion, to reduce the risk
to the taxpayer, according to the Treasury plan. But this may
put additional pressure on the housing market, Rogers said.
"That's going to also ensure that
house prices continue to go down. It's going to be harder and
harder to get a mortgage."
Investors should not pin their
hopes on this year's presidential election for a solution to the
problems, as none of the candidates is likely to find one,
"This is a big huge mess and
neither one of them has a clue what to do next year. It's going
to be a mess."
© 2008 CNBC.com
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