Sept. 10 (Bloomberg) -- Jim Rogers, the head of Rogers Holdings who correctly predicted the start of the commodities rally in 1999, talks with Bloomberg's Betty Liu from Singapore about Lehman Brothers Holdings Inc.'s third- quarter loss, the outlook for investment banks and the government takeover of Fannie Mae and Freddie Mac. (Source: Bloomberg)

(This is not a legal transcript of the interview. Bloomberg LP cannot guarantee its accuracy.)

BETTY LIU, BLOOMBERG NEWS: Joining us by phone from Singapore to talk more about Lehman, and, of course, Fannie and Freddie and the economy, is Jim Rogers, Chairman of Rogers Holdings. Jim, great to have you back on the program, as always.

JIM ROGERS, CHAIRMAN, ROGERS HOLDINGS: I am delighted to be here, Betty.

LIU: You know, Jim, got to get your reaction to the Lehman news. Of course, you've been short financials. You've called all the guys on Wall Street crooks. What do you think about the Lehman news today?

ROGERS: I'm not sure I called them all crooks, did I? Did I go that far? I called a lot of them incompetents. And it's certainly unfortunate that they took a lot of money out of these companies. And now these companies are suffering very badly, and they expect other people, taxpayers, to bail them out.

I find that outrageous, as a matter of fact. They're not turning in their - they all have Maseratis. They're not turning in their Maseratis to - when they're asking us to bail them out. I find that outrageous, yes.

But what do I think about it? I am still short all the investment banks, Betty. I covered many investment banks. I'm short them through the ETFs. And this chaos has further to go.

LIU: Now should the - do you think Dick Fuld should resign? Should the brokerage be taken over? Should it be sold?

ROGERS: Well something's got to happen because essentially that balance sheet is in terrible, terrible trouble. They sold all this garbage. They kept a lot of this garbage. And somebody has failed in Lehman Brothers.

Usually the buck stops at the top. But I am not a shareholder of Lehman Brothers, so I cannot tell them what to do. But normally in most companies, and in most societies, when people do things wrong and fail, they resign and turn it over to somebody else.

LIU: Jim, we were talking before, and I've read some reports that of all the financials, you'd be short Citigroup. Correct me if I'm wrong on that, but why Citigroup?

ROGERS: Well I've covered Citigroup, so I'm no longer short it. But why Citigroup? Because it's the same thing. The place was a mess. They've got gigantic problems on their balance sheets, huge problems on their balance sheet, many more to come.

If the stock should rally, I'll short some more. But I'm not sure that now - and I covered a week, two weeks ago now. This is September, and I covered it a few weeks ago.

LIU: Oh really? Why did you do that?

ROGERS: Because it was down a lot. I've learned many times that when something goes down a lot, you probably ought to short it. That something often comes along and causes a rally, and then you wish you had shorted it. So rather than wish I had covered, I covered it.

LIU: Jim, does any of what's happened so far with Lehman, and with Fannie and with Freddie, does any of that give you confidence that we are somewhat near the end of this crisis, we're midway through? Does it give you any confidence that we're getting a grapple on the situation?

ROGERS: Betty, we're further along than we were. We're 15 months along. But Hank Paulson told us 18 months ago that everything was all right. He told us 12 months ago, nine months ago, six months ago, three months ago. And I'm sure three months from now he will tell us everything is all right.

But everything is not all right, Betty. Bernanke swore, under oath, under oath in 2006, that there was no housing problem, everything was fine in housing. And in every instance since then, he's told us everything is fine. But it's not okay.

The balance sheets of many of these financial institutions are still terribly impaired, and there are more problems to come.

Betty, we had the worst credit bubble we've had in world history. You don't clean that out in a year or two or three. I wish you could, but it's not going to happen.

LIU: Now you called the Fannie and Freddie bailout a disaster. What would you have liked to have seen happen with those two companies?

ROGERS: I would like to have seen them go bankrupt and be turned over to the bankruptcy courts and work out their bankruptcy, and work out their bonds, work out their debits and their credits. That's normally what happens.

But you know, these two companies have run up, apparently, $6 trillion in debt. And the people who ran up the debt, Betty, were not elected by anybody. They were incompetents and crooks. And yes, they were crooks. There's no question about that, some of them.

I don't know why Franklin Raines is not in jail. You see a lot of people in jail these days. What Franklin Raines and his cohorts did were worse than what anybody else has done. And they now have saddled the American taxpayers with $6 trillion, with a T, of debt.

LIU: Yes, but Jim, what about those who say that this is actually - this is going to help lower mortgage rates and help the housing market recover?

ROGERS: Well that's fine, Betty. Why do I have to pay for it? Why do you have to pay for it? Why do my children have to pay for it? You could do that too by letting the thing go bankrupt and starting over.

I don't - I'm happy that some people are going to get lower mortgages. But I don't think I should pay for it.

LIU: Jim, before we start talking about commodities, which, of course, is the favorite subjects to talk to you about, where do you think, Jim, the next big financial shock is going to come from?

ROGERS: Oh, probably more from some of the American banks, the American financial system. But, Betty, for all I know, it could come out of a European bank or an Asian bank. I don't know who has all this garbage. I know a lot of people do.

Some of the Europeans haven't written it off yet, and the Japanese, I would suspect it's going to come from a bank we haven't thought about yet. But there are more problems to come.

LIU: All right. Are you seeing - being in Singapore, are you seeing any of that start to creep up at all?

ROGERS: Well not in Singapore so much, just because the government here has been very disciplined and very harsh on these guys.

LIU: But I mean in Asia. In Asia, Jim.

ROGERS: Oh, well, you're certainly starting to see it in the Chinese banks. Some of the Chinese banks bought a lot of this stuff. The Taiwan banks bought a lot of this stuff. And you're going to see some of those problems come out.

One of the reasons that the Chinese government has been trying to tighten up is because they do know that there are some problems in their banking system.

So you may see more slowdown in China. The government's trying to slow things down. Hope they do, they need to. That, of course, is having an effect on the commodities market now, as you will point out, I'm sure.

But that's just a correction. There are corrections in any market. We always have corrections.

LIU: Well, that leads me, of course, to talk about commodities with you, and particularly oil, Jim. You've been a bull on commodities. We've seen oil come down about 30 percent from the peak. You're still a bull on oil. Why? Where do you see it going?

ROGERS: Betty, the oil bull market started in 1999. Three times since then oil prices have gone down 40 percent or 50 percent. And every time it happened, the skeptics always said, well see, we told you so. There's no bull market.

Well oil could go down 50 percent again. This is not a prediction, I'm just saying it could go down 50 percent. But it's not the end of the bull market. Betty, the bull market will not end until somebody finds a lot of oil, or unless we have worldwide economic collapse, perpetual economic collapse.

The bull market is not over. If oil goes to $75, which is down 50 percent, it's not the end of the bull market. That's the way markets work. They always have and they always will.

LIU: Well, Charlie -

ROGERS: I'm not predicting it's going to $75. I don't want you to start writing that. I'm just suggesting that it could. And it's not the end of the bull market.

LIU: Right. Well on the other side, though, we had a guest on, Charlie Maxwell, saying it could go to 300 in seven years. What do you think?

ROGERS: Well it certainly can. Now wait a minute. I'm suggesting to you the bull market is not over, even if it corrects and goes to 75.

The bull market is not over, Betty, until somebody discovers a lot of oil. Whether it's 150 or 250 or 300, I don't know. I'm not as smart as Charlie Maxwell. But I do know it's going to go a lot higher during the course of this bull market over the next decade.

LIU: Now, of course our viewers, Jim, know - they want to know where oil is going, let's say, by the end of this year. Where do you think? Do you think it's going to stay around this level for a while though?

ROGERS: Betty, you know I'm not smart enough to answer that question. I'm the world's worst market timer, the world's worst short-term trader. I wish I knew. I don't know if it's going to 75 or 175.

I will tell you I've not sold any oil. Even if it goes to 75, I don't plan to sell any oil. I plan to continue to invest in things that I think are cheap, including commodities and hopefully selling short things that I think are too expensive.

LIU: Now Jim, very quickly, we've only got about 10 seconds. Speaking of oil, you've bought into airlines. Are you still heavily in them? Have you bought more?

ROGERS: I have not sold a single airline. I would hope to be able to buy more airlines if I can find some more that are cheap enough, or if they go down for some reason.

LIU: And you're still short Treasuries, right?

ROGERS: I'm still short Treasuries. You asked right. Long term US Treasuries, you're right.

LIU: Okay, Jim.

ROGERS: You know more about - Betty, you know more about me than I do.

LIU: Well you know what? We keep tabs on you, Jim. All right, thanks so much for joining us, as always. Jim Rogers, Chairman of Rogers Holdings in Singapore.

***END OF TRANSCRIPT***

(Source)⇒Bloomberg