Mon. Oct 3rd, 2022


With so-called stablecoins coming under a cloud from the multibillion-dollar collapse last month of the TerraUST stablecoin, Forkast spoke to Singapore-based investor and financial commentator Jim Rogers for his view on these types of coins as well as the relevance of short sellers in the cryptocurrency market.

The former cofounder of the Quantum Fund and Soros Fund Management said most governments won’t allow for stablecoins given the lack of control over the flow of money. Short sellers are good for crypto markets because they aid price discovery, Rogers said.

(The following interview with Forkast’s Lachlan Keller has been edited and condensed.)

Lachlan Keller: Have you been following the Terra Luna story at all? What do you make of it?

Jim Rogers: I’ve been following along and far enough to know that it’s been a disaster for a lot of people. Other people apparently have lost a lot of money. I have no position. Long or short either way. So I have not made nor lost any money on it. 

It doesn’t surprise me. As you probably know, many cryptos have already disappeared and gone to zero. And I’m sure they’re going to be many more which will disappear. In the end, it always happens when something new comes along. 

I don’t know if you remember the dawn of the Internet. Many hot stocks disappeared 20-25 years ago. They had some gigantic valuations, but disappeared. The same is going to happen. It has already happened with cryptos and more will come.

Keller: What do you think the folks at Terra could have done differently to avoid this situation?

Rogers: Hindsight is wonderful. I have no idea. You could do a whole column or a whole chapter on what they could have done better. But it’s not just them. I mean, lots of these have already disappeared. 

I have not done enough research to know the underlying theme of those that have disappeared versus those that have survived. But I’m sure somebody like you or your publication will figure it out.

Keller: Well, certainly we hope to do to get to the bottom of it. Do you think stablecoins — cryptocurrencies that are pegged to an underlying asset — are a viable form of currency? Do you believe in them?

Rogers: In my view, none of them are viable other than maybe as trading vehicles. 

And if they’re just trading vehicles, that’s fine, as long as people want to trade them and make money and as long as the underlying assets are real and sound. But if they become currencies, or threats as currencies, which they say they will do, I doubt if most governments will allow it. 

Nearly every government in the world is working on cryptocurrency now, including the U.S. But I don’t think when the U.S. says, okay, this is money now, but if you want to use that money over there, you can. That’s not the way governments think. That’s not the way bureaucrats think. They like power. They like control. I don’t like it, but they love control. 

Historically it is unlikely that most governments will give up control over money. But as long as they’re just fighting, who cares?

Keller: What do you think is important for projects like these to get right and avoid some pitfalls?

Rogers: Well, throughout history, there have been many new things that have come along and the ones that are capitalized soundly, which have more assets and liabilities, which do not get overextended, do not take on too much debt and have too much of whatever they promise, they survive the others. 

History is full of people who go broke and get overextended and lose everything.

History is very, very clear — just make sure you’re soundly financed and that you’re not overextended. Whatever you’re doing, whether you’re raising cotton or having a cryptocurrency.

Keller: Though you were not involved majorly with the shorting of the British pound in the early 1990s, is there some insight you may have that we could learn from?

Rogers: Well, I and many others have shorted many currencies throughout history. 

We’re not the first ones to invent shorting anything when a currency or anything gets overextended and expectations get too high. They always collapse, especially if there’s a lot of debt involved. 

I wasn’t around when the pound sterling (short) happened, but I have been shorting sterling before in the seventies and made money. 

Anybody that has unsound finances, whatever the product, is going to have a problem. And you asked before about the cryptos; history is going to show some of them are going to disappear. Maybe all of them are going to disappear, especially the ones that get overextended. 

This is something I hope everybody’s parents taught them. If you go too deep in debt, you’re going to suffer badly. If your parents didn’t teach you that, call them up and go visit them tonight.

Keller: That’s probably some sound life advice. But there’s always some debate about the importance of short sellers in the ecosystem, depending on who you are. What’s your view on the short sellers and their role?

Rogers: Well, short sellers are good for any market that occurs. If something is really getting crazily priced, short sellers come in and prevent it from going too high. 

It may go too high, but at least (short sellers) temper the rise. If they’re wrong, they just make the market go even higher because they have to cover (their short positions). 

And on the other hand, if and when, whatever the item (is shorted) collapses, the short sellers have to buy. So that prevents it from going down too much because if it goes from 10 to 2, the short sellers come in and buy and it doesn’t go to one. The short sellers make it, just go to two. 

So the short sellers temper moves on the upside and on the downside. Whether they’re right or wrong. So short selling is good for markets. 

Many don’t understand short selling or what short sellers do. 

There was a president in the United States named Richard Nixon. He could not understand it. He thought it must be illegal because he never quite understood what short selling was. We had another president named (Dwight) Eisenhower who didn’t even know it existed. He didn’t know what it was. So, I mean, these are high-level people in America. And short selling is not understood by most people. And even the people who figure it out, many of them get it wrong.

Keller: Turning to the crypto market then, does it need short sellers or hedge funds making calls on both sides of the equation? I guess what you’re saying probably does carry over to the crypto industry, but do you have any particular insights?

Rogers: It carries over to any market that there is, whether it’s lumber or cotton or cryptos or shares with a coin, whatever it is. Short sellers are good. 

Short selling adds liquidity to a market. It brings in new players, buyers and sellers. So short selling is good for any market where it exists, including the crypto market. 

I don’t know how many short sellers there are, if any yet, but if there are, they will be good for the crypto market.

Keller: Thank you for sharing your view about short selling in the crypto market. Is there anything else that you’d like to cover before we wrap up?

Rogers: [Facts are one thing but] judgment is different; no matter what market we’re talking about with many people. 

If 100 people go into a room and all hear the same facts, only 5 or 6 of them will make the right judgment and get it right. And that applies to crypto, applies to everything. 

Unfortunately, human beings are human beings. And we all make many, many mistakes. 

But to the point, whoever is listening to stories about crypto and reading your publication, just hopefully help them get the judgment right. Judgment is the hard part. We can all know facts.

So try to help them get the right judgment. And I repeat, short selling is good. It adds liquidity. It adds judgment. It adds everything to any market where it exists.

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