FT: It’s a year since we last interviewed you. You were aggressively bearish about the dollar, but you thought there would probably be a rebound and you would take that as an opportunity to further get out of the dollar. Have you made a further exit from the dollar?
JR: Not yet, no. And the reason I haven’t is because we’re in a period of forced liquidation of everything. We’ve only had eight or nine periods like this in the past 150 years, where everybody has to reverse their positions on everything. There is a gigantic short position in the dollar and they’re all having to cover as they reverse their positions, so this rout is going to go on much further than I would have expected, to my delight, because then I’ll get to sell at higher prices. I don’t know whether I’ll get out this month or this year even, maybe next year, but I do plan to get out of the rest of my US dollars, because this is an artificial rally caused purely by short covering.
FT: How will you tell when that deleveraging is finally over?
JR: I’m sure I won’t get it right, but I do hope that when there’s a lot of euphoria about the dollar and everybody’s saying, well, see, there’s no problem with the dollar… I hope I’m smart enough to recognise it and finally get out of the dollar, because it is a flawed and maybe, even, doomed currency.
FT: Do you see the sell-offs we’ve seen in commodities as a drastic correction?
JR: Well, we’re in a period of forced liquidation of all assets… we’re getting the business cycle effect on demand right now, certainly, but unless the world’s in perpetual economic decline, commodities are the only thing going to come out of this okay.
FT: Does this mean you’re actually buying back into commodities at the moment, or is this an area you’re standing clear of?
JR: No, no. In October when I started covering my shorts in the US stock market, I started buying Chinese shares, Taiwan shares, I started buying commodities again. No, no, I’ve added to those positions.
FT: What’s your strategy towards emerging market stocks?
JR: My hope is that I’m smart enough and brave enough at some point along the line to buy some of them back. But I’m not even thinking about it right now… The world’s financial situation is in a mess, and there are a lot of people who have to liquidate. I mean, we must have had 30,000 MBAs flying around the world looking for emerging markets. All of that money has got to come home.
FT: How do you think the world should go about redesigning the regulatory system, and are you worried that we’re going to end up with a swing towards over-regulation?
JR: Well, we probably will, The problem is that people like Alan Greenspan would never let the market work… For 15 years, under Greenspan, and now Bernanke, they would not let the market work. Had they let Long-Term Capital Management fail back in 1998, we wouldn’t have these problems now, I assure you. Lehman Brothers would have been smashed. Goldman Sachs, Bear Stearns, would have been smashed. We wouldn’t have these problems now. That only happened because every time they turned around they propped these guys up, gave them more money, and that’s why we have the problem… But now, of course, they’re going to blame it on other people and cause more regulations.
FT: You’re arguing we need to allow some more big institutions to fail?
JR: One failed. Why didn’t they let Fannie Mae and Freddie Mac? I mean, I was short Fannie Mae, and they should have let it fail, go zero. AIG, they should have let it fail, they should have let all of these guys fail, and we would clean out the system… What they’re doing is they’re taking the assets away from the competent people, giving them to the incompetent people and saying to the incompetent: “Okay, now you can compete with the competent people, with their money.” I mean this is terrible economics. This is outrageous economics.