Warren Buffett vs. Jim Rogers: One Hates the Fed, the Other Loves It

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Last Updated on: 25th December 2020, 05:32 am

Both men are legendary investors.  

Warren Buffet started his first investment partnership with $100,000 in 1956, which acquired Berkshire Hathaway and he made it his holding company.   

Over the years he had an unprecedented string of successes after taking huge, concentrated positions in companies like Coca Cola, Geico, and Capital Cities/ABC.

Over a half century later Buffett’s stake in Berkshire is worth over $56 billion.  

Jim Rogers teamed up with fellow investment legend George Soros in 1973 to run the Quantum Fund.   Rogers saw inflation on the horizon and made big bets on commodities at the time.   It paid off famously and the fund showed investors an eye-popping 4,200% return over its first ten years.  

Rogers retired at age 37, when he began to travel the world and search for investment opportunities on his own time.    His net worth is estimated at $300 million.

Both men are brilliant.   And both men made their money in the markets.   They are experts at separating the wheat from the chaff, what matters from what doesn’t.  

And yet these two legends could not have a more different opinion about our Federal Reserve.

A Huge Difference of Opinion

Rogers claims that the Fed and its chairman Ben Bernanke are destroying the value of the dollar, and thereby destroying the wealth and future of Americans.    

“Bernanke is going to go down in history as an absolute disaster”, asserts Rogers.   “He’s printed staggering amounts of money.  He’s ruined the balance sheet.   America has had three central banks in its history and the first two disappeared – this one will go away as well.”

On who should be the next Fed chairman, Rogers says, “Nobody, we should abolish the Federal Reserve.  Nobody understands the problem and they all want to print money for their friends.”

On the opposing side, Buffett claims that Bernanke is doing a great job, and the Fed acted heroically during the 2008 financial crisis. 

 He said about Bernanke stepping down later this year, “When you have a .400 hitter in the lineup you don’t want to take him out.”

Why Does It Matter?

If you care whether you’re rich or poor in the future, you may want to pay attention to this debate.

The stakes are high when you consider the implications of each man’s stance.

If Rogers is correct, the future of our dollar is doomed.  According to him, the Fed will print money until its value goes to zero.   “This is the first time in recorded history where nearly all the central banks in all countries are pumping out lots of money, debasing their currencies, printing money.  I've never seen this in history, and now we've got everybody doing it.”

Rogers asserts there will be an extraordinary amount of financial and social chaos in the future due to the disruptions that will take place after the dollar is removed from being the world’s reserve currency.   It’s a very precarious time in his estimation, and his conclusion is that markets and economies will be crippled in the aftermath.

Buffett’s view is the complete opposite.   He believes our future is rosy due to the $85 billion of stimulus provided by the Fed.   He speculates that the U.S. economy might be “dead in the water” if it weren’t for such aggressive stimulus.

According to Buffett, Ben Bernanke is “the ideal person to run the Fed”.  

Buffett went on to say, “I think cheap money makes things happen, it makes asset values higher.”

So Who’s Right?

The biggest thing to realize is that Buffett’s net worth took a hit of nearly -50% during the financial crisis.   Since the Fed began to bail out the economy, his Berkshire stock has not only recovered, but gone to all-time highs.   This tacked on at least $30 billion to Buffett’s net worth.  

So not only has Buffett been the largest individual beneficiary of Fed money printing, he has also had direct input into Fed policy.   It’s widely known that during any financial crisis “Uncle Warren” is one of the first phone calls the Fed or the White House makes to get advice.   That’s why CNBC called him “the J.P. Morgan of the modern day” – he’s got that kind of influence.

So Buffett is right, because he has the power to make himself right, at least for now.  

But Rogers may just be right in the long term, because you can’t print your way to prosperity, just like you can’t get in shape by eating donuts every day.   They taste good, but eventually it catches up with you.