Commodities Specialist Rogers: Things Could Get Worse -- Much Worse

While several prominent bears have turned bullish lately, there is by no means a consensus that we’re on the verge of a turnaround. Take Jim Rogers, the international investor and commodities guru who predicted the credit bubble crash two years ago. Rogers tells Fortune in its 2009 investment preview that “this may turn into the Great Depression II“. Rogers says that the lack of financing options for commodities firms means that commodity supplies are shrinking by the day. “You’re going to see gigantic shortages developing over the next few years,” he says. “The inventories of food worldwide are already at the lowest levels they’ve been in 50 years.”

Rogers says that commodities are “virtually the only asset class I know where the fundamentals are not impaired”, and he says that “if and when we come out of this, commodities are going to lead the way, just as they did in the 1970s”. He’s buying up agricultural commodities, as well as stocks in Taiwan and China. “In my view,” he says, U.S. stocks are still not attractive”, adding that it’s possible the Dow falls below 4,000.

In addition, Rogers yesterday told onlookers at the Reuters Investment Outlook 2009 Summit that most big U.S. banks are “totally bankrupt”, and bashed the U.S. government for its handling of the financial sector bailout.

“Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” Rogers said, according to Reuters. The bailout doesn’t address how banks manage their balance sheets, and rewards weaker lenders with new capital, he added. “What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent,” Rogers said. “What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.”