April 11, 2007 / 7:52 AM / 12 years ago

Investment guru Rogers shorts U.S. builders

NEW YORK (Reuters) - Investment industry icon Jim Rogers, who helped launch one of the world’s best performing hedge funds, said on Tuesday that he is betting against U.S. home builders and expects the sector will suffer more losses.

Jim Rogers, author, commodities investor and co-founder Quantum Funds, speaks at the Global Hedge Fund and Private Equity Summit in New York April 10, 2007. REUTERS/Eric Thayer (UNITED STATES)

“I am short home builders and Fannie Mae FNM.N,” Rogers, who co-founded the Quantum Fund with hedge fund industry legend George Soros, said at the Reuters Hedge Funds and Private Equity Summit on Tuesday.

“They will go down a lot more. You just don’t clean out a speculative bubble in six months,” added Rogers, who now invests only his own money. Rogers’ calls, particularly his views on commodities, still resonate with other investors. He said he was short American Home Mortgage Investment Corp AHM.N and other mortgage companies as well.

The U.S. housing sector has taken a hit in recent months as home builders are reporting slumping orders and the number of U.S. borrowers falling behind on making payments on riskier types of mortgages is rising.

As a group, home builders have lost about 18 percent of their value this year, according to the Dow Jones U.S. Home Construction Index .DJUSHB, an industry benchmark.

Rogers said the call was not difficult to make considering the obvious risk at a time lenders were becoming far more lenient than ever before.

“Never in American history has there been a time where you could get a mortgage for no money down,” Rogers said.

However some other investors, most notably Legg Mason’s Bill Miller, considered the best U.S. stock picker for having beaten the Standard & Poor’s 500 index 15 years in a row, said in December he expected home builders to show new promise in 2007.

Mutual funds won’t release data on the investments they made in the first quarter until later this spring.

Rogers said he is also betting against some of the big investment banks which have been making headlines with multimillion dollar pay packages for top executives.

“That is one of areas where there are excesses,” Rogers said, noting “Even though hedge funds and mutual funds aren’t doing so well, people are making gigantic amounts of money.”

Last year five hedge fund managers, including Centaurus’ John Arnold who topped the list of star earners, took home at least $1 billion (510 million pounds). Goldman Sachs (GS.N) chief executive officer Lloyd Blankfein earned $54.7 million in 2006.

Even though hedge funds are pulling in money from investors like pension funds at a record pace, Rogers said the $2 trillion industry is poised for a setback.

“There will be many disasters coming both from incompetence and dishonesty,” Rogers said adding “Right now the best way to make money is in the private equity and hedge fund industries and some people will be wiped out. It is all going to come to a bad end,” he forecast.

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