Jim Rogers : when this artificial sea of liquidity dries up, it's not going to be fun

International investor Jim Rogers says central banks around the world are arranging deck chairs on the Titanic, but if he had to recommend where to invest in stocks in 2014, two of his top picks would be Japan and China.

Rogers said the global environment of ultra-loose economic policies, characterized by nations that run huge government debts while printing gobs of money, will lead eventually to a massive world hangover.

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"When it pops, when this artificial sea of liquidity dries up, it's not going to be fun," he told Reuters TV. "But I don't see any reason why it will stop anytime soon."

In suggesting where an investor could put money in stocks this year, Rogers noted the Japanese stock market is still 70 percent off of its all-time high (while the U.S. is currently hovering around an all-time high), and that a new law in Japan makes it tax-free to invest in stocks.

"I've been investing a long time, and every time a country does that, people invest," Rogers said.

He predicted blue-chip stocks in particular will do well in Japan for the time being.
In emerging markets, Rogers said China is a very attractive choice for equity investments.

Since the Chinese government has said it intends to sink significant resources into cleaning up pollution, railroads and healthcare, he predicted related stocks that focus on those areas will do well.

But what about the backdrop of unfettered government fiscal policies? "It's a good party while it lasts," Rogers said.

If stock markets tumble by 20 percent in the face of monetary tightening, he predicted governments will offer up the same overheated leftovers.

"Then the central banks will get scared. These guys are just academics and bureaucrats. Then they'll start printing money again and the whole thing will get more and more elevated and more artificial." In a weekly commentary, mutual-fund owner John Hussman of the Hussman Funds, a stock market analyst who correctly predicted the 2008 economic meltdown, also said it may be premature to abandon stocks even though central banks are foolish.

"The stock market is hovering in what has a good chance of being seen in hindsight as the complacent lull before a period of steep losses.

"I view (central bank) quantitative easing not as some novel and permanent form of economic and financial levitation, but as a reckless distortion that has no mechanistic relationship with either the economy or stocks. The painful resolution of this distortion, like the dot-com bubble, the technology bubble, and the housing bubble, is yet to unfold."

ET Now caught up with Jim Rogers, Commodity Guru, for his views on precious metals. Excerpts:

ET Now: What is your outlook on precious metals?

Jim Rogers: There are huge shorts that have developed in precious metals as you know. So they are overdue for a rally. We have had a big drop in 2013 and everybody got negative and everybody got short. So we are going to have a rally, though not too much of the rally. I am not ..

Gold has not bottomed and the US Federal Reserve will collapse in the next 10 years, says renowned investor Jim Rogers.

"100 years ago you could not have named the head of most central banks in the world," Rogers told Mineweb. "Now they're all rockstars." Gold and equity markets have increasingly been locked in Fed-watch mode in 2013, obsessing over when or whether chairman Ben Bernanke would taper the bank's vast bond buying scheme.

Rogers however, an ardent free-marketeer, says the market's narrow focus on the Fed reflects the bank's rising and now extreme interference in global markets, propelling the likes of Bernanke in the US and Mario Draghi in Europe to near household name status.

"Everybody knows them," he says, "but that's only a phenomenon of the last 20 years, when central banks have been pumping money into the markets and everybody's singing hallelujah."