Jim Rogers, Chairman of Rogers Holdings and bestselling author of a wide range of books focused on business and travel, says he’s short S&P 500(INDEXSP:.INX) and Dow Jones Industrial Average (INDEXDJX:.DJI) because the financial crisis of 2016 will be much worse than 2008.
James West: Jim would you agree that the roughly 8 percent drop in global market indices since the beginning of 2016 is the harbinger of a continuation of the financial crisis that began in 2008?
Jim Rogers: Oh I know it is. There’s no doubt in my mind. China’s been able to support the world through a period of money printing and low interest rates, and that’s now come to an end cause China’s showing signs of slowing down. People say China’s to blame for all this mess, but China’s just a victim like the rest of us. We’re all victims James, we’re all victims, including American citizens. Our central bank has been a disaster.
Ed Milewski: Jim, what are the effects of all this going to be on the bond market, in your opinion. Do you see things get ugly for bonds if confidence in the major currencies begins to evaporate in the face of volatility? And do you think that will mean a flight to safety in the form of USD?
Jim Rogers: Well I know that the bull market in bonds is coming to an end.What I expect to happen Ed is things are going to get difficult in the markets, the market is going to go down – whatever the number is – you pick the number, 13 percent, 17 percent…and the (Fed) central bank is going to panic, and as you know, they’re just bureaucrats and academics – they’re not very smart people. So they will panic, and they’ll lower interest rates or print more money…whatever they do, they’re going to try to come to the rescue of the bond markets, and bonds will rally, but that will probably be the last time, and stocks will rally, but that will probably be the last time, and then Ed, then the bear market in bonds resumes, and after a 35, 36 year hibernation, we’re all going to pay a horrible, horrible price. And the next time around, this is going to be much worse then 2008, because the debt is so, so so much higher.
You remember when Lehman Brothers disappeared? Well Lehman Brothers has been around since the 1850’s. Bear Stearns had been around since the 1920’s.
Ed Milewski: Jim I heard you say in previous interviews that you thought gold was going to some number around $900, $925. Do you think, looking at gold’s performance in the last couple of quarters, that the bottom for gold has been reached, or are you still looking for that 900 number?
Jim Rogers: Look guys….I want to remind you that I’m the single worst market timer in the world. I’m the single worst short term trader in the world. So asking me is a waste of all of our time. I don’t think we’ve hit the bottom. I’m still looking for a bottom under 1,000. Who knows if it will get there, but if it does, I hope I’m smart enough to buy a lot of gold. In the end, gold’s going to turn into a bubble, and it’s going to go much, much higher. I just don’t know when. But I’m not buying gold yet.
What I do expect to happen, is that as the turmoil spreads, I expect more people will flee toward the U.S. dollar – I own a lot of U.S. dollars – but because of that, people think it’s a safe haven. It is not a safe haven, as you well know, but people think it is. So the dollar will go higher, it will get overpriced, it may turn into a bubble. Gold will go down in a time like that, because often – not always, but often – gold goes down when the dollar goes up. So I will sell my dollars at that point, and put it into something else – perhaps gold. If that scenario works – the dollar gets overpriced, gold gets beaten down because of the panic, then I hope I’m smart enough to buy gold or renminbi or whatever it happens to be at that point.
James West: Jim you’re close to China there, and I’ve been reading since July that China has been selling as much as $100 billion in US bonds per month, and buying a lot of gold bullion to shore up reserves. Is that something that you see from where you sit in Singapore?
Jim Rogers: Well I read that too. I have no clue whether that’s what China’s doing or not. I don’t know if they’re selling the bonds or just letting the bonds run off. But part of it is, if I hear right, is that people are saying their foreign reserve currencies are down, but that’s partly because a lot of their foreign reserves are in other currencies, such as the Australian dollar, the Canadian dollar. Those currencies are down. So I don’t know if they’re just taking losses or they’re losing money because these other currencies are down, or whether because they are actually selling – I have no clue.
Ed Milewski: Jim, will central banks continue to print money at this historic rate?
Jim Rogers: And I expect it to get worse. When the next turmoil comes, they’re all going to print money to save us, they’re going to get calls from all over the world saying civilization is coming to an end, and you must save us. There comes a time when nobody’s going to pay attention. That’s what I expect to happen. They’re going to try something new next time around, and it’s not going to work…I mean they work for a while, but it’s not going to work. And then, they’re all going to do their best, but their best is going to lead to ruination because the rest of us or going to say ‘we don’t want your garbage any more, we don’t want to place this game any more.
James West: Jim isn’t it quite the case that, really at the end of the day, they don’t have any other tools at their disposal except capital fabrication, and zero interest rate policy (ZIRP) – that’s all they can do?
Jim Rogers: That’s all they can do. They can talk and they can just print money. That’s all they can do. They can drive interest rates lower by buying assets, which is what they’ve been doing, but none of that is good for any of us, cause it’s all just going to lead to a worse disaster.
James West: You bet. So where should an investor be, going into a 2016 that is so volatile and so fraught with the risk of another major market correction?
Jim Rogers: Well, who knows. What I have done is I’m short in the U.S. stock market – the nine or ten stocks that never go down – Amazon, Netflix…those things. I am short junk bonds in the U.S., I am long in China – mainly because I have to be long somewhere. So I’m short junk bonds, I’m short the U.S. stock market, I own a lot of U.S. dollars for the reasons I mentioned. That’s mainly where my money is. But who knows if I’ve got it right. I own some other stocks too that I’ve owned for decades.
James West: Sure. I saw that you were also becoming bullish on agricultural stocks during the last year. How has that worked out for you?
Jim Rogers: Well agricultural products themselves are not doing terribly well, but that’s because not much is doing terribly well. I own a few agricultural stocks, but mainly I own the commodities themselves. You know, sugar’s down 80 percent almost from its all time high. So some of these things are very very cheap. It doesn’t mean they can’t get cheaper as they have, cause everybody’s panicked about everything these days.
Ed Milewski: Jim when gold starts to make its move – and I tend to agree that it’s going to be an exponential move – do you see other commodities following it?
Jim Rogers: Well silver, I certainly expect silver to follow gold higher…
Ed Milewski: I mean outside of precious metals, do you think any of the other commodities will be driven higher as we enter a hyper-inflationary period?
Jim Rogers: Well yes…that’s what I was leading to. I do expect the precious metals to get a lift but other commodities too because people will be desperate for real assets. Agricultural commodities will be in great demand at that point. But oil too. I mean, oil is bound to be making a bottom some time in the next few months. It’s a complicated bottom obviously…but if oil goes to – you pick the number – then of course, oil’s going to make a bottom too, and when people start to look for places to put their money, they’re going to be looking for real assets and getting out of their dollars. They’re going to be looking for real assets because they know the banks are just totally debasing the currencies all over the world.
James West: So back to the oil question – we’re just reading now that the Iranian sanctions are ending, which is expected to bring another 500,000 barrels of oil per day into the market, which as we can see, is continuing to put downward pressure on the price. But we’re also seeing research from oil industry analysts cautioning investors that we could be in for some supply side shock to the downside that would suddenly whipsaw prices into the other direction in 2016. It’s as if these days you can read whatever you want to believe.
Jim Rogers: [Laughing] Yes, yes. It’s wonderful isn’t it?
James West: Well yes it’s wonderful but it’s not very helpful…
Jim Rogers: Well, if there’s war, then certainly there will be a sudden supply side price shock. The world is on the verge of war on any given day, but it may not happen for several years. But as for the supply side otherwise, I don’t think it’s going to be sudden. It takes a while for these things to adjust. Yes, a lot of frackers are going bust in the United States, but it takes a while for people to realize, and for that to work its way through. And even if the frackers go broke, you do apparently have more Iranian oil coming on stream. So this doesn’t happen over night.
Ed Milewski: A lot of that Iranian oil is already probably priced into the equation…
Jim Rogers: Yes…you and I aren’t the only ones who know there’s a lot of Iranian oil coming into the market. It’s been written about all over the world. It’s on the front page of newspapers everywhere. So we assume that most people know this already.
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