This is not your father's Jim Rogers. Don't buy gold. Dollar as safe haven. Agriculture should be okay.As I said about the Trump piece, not much to disagree with.
The legendary investor thinks a global bear market is coming. While he waits, here’s what he’s buying.
At age 73, Jim Rogers, the international investor who once motorcycled around the world to find opportunities, says he’s slowing down his investment activity a bit.
But for Rogers, who fights Father Time with daily two-hour exercise sessions at his Singapore home, this step back is not a concession to age. It’s more about the limited opportunities he sees right now in the many markets he studies, due to his concern that mounting worldwide debt and too much easy money will lead to a global bear market.
“The next time around, we are going to have a very serious problem, I’m afraid,” said Rogers, speaking by phone from a hotel room in Beijing last week. “So basically what I’m saying is that I’m not racing around looking for markets.”
Rogers, an Alabama native, first gained fame in the 1970s as he and hedge-fund partner George Soros racked up a 4,200% gain in 10 years. Now, managing his own account, Rogers is nibbling at investments before his projected big shake-out comes. He concedes that global stock indexes could have “another leg up” as central banks “panic” and keep short-term rates low. But it will end badly, he concludes.
During a 40-minute interview with Barrons.com, Rogers offered a few ideas for U.S. investors, including a few China ETFs he holds, and a few short ideas. He also shared his take on commodities, including gold.
Here are excerpts of that discussion.
Barrons.com: You’re regarded in the U.S. financial media as a go-to source for investing in emerging markets, principally China, and commodities. I want you to help me put these investment sectors in perspective. Let’s say you’re a 50-year-old Barron’s reader with a few million dollars in net worth. How much of your assets should be in these areas?
Rogers: Well, it depends on the time [in the market cycle] and it depends on the person. I don’t think anybody should ever be interested in anything that they don’t know about. If you can’t find Kazakhstan on the map, don’t invest there.
Q: What if the time frame is now and the investors are folks who are comfortable with risks of emerging markets and commodities?
A: Right now as I look at the world, I’m not terribly optimistic. The American stock market has been in a bull market now 6 ½ years. In America we’ve had economic setbacks every 4 to 7 years since the beginning of the Republic and chances are we’re certainly getting closer to being due for some kind of correction, bear market even. And the next bear market is going to be worse than most of us have experienced because the debt is so much higher.
You know we had a problem in 2008 because of high debt, but since then debt worldwide has gone through the roof. I mean nobody has reduced their debt, no nation has reduced its debt since 2008 — the debt has gotten higher and higher. So the next time around we are going to have a very serious problem. What I’m saying is that I’m not racing around looking for markets. I’m afraid that the big picture is such that we are going to have more problems in the next year or two and being long most stocks or most investments is not going to be great.
Q: So where do you think the big global problems are going to start?
A: Big problems are going to come from the U.S. essentially because it has been the American central bank which has been the most at fault. We’re the ones who started all this money printing and everybody else of course copied us, but it is the first time in recorded history that you’ve had all the major central banks printing staggering amounts of money: Japan, America, Europe, Great Britain, we’re all doing it. Having said that, you look back at previous bear markets they usually start with a small, marginal country that snowballs and the next thing you know we’re all in trouble.
There is going to be another leg up in stocks as central banks continue to panic [and keep rates low.] I suspect it will be the last one.
Q: In an interview with my colleague Kopin Tan in 2013 you said that you wouldn’t buy China’s stock market “unless it collapses.” This summer, did it collapse enough to get you interested, and are you still a buyer?
A: In July 2015, I started buying on the collapse. There were a couple of days where it was down very big on a day. Well I was one of the buyers on those days. I haven’t been terribly active since.
Q: And you are using ETFs to invest in China?
A: I own FXI [the iShares China Large-Cap ETF] and ASHR [the Deutsche X-trackers Harvest CSI300 ETF], as well as some based in Singapore. But the best investment might be AMP Capital China Ord (ticker: AGF.AU ) units listed in Australia, which is a closed-end fund trading at a big discount.
Q: Do you have any short positions right now that you’d care to share?
A: I have been shorting U.S. junk bonds by going long the Proshares Short High Yield ( SJB ) and I’m shorting U.S. tech stocks through the ProShares Ultrashort QQQ ( QID ).
Q: But if you think U.S. stocks have one last leg up, why are you shorting these risk-on assets that should be helped by a rising market?
A: Well, one has to be hedged in case one is wrong.
Q: What would you say to an investor now who has little to no exposure in commodities and sees that most assets have been beaten down. What types of commodities do you think have the best potential now going forward?
A: I would say agriculture through the ( RJA ) [Elements Rogers International Commodity Agriculture ETN]. It is amazing how low some of these agricultural prices are. The average age of American farmers is 58 now. The average age in Japan is 66. There are more people in America who study public relations than study agriculture. It has been a nightmare industry for a long time and that’s got to change. I would certainly buy agriculture. [Rogers designed the index that RJA tracks.]
Q: What about other commodities?
A: I would probably start to buy oil in a small way, energy in a small way. I think it may be at the bottom, but since I don’t have much confidence in my convictions right now, I want to see more. There is a lot of bad news that keeps coming out about energy and yet the prices don’t go down. Historically, I have noticed that if something is going up and good news comes out and it doesn’t keep going up it usually means the top is being set. Likewise if something is going down, and bad news comes out and it doesn’t continue to go down, it usually means we are making a bottom, so I suspect that energy is making a bottom.
Q: What about gold?
A: I own gold, but I wouldn’t buy gold at the moment. I still expect a great opportunity to buy gold in the next year or two or three. I guess I would buy agriculture with both feet, energy with a toe and watch the others.
Q: What percentage of one’s investment assets should be in commodities now?
A: I would certainly put a fair amount of money in agriculture. It could be 10% of a portfolio.
Q: What about currency investing?
A: I’ll tell you, my largest currency position is the U.S. dollar. I expect some problems going forward in the world financial markets, and during those problems people will seek a safe haven. They think U.S. dollars are a safe haven. The U.S. may be the largest debtor nation in the world, but as you look around, certainly you are not going to the euro or the yen these days, so I own a lot of U.S. dollars and as the turmoil comes, the U.S. dollar will go higher and higher. It may turn into a bubble, depending on the severity of the turmoil. But if gets overpriced, I hope I will sell it at that point....MORE