Jim Rogers on the Markets and the Economy

From time to time I present the views of stock market mavens. Consider it a public service. 

Some people know more about the workings of financial markets. More often than not, they are elder statesmen of the world of finance. They are never hotshot young traders.

So, now we turn to the justly renowned Jim Rogers, formerly of the Quantum Fund, now living in Singapore.

In a recent interview, Rogers sounded a number of alarms, first regarding bear markets. As you know, many market watchers today are breathing a sigh of relief. They think that the bear market is over and that stocks are going to resume their upward rise. 

Rogers sees things differently:

I know more bear markets are coming. The next one is going to be the worst in my lifetime.

Many stocks are going to go down 70%, 80%, 90% - that's the way bear markets work. Of course that's going to happen. I just don't know when.

Why does he see a new and nastier bear market?

It's been 13 years since we've had big problems, and that's the longest in American history. It could go for 30 years, who knows, but it's already overdue on a historic basis. We have very high valuations, we have staggering debt, we have a lot of new investors coming in. It's not my first rodeo, I've seen this movie, I know how it works. They're all going to lose a lot of money. I hope I'm not one of them.

Where would he invest now?

When you have inflation, if you own the things that go up in price, you make money. Agricultural goods are going to go higher, energy will go higher before this is over. You can sell short many things, many stocks all over the world, and make a lot of money. If you don't know how to do either of those, put your money in the bank and wait - it's better to earn 1% per year than to lose 20% per year. Bear markets lead to big losses.

I own a lot of US dollars. Not because it's a sound currency - it's a disaster going forward - but in times of turmoil, people look for a safe haven. For historic reasons, many people think the dollar is a safe haven. It's not, but they think it is. US dollars are going to get overpriced, they might even turn into a bubble depending on how bad things get.

As for cryptocurrencies, Rogers is not buying:

There's no level at which I would buy cryptocurrencies, unless something dramatically changes.

Bitcoin is wonderful for people who buy it and sell it and trade it. I know people who are having fun trading it; nothing wrong with that. But if it ever becomes successful as a currency, no government's going to allow that. No government wants to lose its control - they all love their monopoly, they're not going to give up their monopoly.

As for the future state of the economy, Rogers sees an oncoming recession, produced by Federal Reserve monetary tightening:

Because we've made so many mistakes this time around, interest rates will have to go very, very high. We will have a serious recession; many people will go bankrupt, we're going to have a lot of problems. There's no other way to solve the problem other than to have double-digit, Volcker-esque interest-rate hikes.

We need to raise interest rates a lot, and have a lot of pain. Or we let people continue to print money, and have horrible, horrible inflation, and cause even more pain. I don't know how we solve the problem of too much inflation without pain.

As for the chance the events impact the market, Rogers has this to say about the chance that the war in Ukraine will end:

If there were peace, we might make new highs, but still that would not negate the bear market. If something positive happens in Ukraine, there'll be a big rally. Oil will go down, grains will go down, stocks and everything will go up for a while. I hope I'm smart enough to sell that rally, because that's probably the last big rally.

So, consider these views to be well informed. Jim Rogers is not a contrary indicator.