Two years since his last interview with us, investor Jim Rogers returns and notes that the risks he warned of last time have only gotten worse. In this week's podcast, Jim shares his rational for predicting:
increased wealth confiscation by the central planners
a pending major financial market collapse
gold's return as the preferred safe haven investment
more oil price weakness, followed by a trend reversal
Russia's rebound
a China bubble reckoning
agriculture's long-term value
I suspect in the next year or two we will see some kind of major, major problems in the world financial markets.
I would suspect when we have this correction, it's going to cause central banks to panic. There's going to come a time when there is not much the central banks can do when they have lost all credibility. When governments have lost all credibility. They will print and spend and borrow, but there comes a time when people are just going to say We don’t want to play this game anymore. And at that point, the world has serious, serious problems because there's nothing to rescue us.
I suspect the next economic/financial collapse will be the one they can't deal with. But, if somehow they are miracle workers, be very, very careful. I would be worried about 2022 – 2023 then. The game will definitely be up if it's not up this time around.
My US Dollar holding is my largest position. Not because I have any confidence in the US Dollar; it's a terribly, terribly flawed currency. We are the largest debtor nation in the world’s history. And the debt is going higher and higher and higher. But there is going to be more turmoil coming. And during periods of turmoil people flee to a safe haven. The US Dollar is not a safe haven, but many people think it is, and they don’t know what else to do. So they will go to the US Dollar. They are not going to go to the yen. They are not going to go to the Euro.
We may even see the US dollar, for a variety of reasons, turn into a bubble. That of course is not good for gold. Gold may drop a lot, at which point I would have to sell my US Dollars and hopefully be smart enough to buy gold.
Click the play button below to listen to Chris' interview with Jim Rogers (26m:16s)
"It is always interesting. You are absolutely right. I don’t think it has ever been easy to put money in, pull it out. What you have just described for me is sort of like bubble dodging and I am intrigued. If the dollar is the final safe haven, but it turns into a roach motel and you've got to run out of that where – what is on your list then? You said gold potentially, but where do you go if the US bubble bursts?
Jim Rogers: Well if the US Dollar bubble bursts and the US bubble bursts – that is what I don’t know. By then conceivably the Chinese currency will be convertible. But conceivably the market in China would have turned into a bubble and it would burst. If the currency becomes convertible—it looks like it may well in that period of time—I may have to sell my US Dollars, buy gold, buy the Renminbi. I don’t know. Paper money everywhere in the world is suspect now. There is not a sound paper money anymore because politicians everywhere have learned to buy votes. Even dictators have learned to buy votes with their currency. It is not easy now, but for me Chris it has never been easy."
1. Have cash and other financial instruments (which?)
2. Constant vigilance for bubbles, everywhere. (thanks be to Chris, and others)--indicators.
3. Ready to sell and buy, to avoid bubbles (stay by your computer)
4. If not easy for Rogers, poor me! At least he has enough to make mistakes!
5. And IT NEVER ENDS. Or, does it? For buying gold cheaply is not the endpoint. NO FINAL SAFE HAVEN. Thus, build resiliency on ALL levels.
Two things.
First, this can be highly profitable from a personal perspective, but it's non-productive investment. No goods or services are produced by this behavior. It's not exactly the same thing that we denigrate bankers for doing, but the benefit to society is much the same. It's income for producing basically nothing that allows the investor to buy more stuff.
Second, chasing a bubble in a broken investment market bears a great deal of risk. If the future you predict comes to pass, you in the money, otherwise, not so much. I suspect we mostly hear the success stories when it comes to this type of behavior. The people who fail don't become internationally known.
Les, you hit on 2 key points I was thinking of during this and other podcasts. I've been out of the market for a few years largely because (a) it's a non productive game that I don't want to be part of and (b) is a high risk game that I don't want to be part of.
I have to wonder if enough investors, who know what the current game is, actually sat out in protest, whether that would accelerate events to stop the train wreck we're in.
I gave up on Jim Rogers years ago. Typical analysis-lite comments.
He likes Japanese equities. What about the currency risk involved in trying to pick up nickels in front of a steamroller? Has he seen a chart of Chinese equities?
Much better macro investors out there that actually educate us on their thinking and process.
Aloha! I don't agree with Jim Rogers insight about investing always has been hard, especially if you started in the 1970s as it seems he did. Go look at long term charts of Exxon(XOM), IBM or any of the old timers. Exxon if you bought in 1975 is up 3500%+ and all you had to do is buy it and sit on it and never look at it again for 35 years. Add in all the forward splits and dividends over 35 years and you got paid to be a millionaire!
Now if he said it has always been hard to be a "trader" I would agree more. Trading ina nd out of positions takes more time and effort and skill.
Now all that said isn't the long term rise in share price of Exxon or IBM nothing more than a reflection of the lost purchasing power of the currency? Invert any long term chart of the DOW and it looks like a chart of the purchasing power of the USD.
I agree the USD will rise further in the mid term and will retain the title "Best of the Worst"! However, what sort of world will we be living in when the DOW is at 40,000?
I suggest "real world" choices when it comes to trading and investing. First, get rid of debt! If you are paying 10% on your Visa and 7% on your mortgage and getting 5% returns from the market … STOP! You're losing money even when you make a market profit because the IRS will tax your 5% profit and even 5% is not 5%! It's all about the NET not the GROSS!! If you do not make at least a 15% annual NET return on your trading or market investments you are wasting your time.
Your time has immense value and I would guess that probably 90% of us under value our own worth. Time is such a precious commodity. Once it is spent it is spent there is no "free refill"! We talk a lot about portfolio and asset allocation, but rarely do we consider "time allocation". Time is King!!