Interview: Most central banks, especially the Fed, get interest rates wrong, says Jim Rogers

The wild swing that Japan, Asia and global markets including the US witnessed on Monday following data on US jobs and the unwinding of yen carry trade has stabilised for now, but fears of the US slipping into a recession, remain.

Ace American investor and chairman of Beeland Interests, James Beeland Rogers, popularly known as Jim Rogers, has seen the tides turn many a times, and held strong.

Invezz turned to Rogers to get his views on how to make sense of the recent events, which assets to buy or hold in such volatile times, and why, though he thinks a bear market is around the corner, he is not selling short yet. Edited excerpts:

Invezz: What do you make of Monday’s market crash led by Japan and fears of impending recession in the US?

Well, stock markets around the world have all been making new highs, except China. Everybody else has been having a very good time. That usually leads to a problem. When everybody’s happy, you should be worried.

So, Japan had been down for 35 years. Then it started going up this year, for many reasons, and it went straight up for a long time. When a market like that starts going down, it usually gets very scary, and Japan got scary.

Is it the end? I don’t know. I know the end is coming soon, because everybody in the world has been having a very good time, including India, including Japan. These are markets that have not been great for a long time. So, I don’t know when the end comes, but I know we’re getting close.

Monday market crash a signal for times to come?

Maybe it was a ring of bells saying, get ready, get ready.

I will tell you that I do not own many shares anywhere in the world, because I know we’re going to have another bear market, and I know it’s going to be very, very serious when it happens.

We had a problem in 2008 because of too much debt. That’s all of it. Since 2009, the debt everywhere has skyrocketed. Even India has debt now. So, be worried. I’m worried. But I am not selling short yet. 

Silver is a cheap asset to consider

Invezz: So, where are you currently holding your wealth now? Which asset class investors should be looking at in such volatile times?

What I have learned in the past is, you should look at things that are still depressed.

I mean, silver is cheap. Gold is at the all-time high. Silver is down 40% from its all-time high. So, maybe silver. I own silver. I hope I buy more. I hope I buy more gold if it goes down.

Agriculture is still cheap, but most things are not cheap. Most assets, especially stocks all over the world, are expensive. So, there are not many things to buy.

When you start selling short, you should short the stocks that have gone up the most. Those stocks in America, you know, the (magnificent) seven- when the bear markets come, those are the kinds of things that one should sell short. 

I don’t know any stock in India to sell short. It’s more likely America is the place to sell short.

Invezz: Experts have been debating whether AI stocks will go down the dot-com path. What do you make of the whole AI boom that is driving Big Tech? 

AI is already changing the world. It’s going to change the world even more. And there will be great fortunes made. There will be great disasters as well. There always have been.

But that’s how electricity changed the world. And it was wonderful. The stocks were wonderful for a while.

As I said, some of these companies are going to collapse. Most of the stocks will collapse. But I am not shorting yet, partly because I don’t know which ones and partly because my timing is bad.

Waiting for more hysteria to build up in AI

What I’m waiting for, is for more hysteria. I’m waiting for there to be wild hysteria. That’s when I will sell short, if it happens. Usually when you have a bubble, whether it’s railroads or electricity or television or computers, whatever, that becomes hysteria at the end.

Invezz: Coming back to the fears of a recession in the US, historically, emerging markets seem to have benefitted when developed markets see a recessionary phase. Do you see the pattern getting repeated if it happens?

Well, this is one of the few times in my life that I’ve seen nearly everybody except China booming and making all-time highs.

That has happened rarely in my life. So when this market boom ends, it’s going to be very, very bad.

In 2008, we had a problem because of too much debt. That’s all since 2009. The debt everywhere has skyrocketed. So the next time we have a bear market, the next time we have a problem, it has to be hard.

The debt is so high. I got out a paper the other day and I started trying to figure out American government debt. It is impossible for America ever to pay the debt. But people don’t care right now. I can see my children are going to have horrible problems in their lifetime.

Even India is building up debt. I mean, India is nothing as bad as the United States. But Americans, young Americans are going to have a hard time. It’s a good time to be an old American. It is not a good time to be a young American.

Invezz: Who’s to blame for this? Is this something that you had been expecting even before the whole talk about a recession started? 

Well, we have noticed some small problems are developing in the United States and other countries. That’s the way recessions start. They start small over there. Nobody cares. They don’t. It’s too small. It’s too insignificant. Eventually, it’s on the evening news. It’s on the BBC worldwide.

It’s not there yet. But the signs are beginning to emerge. But I’m not selling short yet. 

Monday was the kind of thing that happens to warn people that problems are coming. Maybe that was the sign. I don’t know. But it’s a sign that we’re getting closer to the end. 

Fed has waited for too long, indeed

Invezz: A lot of experts are worrying that the Fed may have kept the interest rate too high for too long, which is fuelling fears of a recession. Do you think the Fed misjudged the inflation situation?

Most central banks, especially the Fed, misjudge and get it wrong. There have been very few smart central bankers in history. India had a great one a few years ago. I think he’s a professor somewhere now. America’s had two or three in our history.

Most of them don’t know what they’re doing. That’s why they get a job working for the government. I make many mistakes myself.

But it seems that yes, they have waited too long, that they should be raising interest rates, not cutting interest rates, but they will cut them some more.

Where’s crypto headed?

Invezz: What are your views on cryptocurrency? There has been some formalisation in the asset class with the SEC green-lighting ETFs for Bitcoin.

Well, I have never bought or sold crypto. I have never sold short. I mean, I wish I had bought crypto when I was two. I wish I had bought IBM in 1940. There are many things I wish.

I do not see any value for crypto except for trading. And if you’re a trader, you probably have a lot of fun, and there’s nothing wrong with that.

There are trading deals around the world, but I do not see any real value or real worth to cryptocurrencies except as trading. 

I do not believe that the United States government is ever going to say, okay, you can use crypto to pay your taxes if you want to. Or, you can use crypto to buy licenses. Governments want a monopoly.

So, in my view, crypto will never be real to me and will disappear someday.

Is the slowdown in China a concern?

Invezz: You spoke of China being an exception to the trend of all-time highs. What do you make of the slowdown there?

Well, China has been very successful too, as you know. But then China got hit by the virus which hurt them badly.

And they had a huge property bubble, one of the biggest in history in the world. They tried to stop it unsuccessfully, but then the market popped the bubble.

So now China has two very serious problems. The property bubble collapsed, and they had the virus. So they’re struggling. This has happened to many countries in history.

Don’t worry, China will recover. Do not give up on China. If you can do business with China, you should.

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