International investor Jim Rogers sees limited investment opportunities and warns 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,” Rogers told Barron’s.
“So basically what I’m saying is that I’m not racing around looking for markets.”
Rogers gained fame in the 1970s as he and hedge-fund partner George Soros racked up a 4,200 percent gain in 10 years.
Rogers admits 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.
“Right now as I look at the world, I’m not terribly optimistic. The American stock market has been in a bull market now 6½ 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," he said.
"And the next bear market is going to be worse than most of us have experienced because the debt is so much higher,” he said.
“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," he said.
"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,” he said.
“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," he said.
"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.”
In a wide ranging interview, Rogers offered many investments tips and insights.
- Only invest in what you know, and most importantly, where it is located. “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.”
- “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 ).”
- “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.”
- “I would probably start to buy oil in a small way, energy in a small way.”
- “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.”
- “I would certainly put a fair amount of money in agriculture. It could be 10% of a portfolio.”
But not all prominent economic minds are as gloomy about the U.S.' economic future.
To be sure, stock-market guru Jeremy Siegel, professor of finance at the University of Pennsylvania, predicts there is a "real possibility" that the Dow Jones industrial average could hit 20,000 next year.
The Wharton finance professor and economist told CNBC
that an interest rate hike by the Federal Reserve would give the market clarity.
The central bank has not waited too long to raise rates, he added, but stressed it's now time.
"If we waited too long, we would see the long [bond] rate raising a lot more, saying ... you're going to have a lot of inflation in the future. It's been very well behaved."
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