Stocks have climbed in 2023 after suffering through a bear market in 2022. But according to legendary investor Jim Rogers, the next downturn could be more painful.
In a recent interview with Real Vision, Rogers explained why his outlook is so bleak.
“[In] 2008, we had a bear market because of too much debt,” he said. “Look out the window since 2008, debt everywhere has skyrocketed.”
And that does not bode well for investors.
“It’s a simple statement that the next bear market will be the worst in my lifetime because the debt has gone up by such staggering amounts in the past 14 years.”
Rogers has plenty of experience in leveraging market volatility to his advantage. He co-founded the Quantum Group of Funds with George Soros in 1973 and played a crucial role in navigating the fund through multiple market downturns and economic crises in the 1970s and 1980s.
Here’s a look at where he sees dangers and opportunities now.
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The Greenback
Rogers argues that instead of negotiating temporary ceilings for America's gigantic debt problem, Washington should focus on determining how to address the ever-expanding debt pile.
“Every country in history that’s gotten into this situation has had serious problems eventually,” the 80-year-old market veteran warned. “And we will, too.”
The U.S. debt problem could also spell trouble for the nation’s currency.
“You should be extremely worried because if you're not, you don't know what's going on,” he said. “Many countries are starting to look for alternatives to the U.S. dollar, partly because of its horrendous debt problem.”
Speaking to a group of emerging fund managers during the Fund Launch Live event in May, Rogers said “No world currency has been on top for more than 100, 150 years at a time - they all change. We've been on top for a long time and now there are reasons to start looking for a competitor to the US dollar.”
Rogers is on the lookout too as he sees “something bad” happening in the currency markets over the next two to three years.
Check out: How To Short A Currency (Including The USD)
Fighting Inflation
Spiking price levels have been in the headlines over the past year. To Rogers, though, rampant inflation is no surprise.
“Throughout history, when everybody is printing money, or whenever people are stimulating the economy, it always led to inflation,” he said.
Inflation erodes the purchasing power of your hard-earned money, but here’s the good news: Rogers also offers a way to combat inflation — real assets.
“The best place to be when you have inflation is real assets, and real assets are commodities,” he said.
In particular, Rogers revealed that he owns silver and said he would buy more of the metal “if it goes down more.”
Precious metals like gold and silver can’t be created out of thin air like fiat money, so they have been popular options for people looking to hedge against inflation.
Rogers also highlighted how inexpensive these real assets are.
“The cheapest asset that I know is still commodities,” he said. “Silver is down 60% from its all-time high.”
Agriculture
Agriculture may not seem as exciting as artificial intelligence or cryptocurrency, but it is an essential part of the economy and society. Without it, there would be no food on people’s plates.
Rogers points out that the segment has yet to gain significant traction, which could lead to opportunities.
“Agriculture has been a disaster for years,” he said. “And usually if you buy a disaster, things turn out OK.”
Investors can gain exposure to agriculture through exchange-traded funds (ETFs) like the Invesco DB Agriculture Fund DBA.
Agriculture can provide opportunities for growth and diversification because of the consistent demand for food. Another area investors might want to pay attention to is housing — since food and shelter are humans’ most basic needs.
Billionaire investor Stanley Druckenmiller recently pointed out that “housing has obviously gone down dramatically given the 500 basis-point increase in interest rates.”
But this is not doom and gloom, as he noted that there’s now a “structural shortage in single-family homes.”
“So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out,” Druckenmiller said.
Indeed, no matter how bad the next bear market turns out to be, people will always need a place to live and a growing number of people are now renting instead of buying. These days, there are even options to invest in rental properties with as little as $100.
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Photo source: Jim Rogers speaking at Fund Launch Live courtesy of Bridger Pennington
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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