Jim Rogers Bracing For Crash

Legendary investor discusses why he sees big economic downturn approaching and how investors can protect themselves.

When Jim Rogers talks, investors listen. One of the world's most famous investors, Rogers is known for his no-nonsense style and investment wisdom. He is the author of several best-selling books, including his latest, "Street Smarts: Adventures on the Road and in the Markets." ETF.com recently spoke with Rogers for his take on the latest financial market developments.

ETF.com: I saw some headlines recently that you foresee an economic downturn on the horizon. Can you get into that?

Jim Rogers: The next time we have an economic problem in the U.S.—and therefore the world—it’s going to be the worst of our lifetime given what’s been going on.

The world has been printing a lot of money and the whole world has a lot of debt. In 2008, we had a problem caused by too much debt, but now the debt is much larger than it was in 2008, so the next time we have a problem, it’s going to be even bigger than 2008.

ETF.com: When do you forecast the downturn to take place?

Rogers: I would suspect it’s in the next year or two. Historically, we’ve had economic problems every four to eight years. As you know, it’s been over eight years since our last problem. It doesn’t mean we have to have problems, but it means we’re getting closer and closer.

ETF.com: What’s your take on the fixed-income markets?

Rogers: Given what's happening in the world and with central banks, I don't see any reason government bonds in the U.S. should go down. But I am short junk bonds—not that it’s doing me much good yet.

ETF.com: What are your latest views on oil and gold?

Rogers: My view on oil is that it’s in the process of making a complicated bottom. We’ll look back in a while and see that in 2015, 2016, 2017—and maybe 2018—that oil made its bottom. Worldwide reserves continue to decline except for U.S. fracking, and fracking isn’t doing great at these prices.
That doesn’t mean oil can’t go under $40 again. As I said, the bottoming process takes time.

ETF.com: What about gold?

Rogers: I haven’t bought any serious gold in a long time. I own gold and I haven’t sold any. I expect gold to go lower—at which point I hope I’m smart enough to buy a whole lot. If it doesn’t go lower, I’ve got plenty of gold already, I assure you.
Before this is all over in the next few years, gold is going to go much, much higher. Whenever people lose confidence in governments and paper money, they always put their money in gold and silver, and they will again.

ETF.com: How should investors position themselves for the coming economic downturn?

Rogers: I own Russia and I’m looking to buy more. The Russian market is still a very hated market. I also own China; the Chinese market is down 50% from its all-time high. I own Japan, which is also down 50% from its all-time high.

Who knows how long I’ll own these things, but they’re likely to be less badly affected by the economic downturn. There are also plenty of ETFs now where you can sell short, which is another option.

I also own a lot of U.S. dollars at the moment, not because U.S. dollars are a sound or compelling investment, but it’s because when there’s turmoil, people look for a safe haven. At the moment, people think the U.S. dollar is a safe haven. It’s not. America is the largest debtor nation in the history of the world.

But people think the U.S. dollar is a safe place to be, so I own a lot of dollars—with the expectation it’ll get overpriced, maybe even turn into a bubble down the road. Hopefully when that happens, I’ll be smart enough to get out of my dollars and put the money somewhere else.

Contact Sumit Roy at [email protected].