Legendary investor Jim Rogers on Wednesday told financial advisors their most important challenge is to learn about commodities because real assets will be the best place to invest the next 10 years.
“Commodities are just an unknown asset class at the moment,” Rogers said at the Alts Virtual Summit co-produced by ETFtrends. “A huge amount of money will come into commodities the next decade as people learn about supply shortages. Very few people are invested in real assets.”
The candid investor and best-selling author also weighed in on Europe’s debt crisis, a bubble in U.S. Treasury bonds, his favorite investing themes in commodities, and his everyday use of exchange traded funds and notes.
As usual, Rogers pulled no punches with his opinions on the market. Here are some of the highlights of his conversation Wednesday with ETFtrends editor Tom Lydon:
The news from Europe is getting worse as leaders push debt problems out into the future to get past the next election. “No one is really reducing debt,” Rogers said. “There is no resolution in sight. The solution to too much debt is not more debt. They keep piling on more debt and hope the problem will get better. It’s getting worse … It doesn’t look good.”
He thinks bankruptcies should be allowed rather than propping up troubled banks. There would be a collapse but the region would be able to start over. Rogers pointed to the experience of Japan. “They tried this in 1990. They wouldn’t let anyone fail and created zombie banks. It’s 22 years later and Japan’s market is down 80%. This does not work.”
Going back further in history, the U.S. faced a financial crisis in the early 1920s and the response was to raise interest rates and balance the budget, which set up a decade-long boom. “You’ve got to pay the price. It’s not fun going through the pain,” Rogers said Wednesday at the virtual conference.
“I’m short stocks,” Rogers said.
“The 31-year bull market [in Treasuries] is coming to an end. However, I said that last year so my timing is not good.” [Are Treasury Bond ETFs Bubblicious?]
“I cannot conceive of lending money to the U.S. government for 30 years.” Yields on the 30-year Treasury bond are trading around 2.7%.
“If debt continues to rise and money printing comes back stronger, bonds will be a terrible place to be.”
“I’m absolutely convinced we’ll see higher interest rates. Of course, I was convinced of that last year but rates went down. Bubbles always go longer than most people expect and higher than people expect. That’s the definition of a bubble. I have no idea how much longer it will last but I’m not playing.”
Rogers owns several currencies but his largest positions are in the Swiss franc and Japanese yen. Other currencies he owns include the U.S. dollar and Chinese renminbi.
He owns the dollar due to the turmoil in Europe. “People will flock to the dollar,” Rogers said. “It’s not a safe haven, but people think it’s a safe haven. I will own it until people realize there is something better.”
“The U.S. is the largest debtor nation in the history of the world. This is not a good situation. The U.S. dollar is terribly flawed and will be a big problem for us down the road.”
Rogers said in his own portfolio he’s long commodities. “If the global economy gets better, commodities will do well because of shortages,” he said.
“Governments print money – that’s all they know. So own real assets like silver and rise and you’ll survive,” Rogers said.
“Most people don’t think about commodities, but they’re starting to more and more.”
“The supply of commodities has been in decline for over 20 years.” The major oil fields are in decline and there haven’t been many new mines opened.
In agriculture, the average age of a farmer in the U.S. is 58, and 66 in Japan. “We’re running out of farmers,” Rogers noted.
“I want to own real assets. I want to invest in companies that produce real goods. Shortages are getting worse, not better.”
He would rather own natural gas at these prices than shorting the commodity. Rogers thinks we’re closer to the bottom than the top in natural gas.
“Gold is up 11 years in a row. Gold is consolidating now, a well-deserved consolidation. I own gold, I’m not selling gold. If gold goes down, I’ll buy more.”
He’s bullish gold will eventually go well over $2,000 an ounce but said corrections of between 30% and 40% are normal.
Rogers owns all the metals but said if he had to buy one today, it would be silver.
“Exchange traded products are convenient for commodities. I always buy exchange traded products and it’s terrific.”
“I own commodity ETFs and ETNs that are futures-based.”
Best advice for financial advisors
“I would learn about real assets.”
“Buy low and sell high. It’s pretty simple. The problem is knowing what’s low and what’s high.”