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Jim Rogers is 100% sure a US recession will occur within a year
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Jim Rogers to Bloomberg: There's a 100% Probability of a US Recession Within A Year
But buy the greenback anyway. Published On: Fri, Mar 4th, 2016
Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months.
During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100 percent probability that the U.S. economy would be in a downturn within one year.
“It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” he said. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.”
Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33 percent.
Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion.
The former partner of George Soros suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering.
“If you look at the … payroll tax figures [in the U.S.], you see they’re already flat,” he concluded. “Don’t pay attention to the government numbers, pay attention to the real numbers.”
In light of the economic turmoil envisioned by Rogers, he is long the U.S. dollar.
“It might even turn into a bubble,” he said of the greenback. “I mean, if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.”
Rogers added that a strengthening U.S. dollar has historically been negative for commodities—the asset class that the investor is best-known for.
While the yen is often designated as a risk-off currency, it won’t benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan’s balance sheet, according to Rogers, who said he exited his position in the yen last Friday.
Jim Rogers: This Could Ignite a U.S. Dollar Collapse
If you think that the U.S. dollar is a safe haven, think again. Despite the strength in the U.S. dollar exchange rate to many major currencies these days, billionaire investor Jim Rogers thinks otherwise.
Jim Rogers: U.S. Dollar Is Not Sound
Jim Rogers, chairman of Rogers Holdings, recently spoke with Bloomberg TV India and expressed his concerns about the U.S. dollar: “The U.S. dollar is not sound. But with a lot of turmoil coming, people think U.S. dollar is a safe haven. What I expect to happen is that turmoil will get worst and the dollar will go higher—it is already over-priced—and may turn into a bubble.” (Source: “‘Third Fed Rate Hike is Where You Have to Start Worrying’,” Bloomberg TV India, last accessed December 24, 2015.)
Rogers is worried about the debt problem in the U.S. He told the media outlet that the U.S. is a “terribly over-indebted country with the largest debt in the history of the world.” For him, the largest long currency position for the past two to three years has been the U.S. dollar. But right now, his plan is to sell the U.S. dollar and maybe get into gold or the Chinese renminbi.
Jim Rogers also talked about the Fed rate hike. On December 16, the U.S. Federal Reserve raised its benchmark interest rate by 25 basis points, marking the first interest rate increase since the financial crisis. However, Jim Rogers is not impressed. He said that “the Fed is just made up of bureaucrats and academics” and that “they don’t know very much.” He mentioned that market interest rates were already going up and Fed’s first rate hike “doesn’t mean very much.”
Jim Rogers: Third Fed Rate Hike Is the Time to Start Worrying
The Fed is expected to increase interest rates a few more times in 2016. To that Rogers said: “The third one is where you have to start worrying. If the Fed raises rates three or four times, then it is usually all over for the stock market. So just keep watching, be worried and be prepared.”
With the world economy at risk of a slowdown and commodity prices tanking, Jim Rogers sees potential in precious metals. He said that he has hedged his positions in gold and silver because their prices could drop further. However, once gold drops below $1,000, the billionaire investor would take his hedges off and “buy a lot of gold.”
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