Few observers are more astute on the markets, modern life, and human nature than investor Jim Rogers. An early internationalist, Rogers has made a fortune over many decades, seeing what others don't. I recently spoke to him about a range of topics, from the latest market turns (and what he calls his "hopeless" timing abilities) to his life growing up.
Still wary of the US stock and bond markets, Rogers says he's not short now, but nor is he a buyer. He believes that sometime in the next year or two, US stocks will fall as interest rates rise, and that will be a turning point. The following has been edited for clarity and length:
© Joel Benjamin
So, you're bearish.
: [No. Not yet.] If the stock market goes down - say, you pick the number, 13%, 23%, who knows - everyone will be screaming, and Mrs. Yellen and her friends will say, 'Oh, we're sorry, we didn't mean to hurt you,' and they will loosen up again. One way or the other, the markets will heave a sigh of relief, have a big rally, maybe even turn into a bubble, at which point I hope I'm smart enough to try to short stocks in the US.
: We seemed to have a preview of that a few weeks ago where we had a pretty sickening plunge for a few days, and then James Bullard came out and said, 'Hey, we'll do what we need to do.' And suddenly stocks took off again. So you're expecting a bigger version of that?
: That's exactly right. Wait until it gets worse and it will, somewhere along the line. At which point, the Fed will panic. It's all they know how to do, Henry, so they will pump huge amounts of money in. It's going to go into shares, and that will cause the top. I have no idea when that will be. That's when I would sell short. By the way, if it happens that way, one should be long, and long big time. I doubt if I will. Either I'm too smart or not smart enough. What we need is a 26-year-old. The 26-year-old will think this is wonderful. She will think she is very smart. She will make a lot of money for a while, and then it will collapse.
: You said recently we're going to pay a 'terrible price' for what the Fed doing is doing. What do you mean?
: We're going to have economic hard times again. Next time it will be worse because the debt is so much higher and because for the first time in recorded history, all major central banks are printing huge amounts of money.
So there's this gigantic artificial ocean of liquidity that's going to dry up some day, and when it does, we're all going to pay a terrible price.