The stock market has been pummeled, and many investors are wondering when things will turn green again.
According to legendary investor Jim Rogers, there is hope on the horizon — but perhaps not for long.
“We had huge pessimism because of inflation and other things,” he tells ET NOW. “Now it looks like inflation and pessimism is breaking, but just remember, this is probably the last rally.”
The 79-year-old investor knows a thing or two about making money in turbulent times. He co-founded the Quantum Fund with George Soros in 1973 — right in the middle of a devastating bear market. From then till 1980, the portfolio returned 4,200%, while the S&P 500 rose 47%.
So let’s take a look at why Rogers is not too optimistic — and what he likes and dislikes in this environment.
Rogers points out that the stock market welcomed a lot of new participants. But these new investors didn’t take the traditional route.
“New investors are coming in. They have discovered this new thing called the stock market, it is fun and one can make money and they are betting on crazy stocks,” he says, adding that “crazy stocks are going through the roof.”
He also mentions the euphoria we previously saw around special purpose acquisition companies (SPACs).
“Everybody comes in betting on SPACs, But SPACs have been around for years. It has all happened before.”
The lesson here, as Rogers explains, is that “usually towards the end, stocks go crazy.”
Commodities to the rescue?
One of the surest signs of inflation is the rally in commodity prices we saw earlier this year.
In fact, commodity prices are commonly believed to be a leading indicator of inflation. When the cost of raw materials goes up, that eventually gets reflected in the price of final products — and consumer prices go up.
Rogers knows the importance of commodities. He created the Rogers International Commodity Index in 1998. The fund that tracks the index — Elements Rogers International Commodity Index-Total Return ETN (RJI) — is up 12% year to date.
He’s also holding commodities himself.
“I own commodities and commodities certainly are going to do well because of supply constraints that are developing and the central banks will print more money eventually because that is all they know to do,” he says.
“When we have a recession, they will panic and print more money and when there is a lot of money printing, the main thing to own are real assets.”
Long and short
When asked what he would go long on for the next three years, Rogers’ response was simple: “First, silver, maybe agriculture.”
As a precious metal, silver can act as a store of value — it can’t be printed out of thin air like fiat money.
Of course, gold has the same function, but Rogers actually favors the grey metal for now.
“Silver is down something like 70 or 80% from its all-time high and gold is 15% below its all-time high,” he says. “I will buy both at the right price but at the moment, I would prefer silver to gold.
Agriculture has been another favorite sector for Rogers, and for a good reason: No matter how big the next crash is, no one is crossing “food” out of their budget.
Investing in agriculture is also becoming more accessible these days, even if you know nothing about farming.
The host also asked Rogers what he would short for the next three years.
“The one thing I would sell would be the American stock market, the FAANGs, the technology stocks in America,” he says.
Tech stocks have already plunged. Meta (formerly known as Facebook), Apple, Amazon, Netflix, and Alphabet (formerly known as Google) — which make up the FAANG — are all deep in the red year to date.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.