The Jim Rogers’ Take: Financial Markets & Commodities

Against the current turbulent geopolitical backdrop, legendary commodity expert Jim Rogers sheds some light and gives his opinion on geopolitics, the stock market, commodities, and hedging risk in an exclusive interview with Vantage. Rogers also shares his invaluable experience based on past financial events that could provide insights to the future of the financial markets. 

Here are the key takeaways from our interview with Jim Rogers. 

Key Points

• Jim Rogers criticises current monetary policies, noting quantitative easing on an unprecedented scale, and suggests the overvalued US dollar in his portfolio as a temporary safe haven.
• Rogers does not believe stock markets have bottomed out, attributing the lack of a bottom to increasing debt and stating that markets historically don’t always rise.
• The transition to clean energy as a shift in commodity demand rather than a replacement, predicting a potential increase in the value of metals like copper, and advises buying assets like silver at depressed prices as a hedge.

Current global monetary policy is ‘really bad’

According to Rogers, the current economic climate is in an unprecedented state where in recent years central banks in major economies have done quantitative easing at a level not seen historically. Rising inflation and aggressive interest rates hikes have also been plaguing the economy. 

As a hedge against this economic backdrop, Rogers’ portfolio consists partially of the US dollar. His reasoning is that the US dollar is considered a traditional safe haven by investors in times of turmoil. However, his financial experience has also led him to take note of the potential over-valuation of the US dollar, and when the time comes, he will be looking to sell. 

When asked to comment on how aggressive the Feds should be with interest rates, Rogers chose not to comment but rather, gave a historical example of the “Great Inflation” that occurred in the 1970s. At that time, the Fed had to raise interest rates till 21% to bring inflation rates down to acceptable levels ^[1], which according to Rogers, worked well and managed to kill inflation. 

To see a potential shift in the markets, Rogers emphasized to keep a look out for potential wars, a re-emergence of Covid, and major central banks interest rate hike cycles. 

“They got to keep an eye out for war, because if we have world war, that’s going to have a big effect. We have to watch the virus, if the virus comes back, that is going to have major effects as well. And we have to watch the central banks. If the central banks are serious, and if they raise the rates, that’s going to have a major effect on markets.”

Stock markets have not ‘bottomed out’ 

Through his lifetime of financial experience, Rogers has been through many forms of bear markets. More specifically, Rogers pointed to the growing amount of debt in major economies which contributes to the intensity of the stock market bears. 

When asked about the stock market bottom, Rogers firmly said that the bottom is not near and in order to have an indication on where the bottom is, markets must first reach a stage of despair. However, Rogers was also quick to correct the saying “the stock market always goes up”.

“It is not always the case that stock markets go up. The saying that stock markets always go up, maybe they have in the end, but in the end can be a long time.”

In addition to the economic pessimism, Rogers added that before the worst is over, companies will go bankrupt. 

OPEC and the future of clean energy

With the OPEC oil supply cut looming, Rogers’ focus is the overall supply and demand of oil in general. According to Rogers, the OPEC and their meetings does not have as much influence on oil prices as people might think and prices are dictated by overall supply and demand changes.

Rogers pointed out that over the years, known oil reserves have been declining, especially in Saudi Arabia, and that the consumption of oil in major economies has increased, which will lead to higher oil prices in the future. 

With many governments globally heading towards a clean energy future, Rogers is supportive of the clean energy initiatives but mentions that for further improvements, the clean energy markets must be competitive – which does not seem like the case at this point. 

Diving deeper, when asked if clean energy could one day replace oil, Rogers said:

“If we all do have electric cars, electric cars use several times as much copper, lead, and lithium as petrol cars. So, what we give up on one side we pick up on the other. Maybe prices of oil will go down and prices of copper will go through the roof.”

‘Not the time’ for precious metals. Yet. 

With the fears of recession growing in tandem with each interest rate hike, Rogers spoke about the gold and silver investments in his portfolio.

The commodity expert noted that although he has these precious metals as investments, he is currently not looking to buy or sell any. However, if given the opportunity, Rogers would look to silver instead of gold. The reasoning Rogers gave is that silver has peaked $50 twice and is trading at approximately $17 at the time of the interview. Although silver’s all-time highs are three times current day prices, with the appropriate market conditions, silver could easily re-visit its $50 high or further. 

“If I were buying either of them, I’d buy silver because silver is much cheaper on a historic basis. I’m waiting to buy at some point. I hope things get so depressed in both gold and silver that I will buy more.”

With precious metals losing their shine currently, the question of alternative safe havens was posed. Rogers reciprocated the question with sage advice: no matter the instrument, buy at the right prices and conduct proper research. With those two considerations, exposure to most instruments might not be as risky.

Following the advice, Rogers used the soft commodity sugar, to illustrate. When sugar prices were at 67 cents years ago, it was considered a risky investment, but when prices declined to 2 cents, the level of risk for investing sugar dropped. 

“If you get the price right and the fundamentals right, there is less risk no matter what you’re doing.”

Smartest thing to do? Hedge risk. 

Many investors are looking to hedge against the high inflationary backdrop by investing in precious metals such as gold and silver. When asked about hedging risk, Roger said:

“If people know what they’re doing, hedging risk is always a smart thing to do”.

To reiterate Roger’s opinion on trading at the right price and conducting proper research, Vantage offers CFD trading which allows traders to go long or short on various asset classes. You can also access free educational articles on our Academy or sign up for weekly webinars to learn from experienced traders.

James Beeland Rogers Jr., commonly known as Jim Rogers, is an American veteran investor, Chairman of Beeland Interests Inc. and financial author who co-founded Quantum and Soros Fund Management. He also launched the Rogers International Commodities Index in 1998.

The views and opinions expressed in this article are those of the interviewee and the author, and do not necessarily reflect the opinions of Vantage. This article is written based upon information the author considers reliable, and Vantage does not warrant its accuracy or completeness, and it should not be relied upon as such. Past performance is not an indication of future results.

Reference