When one of the smartest money managers in the world says the U.S. is due for a stock market crash, savvy investors take notice.
Jim Rogers is one of the best investors on earth. In 1973, Rogers co-founded the Quantum Fund. During the following decade, the portfolio gained 4,200%, handily beating the S&P 500’s meager 47% return during the same period.
Needless to say, these types of returns put him in the same class as investing legends Warren Buffett and Jim Simons. For this reason, I always pay close attention to how Rogers views the market. And right now, he has some interesting ideas as to what investors should do next.
In an interview last week with MarketWatch, Rogers dished out the straight talk on the financial markets. In his view, we’re “overdue” for a serious correction (or worse). (Source: MarketWatch.com, June 26, 2015.)
“In the United States, we have had economic slowdowns every four to seven years since the beginning of the Republic. It’s now been six or seven years since our last stock market problem. We’re overdue for another problem.”
In Rogers’ view, low interest rates caused stock prices to increase significantly. He believes many assets are priced beyond their fundamentals thanks to the ultra-easy monetary policies by the Federal Reserve. Fed supporters argue such measures are good for investors, but Rogers takes a different view.
“The Fed might tell us we don’t have to worry and that a correction or crash will never happen again. That’s balderdash! When this artificial sea of liquidity ends, we’re going to pay a terrible price. When the next economic problem occurs, it will be much worse because the debt is so much higher.”
What should investors do? Rogers has four key pieces of advice. First, stick to investments you understand. Second, diversify your assets outside of the United States. Third, consider betting against stocks by selling them short. And fourth, buy farmland.
According to the billionaire investor, agriculture is a wonderful investment:
“Farmland always comes through, but it doesn’t mean you can’t go bankrupt owning farms because people can and do. But in the end, productive agricultural land always survives one way or another. I would urge people to think about this going forward.”