Last week, one of my favorite investment analysts predicted an enormous bull market in agricultural commodities and continuing weakness in the U.S. dollar, and lambasted the Federal Reserve for creating an inflationary environment.
Jim Rogers is no stranger to investors and he is a fellow who puts his money where his mouth is.
I fully believe in the current commodity price cycle and its effect on the global economy. Rogers believes that the commodity price cycle is now just beginning to affect agricultural raw materials and this means to me that the price of food is going to get a lot more expensive. Add in strong population growth around the world and global warming causing major droughts — now you’ve got the makings of some serious inflation, and this isn’t good.
Of course, one of the only free market ways to control inflation is by raising interest rates. Rogers is not hopeful about the prospects for monetary policy in the U.S.
Now, we have really reduced interest rates trying to jumpstart the economy, and this could be followed by much higher interest rates over the coming years to try and control prices.
At the end of the day, Rogers’ view isn’t very rosy for the domestic economy. So, this is why he moved to Asia and is advocating that everyone learn Mandarin.
If you look back at the economy and the stock market over the last decade or so, it’s pretty easy to notice we’ve had some good times. I don’t like to be a pessimist, but with the current monetary and fiscal backdrop, investment returns from the stock market are going to be very tempered for the next several years.