Jim Rogers’ Latest Long and Short Bets
Billionaire investor and legendary fund manager Jim Rogers is almost certain that the global market upheavals triggered at the beginning of this year will spark a U.S. stock market crash in 2016 that will likely be worse than the global stock market crash of 2008.
In one of his latest interviews, Jim Rogers revealed that he is short on the S&P 500 and Dow indices and long on the U.S. dollar and Chinese markets.
The contrarian investor predicts that the decline in the U.S. equity markets will expand through this year. Meanwhile, the depreciating foreign currencies against the dollar will continue to inflate demand for the greenback until we get a currency bubble.
Moreover, Rogers forecasts gold prices will tumble below $1,000 an ounce. He believes that the inflated U.S. dollar will further depress the prices of safe haven investments like gold and silver. (Source: “Jim Rogers Is Short S&P 500 (INX), Dow Jones Industrial Average (DJI),” Midas Letter, January 19, 2016.)
Interestingly enough, Jim Rogers does not hold China responsible for the investor anxiety perpetuating throughout the U.S. markets. Just like most other renowned billionaire investors who have come out to criticize the U.S. Federal Reserve, Rogers, too, has his finger pointing at the Fed, making a peculiar prediction on the central bank’s next monetary policy move.
Rogers vehemently criticized the Fed, saying the members are “not very smart people” who are incapable of making the right decisions. He believes that should the markets take a big plunge, which they already are, the Fed will panic and cut back interest rates, once again.
Separately speaking with Bloomberg, Rogers reiterated his stance. When asked if he was worried about a debt bubble in China, Rogers scoffed at the idea saying, “If you’re worried about debt, please, look at the United States. The United States is the largest indebted nation in the history of the world.” (Source: “Jim Rogers Says China Is a Victim, Not Cause of Problems,” Bloomberg, January 12, 2016.)
As a premise for his prediction, Rogers aptly pointed out that unlike the U.S. that doesn’t hold enough reserves to support the country’s mounting debt, China has a staggering amount of reserves that can provide cushioning to its economy in the event of a collapse.
Investors should take note that Jim Rogers’ prediction is in line with general market sentiment. Japanese, Canadian, and European indices have entered bear markets. China is trying its best to grapple at any positive news to end the perennial decline in its markets. Commodity prices are routing to decade-lows. Oil, which is often considered the life support of most big global economies, has not seen worse times in more than 13 years.
Meanwhile, the U.S. dollar is touching new highs every day against all peer currencies. The cherry on the top is the Dow and S&P 500 indices, which have fallen about eight percent since the beginning of this year, marking the worst-ever opening to the New Year. In short, equity markets around the world have nullified the “January Effect.”
Argue all you want, but Jim Rogers is right. The fact of the matter is that all of these signs are only pointing to one thing—a U.S. stock market crash in 2016!