With somewhat decent data coming from economic indicators, an economic collapse is not really on the minds of most Americans. But according to billionaire investor Jim Rogers, it’s more than just likely for the U.S. economy to experience a downturn in the near future.
In an interview with Bloomberg, Jim Rogers said there is a 100% chance that the U.S. economy will enter a recession in the next 12 months. (Source: “Jim Rogers: There’s a 100% Probability of a U.S. Recession within a Year,” Bloomberg, March 4, 2016.)
This is in sharp contrast to Wall Street’s expectation. For instance, JPMorgan Chase & Co. (NYSE:JPM) only sees about a one-third chance for the U.S. economy to enter a recession within a year. (Source: “Rogers: Why I Am Out of the Yen, Long the U.S. Dollar,” Bloomberg, March 4, 2016.)
“It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” said Rogers. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.” (Source: Ibid.)
The billionaire investor did not specify what would actually trigger such an economic downturn. However, he did point out today’s staggering debt levels as well as the slowing world economy. In particular, he mentioned that Japan is already in recession, China is slowing down, and half of Europe is in recession.
His answer to what’s going to spark a recession: “Lots of things are going to cause it.” (Source: Ibid.)
At the same time, Rogers also told Bloomberg that if investors were to pay attention to the right data, they’d see that the U.S. economy is already in trouble.
The labor market would be a good example. While official data looked just fine, Rogers does not believe that’s the case.
“If you look at the…payroll tax figures [in the U.S.], you see they’re already flat,” he said. “Don’t pay attention to the government numbers, pay attention to the real numbers.” (Source: Ibid.)
What is Rogers doing to prepare for a recession in the U.S.? He’s hoarding the U.S. dollar.
In Rogers’ view, investors will flee to safe-haven currencies as they always do when there’s economic turmoil. The difference is that this time, the Japanese yen and the euro will not be sought after due to the situations in their respective economies and monetary policies. In fact, Rogers exited his position in the yen not that long ago.
Rogers is long the U.S. dollar, even though he believes that if a lot of people are doing the same, “it might even turn into a bubble”: “I mean, if markets around the world are crashing, let’s just say that scenario happens, everybody’s going to put their money in the U.S. dollar—it could turn into a bubble.” (Source: Ibid.)
If you share Jim Rogers’ view that the U.S. economy will be in a downturn with 100% probability within a year, then the U.S. dollar seems to be the only way to go.