Jim Rogers Delivers Dire Warning
Billionaire investor Jim Rogers suggests that oil prices are not going to drop below $30.00 for some time; he predicts a correction. Meanwhile, as the rally lasts, there will be downward pressure on the U.S. dollar.
Rogers, who has painted a bearish scenario for the world economy over the next year, says that commodities have been “banged a great deal,” such that the only thing that can happen next is a major rally. This rally is already underway, according to him. (Source: “The dollar needs a correction…it was so strong for so long: Jim Rogers,” The Hindu Business Line, May 4, 2016.)
But Rogers speaks of a “complicated bottom.” By that, Jim Rogers implies a continued murkiness in which prices could jump or crash at any time.
In this case, he sees the Federal Reserve’s plans as crucial. Rogers says the dollar is already correcting and that it needs to do so because it’s been strong for too long. Rogers suggests that the recent commodities rally will end and metals will drop again. He suggests that there will be more profitable opportunities to buy metals later this year and possibly next year also.
Meanwhile, Jim Rogers has warned investors that the U.S. economy will—not could—enter a recession within the next year. (Source: “Jim Rogers: There’s a 100% Probability of a U.S. Recession within a Year,” Bloomberg, March 4, 2016.)
You won’t find too many Wall Street executives sharing that view. Bankers at JPMorgan Chase & Co. (NYSE:JPM) see only a 33% chance of a recession in 2017. (Source: “Rogers: Why I Am Out of the Yen, Long the U.S. Dollar,” Bloomberg, March 4, 2016.)
Rogers sees China as one of the weak links in the global economy. He is skeptical about China’s efforts to change, noting that economies are always changing; that is their nature. The problem, as Rogers sees it, is that China’s economy has a lot of debt buildup, which is going to cause many investors to blow up. A Chinese recession will have global repercussions.
If the Chinese economy tanks, the commodities market will suffer from loss of demand. When commodities drop, the U.S. dollar strengthens against major currencies such as the euro or the British pound, and vice versa. So, Rogers suggests, the U.S. dollar should see a correction in the short term, while commodities remain in the so-called complicated bottom; however, its value should rise as the economy heads toward a recession, which will force demand for commodities to drop.