Legendary investor and Quantum Fund co-founder Jim Rogers remains cautious about the future of the global economy.
“We’re getting to that point where either one of two things are going to happen; either central banks are going to stop all this [money printing], or the market is going to force them to stop it,” Rogers, referring to the Fed’s inability to control the bond market, said in an interview with Tekoa Da Silva of Bull Market Thinking.
“It looks like we may be having a juncture of both…where the Fed is getting worried…and at the same time, the market is jumping in and saying, ‘Yes, it’s insane what you’re doing, and this has to end.’ So we may have a healthy convergence of both. And if it’s not ending now, it’s going to end sometime in the next year, because this cannot go on — it’s too insane,” he added.
Now some may see Rogers as being overly pessimistic. But considering the fact that we’ve had a flurry of both positive and negative economic news, perhaps his caution is merited.
True, the U.S. economy is growing at a moderate clip, according to the Federal Reserve’s latest “Beige Book.” And, yes, consumer sentiment is at a six-year high while U.S. durable goods saw a respectable uptick in May.
But remember first quarter GDP only grew at an annual rate of 1.8 percent, well below the expected print of 2.4 percent. And while U.S. stocks have posted record gains, they have also suffered large losses due to Fed Chairman Ben Bernanke publicly announcing a possible draw down of Fed’s $85 billion-per-month bond-buying program.
So perhaps it’s not all that unreasonable for an old pro like Rogers to be wary of global markets. Indeed, add to all of this the current unrest in places like Egypt and Brazil, and you have a volatile situation.
“This is the first time in history where you’ve had all the central banks in the world printing money at the same time. Europe, Japan, America, and the UK, all, are frantically trying to debase their currencies,” he said, “I’m afraid that in the end, we’re all going to suffer perhaps, worse than we ever have, with inflation, currency turmoil, and higher interest rates.”
“As I say, this has never happened before, it’s never been a good policy in the long run, so I’m afraid we’re all going to suffer for the rest of this decade from this crazy, crazy money printing,” he added.
So what’s the savvy investor to do? How does one prepare for a possible global meltdown?
“The way to protect yourself is to own real assets…because that’s the only thing which will protect you as currencies debase,” Rogers advises.
But isn’t gold (i.e. a traditional “real asset”) getting crushed right now? Yes, Rogers agrees, but he’s not paying too much attention to other investors.
“[Don't] pay [much] attention to other people. I pay attention to what’s going on,” he said. “Obviously with gold collapsing I know about that — but I don’t listen to other people.”
If you have money in the financial system and the financial system collapses — even though you may have done nothing wrong — you may suffer because somebody else did something wrong.
So you need to be very careful about where your assets are in the financial system, or have strict control over them yourself, so that you’re not going to lose them.
Read the full Rogers interview here.
Follow Becket Adams (@BecketAdams) on Twitter
(H/T: Zero Hedge) Featured image Getty Images.