Monday, June 27, 2016
Jim Rogers talking his book
The UK's decision to leave the European Union will lead to an economic crisis more severe than what the world faced in 2008, according to legendary investor Jim Rogers, chairman of Rogers Holdings.
“This is going to be worse than any bear market you’ve seen in your lifetime,” he said on Yahoo Finance’s “Market Movers” program Monday. “2008 was bad because of debt. The debt all over the world is much, much higher now. Stocks in the US, for instance, have been going sideways for 18 months to 24 months. That’s called a distribution by many people. When you have distribution for a year and a half, it usually leads to bad things.”
Rogers — who cofounded the Quantum Fund with George Soros in the 1970s — believes the “leave” movement’s victory last week may threaten the British union. While any negotiated deal may help assuage the market’s Brexit fears, Rogers foresees a “bad case scenario” where Scotland and Northern Ireland leave the UK and London’s clout diminishes significantly as financial institutions move towards continental Europe.
“The UK already has huge international debts and it has balance of trade problems and budget problems,” he said. “The bear case is the pound disappears. England becomes Spain or Poland or Italy or something.”
While he doesn’t see an immediate collapse of England’s economy, Rogers anticipates a long-term decline in the country’s prospects.
“The deterioration will continue and make stocks go down a lot,” he warned.
Brexit’s win will also embolden other countries to leave the EU and separatist movements to break up a few states, Rogers predicted. That could make the world to look significantly different in just a half a decade.
“The EU as we know it will not exist,” he said. “The euro as we know it will not exist. Some people leave, others may join — unlikely, but they could join. There are a lot of angry people all over the world. Look at what’s happening in America." In the UK, he added, "People are making unbelievably incompetent statements but they’re very happy to be getting out [of the EU]. They’re so angry.”
Rogers said he is short US stocks but is long Chinese stocks and agricultural commodities. “These are the things that might do well no matter what happens going forward,” he explained. “These are going to be perilous times. I hope I get it right.”
He also expects a tougher time for the euro even relative to the British pound, as movements in other part of the European Union threaten its foundations. Rogers is long US dollars and is less negative on the Japanese yen and the Swiss franc.
“There are not many sound currencies left anymore,” he said. “They’ve all been ruined by politicians.”