International investor Jim Rogers said that amid the global central bank uncertainty and stock-market volatility, average investors should keep it simple by putting their money into what they know about, such as farming.
“The troubles in the financial markets have started,” he told Malaysia’s The Star Online.
“There will be a lot of turmoil in the financial markets next year, eventually leading to some sort of crisis, perhaps even a full-blown crisis,” said Rogers, who co-founded the Quantum Fund with George Soros in 1973, and seven years later retired at the age of 37. The fund gained 4,200% over a period of 10 years.
“Some emerging-market currencies are already having problems this year, and this is spreading to bigger things since this is the first time in history that all the major central banks are printing huge amounts of money,” he said.
The Federal Reserve decided last week to hold interest rates near zero. That means borrowing costs will remain low for a while yet, a prospect that has in the past typically boosted stocks. But some investors, expecting the Fed would be confident enough to nudge rates up by at least a quarter of a point, interpreted the stance as a sign that the global economy is dangerously weak.
“My main concern is that the US Federal Reserve doesn’t know what it’s doing. It does not know what it is going to do next as interest rates are going to go higher so it has to start withdrawing huge artificial oceans of liquidity. When that takes place, 2016 and 2017 are not going to be fun years because these guys have made mistakes and they have to correct it,” he said.
The Fed has kept its benchmark rate close to zero for almost seven years. In that time, U.S. stocks have nearly tripled from their financial crisis low. The Fed meets again next month and in December.
So amid all the uncertainty, Rogers offers basic, simple advice.
“You should invest in only what you know about. However, I have put some of my money in places that are depressed like Japan, Russia and agricultural commodities,” he said.
“I do own some real assets like silver and gold. However, I have not bought silver and gold for a while, but if prices fall further, I will buy more gold, and again the best is to stay with what you know,” he said.
“Stocks in the New York Stock Exchange can fall by 60% to 70% when things get bad but I don’t see sugar or rice prices falling by that amount. Agricultural prices have fallen and may start to turn around,” he said
“Avoid technology stocks, especially the mainly US-listed social media and biotechnology stocks as their valuations are extremely high. Salaries of employees are also very high. Even if there’s no tech bubble, the share prices certainly look expensive,” he said.
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