Ask the Expert - Jim Rogers - March 2017

Transcript:

Male: You're listening to "Ask The Expert" on Sprott Money News.

Craig: Well, greetings again from Sprott Money News and sprottmoney.com. This is your "Ask The Expert" segment for March 2017. I'm your host Craig Hemke, and joining us this month is Jim Rogers. Jim is a legend in the investing business. After making his fortune in the 1980s managing his own hedge fund, Jim now lives in Singapore where he's a business man, an investor, world traveler, financial commentator, and author. And like I said, a legend in the financial business. Jim, thank you so much for spending some time with us here at Sprott Money News.

Jim: I'm delighted to be here, Craig. I doubt if I'm a legend, but I am delighted to be here.

Craig: Well, I can tell you, I think a lot of folks listening view you that way. No question about it. And before we get started, I always like to point out that these "Ask The Expert" segments are brought to you by the Sprott Money Precious Metal Storage Program. We have five international storage vaults and the most competitive prices in the industry. So please visit our international storage page at sprottmoney.com to learn more. Jim, if you're ready, I'll hit you with the first of...looks like six questions.

Jim: Let's do it.

Craig: And again, these questions are submitted over the last couple of weeks from Sprott Money customers, and it's my job just to relay them on to you. The first one has to deal with what just took place on Wednesday in the States, and that's another FOMC Fed funds rate hike. The question is since the Fed is currently in a hiking rate cycle...all they're doing, though, seems to be flattening the yield curve...so now, do you, Jim, expect a U.S. recession soon or do you think rate hikes will continue?

Jim: Well, Craig, there's no question that interest rates are gonna go higher all over the world. We have a very artificial situation with interest rates at zero or negative rates in some places that is not normal and it cannot last. It will not last. So whether the market or the Fed or somebody is going to raise interest rates, historically, once the Fed raises interest rates three times, it usually means the stock market is going to have problems. If it doesn't happen after three times, historically, it has always happened after four times. So we will have another interest rate hike, and that maybe the death knell for the stock market and maybe even for the economy. The caveat for that, of course, is never before have interest rates been at zero, so who knows what will happen this time. Maybe it is different this time.

Craig: I guess we shall see. You're right, history if often a guide though, no question about that. The second question that we had has to deal with gold, specifically. And that over the past couple of years, you've often stated that you think gold is going even lower from here. The question, just simply, is that still your forecast?

Jim: Oh, yes, yes, yes. I own gold but I haven't bought any serious gold in a long time because I do expect gold to go down to a thousand or maybe even probably under a thousand before it hits its bottom. And if it does, I hope I'm smart enough to buy a lot more gold because when that happens, you know, it's gonna be a great chance to buy because gold is gonna go much, much higher, Craig, before this is over because we're gonna have a huge mess in the next few years.

Craig: Just a quick follow-up, I guess, Jim, is that are you basing that on this higher interest rates cycle, stronger global economy...what are the main points there?

Jim: Right, that of course, it will have an effect on the price of gold because it is a competitive instrument but also just, you know, gold has not had a 50% correction since probably a year, many, many, years. And banks normally have a 50% correction even in the biggest bull markets. So, who knows? I don't know if I know what I'm talking about but I do expect a chance to buy gold lower.

Craig: Fair enough. All right, the third question is right in your wheelhouse, I suppose, with your expertise and history of trading currencies. This question has to do with the upcoming French elections and the move toward a Brexit in Great Britain. The question is by summer, with Brexit and the French elections pending, where do you see the dollar, the euro, and the yen?

Jim: Because I expect more turmoil in the markets and when there's turmoil, people look for safe haven. Now, many people think the U.S. dollar is a safe heaven. It's not. It's not, Craig, because, you know, the U.S. is largest debtor nation in the history world and getting worse all the time, but people still think it is. So that's why I own a lot of dollars. The dollar 's gonna go higher. It may even turn into a bubble before this over, if things get as bad as I think they will. At which point, I hope I'm smart enough to sell my U.S. dollars. I don't know, maybe if I'm right about gold, you know, the dollar will go higher. It'll turn into a bubble, I'll sell my U.S. dollars and buy gold under a thousand. See how easy it is to get rich? Just sit here and talk about it on the internet and you can get rich. So that's what I expect to happen.

Craig: And again, one, I guess, follow up to that. What do you make of the euro with some of these movements, these nationalists, populist movements in Europe kind of chipping away at it?

Jim: Well, partially, because the dollar's gonna be so strong, either artificially or because of sound fundamentals. The euro and everything else is gonna go down. Now the euro, of course, has serious problems. It's a fabulous idea and the world needs something to compete with the U.S. dollar. Unfortunately, the euro's been very badly executed, very badly constructed, that people come in with phony bookkeeping, or with no bookkeeping, and with very bad fundamentals. So the euro is gonna continue to go lower, I'm afraid. There'll be rallies along the way, of course. I mean nothing goes straight up and nothing goes straight down, but basically I would not own the euro.

Craig: And the third leg of that question, what do you think of the Japanese yen after all these years of quantitative easing over there?

Jim: Well, I am skeptical about the Japanese yen. Some people consider that a safe haven compared to the U.S. dollar so it will be less weak, I should say, than the euro, but I wouldn't buy the yen either. There is some money that goes into the yen on the mistaken view that it's a safe haven too. But you know, the Japanese have gigantic debts as well. Their internal debts are, perhaps, higher even than the U.S., so it's not a place to put money. But if you don't believe the U.S. dollar is a safe haven, you might try the yen. I am not, but some people do.

Craig: Fair enough. Turning to silver now Jim, and this question deals with Silver, I guess probably the Comex and JP Morgan, in that it has been noted that JP Morgan has acquired a massive amount of physical silver. I know specifically within their Comex vault, they're approaching 100 million ounces. If that's the case, what do you think their intentions are? Is it just simply to manage it and hedge it, or do you have any thoughts on this?

Jim: Well, I really don't know. I have not a clue, but I do know that in the past they said it was for customers. I really have absolutely no clue at all, Craig.

Craig: How do you feel about silver in general? You talk about gold maybe going lower. How do you feel about silver at this price?

Jim: Well, the same. Gold and silver...if I'm right, gold will go under a thousand, silver will go down to a comparable price, and I'll buy some of both if and when it happens.

Craig: Sounds like a good plan to me. All right...

Jim: And it will really depend on which one is cheaper at the time. At the moment, silver is cheaper, historically, than gold. I mean silver is down nearly, what, 70% or 75% from its all time high. Gold is not down so much so, at the moment, if I were buying one I would buy silver, but I'm not buying either.

Craig: In a sense, do you watch that gold/silver ratio and what it means historically? Does that mean much to you?

Jim: If and when I start to pull the trigger, I will look to see, but I don't really sit and watch it every day or every week. I'm aware of it in my brain but I don't watch it very closely.

Craig: I understand. All right, and the next question has to do with the mining shares and the miners, if you wanna leave it at that. As gold and silver prices eventually rise, should someone who owns the mining shares be concerned about mine nationalization? And if so, which countries would hold the greatest risk of mine nationalization?

Jim: I don't think there's much risk of mine nationalization. I mean there may be some countries where there are internal political problems, but I'm just racing around the world in my brain trying to think of where somebody might nationalize mine. I don't see that happening. Now, maybe there'll be some countries where the government gets in trouble and they'll nationalize mines because they don't have anything else to do, but I don't see that as a very serious risk.

Craig: I've got one more question for you. Actually, maybe we'll throw in one fun one at the end that somebody sent in. But one last question is you've often stated that folks should broadly diversify into places like Russia, and perhaps even land and farms and commodities. How does an individual go about doing that?

Jim: Well, it's very easy these days to invest in just about any country in the world. Russia has ETFs, there's several ETFs which would trade in New York. So if you want to add, there are several Russian companies and stocks that trade in New York or London. I mean stocks these days, just about anywhere, anybody can invest in either the stocks themselves or ETFs. It requires a little research, but not much research. I mean the internet has everything now. So if you want to invest in Russia, there are ETFs, there are stocks. There are all sorts of ways to invest in Russia and most countries. The same applies to most countries around the world. I'm very bullish on agriculture, so one could buy a farm. I'm not gonna buy a farm because I'd be a terrible farmer. But if you wanna buy a farm, you certainly can, and you even hire a farmer to do it for you. Or you can invest in agricultural ETFs or agricultural stocks.

Craig: Interesting. I'm sitting here thinking to myself if I've ever seen anybody put together a limited partnership or some type of fund that owns farmland. I don't think I've ever seen anything like that, have you?

Jim: Yeah, well, I'm aware that at least a couple of those exist. I cannot tell you the names because I don't remember, but there are at least a couple of funds designed specifically for people to buy farmland in the U.S. and there probably are some abroad as well. And in some stocks markets, you know, plantations or farms trade, they're publicly owned. Indonesia, Malaysia, there are places where farms actually trade as public vehicle.

Craig: Jim, one last question comes from a Sprott customer in the American state of Arizona. His name is Rusty and he just wanted to let you know that he's a big fan. He's read several of your books and enjoyed all of them, and just wants to know if you have another plan for around the world trip?

Jim: Oh, Rusty, I would love to do that. I've got two little girls now and I don't want to do anything without them. If and when they're older, I do hope that I can take them traveling, but they're too young now. Whether we do around the world or not, I don't know. They both speak Chinese, so first we would probably drive around China and then who knows. Let's see if they like it. Who knows what we might do.

Craig: There you go. Do you have any new books in the offing?

Jim: Not for me. There's a Chinese lady who's written a book about me. I guess it will be published in Chinese soon. There's an American who's writing a book about me, I think. Well, let's see if he can get a publisher. But I, personally, do not have any plans, no.

Craig: All right then. Well, Jim, that's the last of our questions. I wanna thank you very much for spending some time with us. I know you're a busy man, but this has been beneficial and I think everybody listening will have found it very interesting and helpful, so thank you so much for your time.

Jim: Thank you, Craig. I'm a fan of Sprott, so tell them hello.

Craig: I will do that. And from all of us here at Sprott Money News, thanks for listening, we'll talk to you again next month.