Importance of historical knowledge when investing

How do you know when to sell an asset?

Well, when people are getting hysterical, you can sense it just by market action ... If you read the press, you can see when everybody's talking about whatever it is that's the best thing, something going to change everybody's life ... it's a whole new era ... You hear the same words every time, every time -they are the same.Oh, how many new eras have we had in history? It's just amazing.


You're talking about using history to interpret the current market.

Yes ... If you understand history, you're probably going to be a much better investor. But you need to understand the basics of how the world works ... And, if you know what's happened before, then you'll probably be a step ahead of figuring out what's going to happen.


What in today's markets do you see and think, "10-15 years from now we're going to look back at this and say, `We were fools'?

Well, in New York, on the stock exchange there are only like 10 or 15 stocks that are holding up the averages. They're all the big stocks like Google, Amazon, Apple ... and all of those companies are going to go on forever, and get bigger. Perhaps some of them will, but, I know, you know, if you look back at the data . This is an extreme example, but if you look back at the Dow Jones industrials Average from 100 years ago, I think there's only one stock left, that's still in.  

Nothing goes on forever. In fact, in one of my books I talk about the need to understand that everything is changing. You pick any year in history, 1900, everything that people knew in 1900, 15 years later it was totally wrong. Everything changed.

Jim Rogers speaks on Gold, Oil. Fed and more

ETF.com: Are you a buyer of gold right now near $1,300/oz?

Jim Rogers: No, I’m not a buyer of gold at all. I expect another opportunity to buy gold. If it doesn't happen, that's fine, I already own plenty of gold. If and when it does go down, I hope to buy a lot more.

ETF.com: Oil doubled off its lows from earlier this year, but it seems to be having trouble breaking above $50 on a sustained basis. What's your outlook for oil, and should we be paying attention to OPEC's attempts to cut production?

Rogers: I don't pay too much attention to OPEC. They talk a lot, but even when they agree on something, somebody is always doing something else under the table. So I don't pay attention to OPEC.

As far as oil, it's is in the process of making a bottom. In two or three years, we're going to look back and say, "Oh, that's what it was doing: It was basing; it was making a bottom."

Whether that base is between $25 and $60 or between $30 and $50, who knows? But it’s in the process of making a bottom.

ETF.com: Two or three years from now, will oil prices be much higher?

Rogers: Perhaps, yes. Since the world will be in chaos with a lot of civil unrest and maybe even military unrest, I suspect that's probably a safe bet. But I'm terrible at market timing and short-term trading, so don't listen to me on something like that.

ETF.com: Where do you see the most risk of unrest in the world right now?

Rogers: Clearly, the Middle East is a powder keg; it can erupt at any time. There are all kinds of people making mistakes there. It's not as though it's just the Arabs and Israelis. A dozen different groups are making mistakes in the Middle East.

History also shows these things usually start where we're not looking, where we don't expect something. Who would’ve thought Sarajevo in 1914 [would lead to World War I]? Nobody knew what Sarajevo was, and the next thing you knew, the world was in chaos.

It's probably going to start in the Middle East, but it could be Asia. It could be anywhere.

ETF.com: After being in the financial news a lot last year and early this year, China hasn't made any waves recently. Do you foresee another shoe dropping in China, or are you comfortable buying Chinese stocks here?

Rogers: I'm not buying shares anywhere at the moment, including in China. I own Chinese shares; I haven't sold any. The world's going to have serious problems in the next couple years, and it's going to affect everybody. The Chinese are a large trading country, and anybody who trades with the outside world is going to suffer. Many Chinese companies now have debt, which was not usual 10 years ago.

Some Chinese companies are going to go bankrupt. Other parts of the Chinese economy are going to boom no matter what. Pollution cleanup in China, for instance; those guys don't care if America falls into the sea; they're too busy making money.


ETF.com: You said the world is going to have serious problems in two to three years. What do you see causing that? Where do you see that emanating from?

Rogers: The main cause is the Federal Reserve, and Washington, D.C., more broadly. They're accumulating gigantic debts and doing huge amounts of money printing. That can’t last; it's going to cause problems for all of us down the road. If you're looking for a single culprit, it's Washington, D.C.

It's already happening. In 2015, for instance, twice as many stocks were down on the New York Stock Exchange as were up. It was disguised by the averages, but the averages are dominated by 15 or 20 big stocks that never go down.

Most stock markets are down around the world. Japan is already in recession. It's just not visible to the press or to the public yet.

Something similar happened in 2007: You had Iceland go bankrupt. People didn't even know where Iceland was or anything about it. But then that led to Ireland, which led to Bear Stearns, which led to Lehman Brothers. Before long, everybody knew something was wrong.

That's the way these things always work. It starts with an outlier or marginal place, working its way through to, "Oh, my god, why didn't they tell us?" My point is, it's already happening; it's just not in the headlines yet.

ETF.com: Is there anything anyone can do—the Fed or anyone in Washington—to prevent the collapse you see coming?

Rogers: I don't know. Historically, in America, we've had economic difficulties every four to seven years since the beginning of the Republic. We're overdue for a recession, timewise.

ETF.com: You mentioned you're not buying any stocks at all. You don't have a favorite region?

Rogers: No, I'm not buying anything anywhere. I'm looking at places and I have ideas on my list, such as some of the Chinese industries that are going to do well no matter what. But mainly I'm not doing anything.

ETF.com: Do you have any opinion on the fixed-income markets? Do you see interest rates going up or down?

Rogers: I'm short junk bonds in the U.S. Interest rates have already started going up a little bit in the U.S. and other places. My view is that I wouldn't buy Treasury bonds with your money. But I know that central banks have more money than I do, so I'm only short junk bonds.

ETF.com: Last year you liked sugar, and it's turned out to be the best-performing commodity this year, with gains of nearly 50%. Do you still like sugar, and do you have any other under-the-radar investments people should take a look at?

Rogers: Sugar is going to continue to go higher over the next few years. Sugar—even though it's done well in the last year or so—is still down 70% from its all-time high. Sugar could triple and still not make an all-time high, so you can see how low it still is.

I can’t think of anything else worth buying. Some of the Chinese companies ... like I told you, pollution control: Those companies are going to do extremely well no matter what happens in the world.

I'm just waiting, because I know that when everything collapses, even good, sound companies that are booming usually go down for a while, too.

Trump, taxes and US economy

It is a Trump victory then, how are you placing your bets? But what about the commodity trade?

I suspect oil would probably not go down because people will be worried about war and some of the things he might do. I am long on the US dollar. Mr Trump says he is going to have trade wars. Trade war usually makes a currency go up at least for a while. Gold I suspect may go down because people will be worried about what he might do and agriculture I suspect will stay the same, may be even rise.


Do you think a new cycle has started for commodities because suddenly the prices of the major commodities are up by about 50% to 70% from the recent lows?

Whether it is a new cycle or continuation of the old cycle, I do think commodities will be going up for a while. All bull markets and all bear markets have big consolidations. Commodities have been consolidating and they are rising again.


For the longest time we have identified that China is a real problem for the commodity bull market. Not that the data points from China has changed, but one is getting a sense that at least the worst of the contractions for the Chinese economies is behind us. Do you think China once again will play the lead role in determining where commodity prices would move?

Remember, China is one-third the size of the US economy or less than one-third the size of the European economy. Yes they are important but American, European and Japan economies are much more important to all markets and certainly to commodity markets.

If China starts buying a lot of commodities that will help but if Europe and America drop their demand, it really would not matter. Two of the bigger points -- I expect most of the world will have economic problems in the next couple of years and that would mean China will have economic problems. China is a very large trading country now and if their customers have problems, they have problems.


Trump is talking about cutting taxes and jumpstarting the US economy. So I wonder. Wall Street which always wants lower taxes and more stimulus , are so anti-Trump?

They are anti-Trump because Mr Trump has said there will be trade wars. Everybody who knows any history, knows trade wars lead to bankruptcy and economic problems, If Trump wins, the market will go down in panic but then he will come out and say do not worry I have tax cuts, I have this that and the other and then there will be a relief rally later in November or December until people realize it cannot work.


Bond yields have inched higher from the recent lows. They are still at historic lows but they have inched higher. German bund is in positive territory, US 10-year paper is now above 1.5%. Do you think the rally in the bond market is over?

Yes, I think the bull market has been going up for 35 years, you have big big long bull and bear markets and bonds in United States. In my view that 35 year bull market has come to an end and now bonds will be going down for a long-long time. But I am not sure about bonds, there are mainly junk bonds in the United States.


Give me a five-year structural trade long or short. You can pick and choose?

Buy agriculture, short junk bonds in the US, long those two.

Yes I am a director with Spanish Mountain Gold

I knew some of the people involved with Spanish Mountain Gold, and they asked me if I’d be a director, and I said yes. It’s pretty simple.

I’m interested in gold, I don’t own any gold mining shares, but I knew the people, I was interested in them, I did enough homework to know that there’s a lot of gold in the ground at Spanish Mountain Gold. I mean, they’re not an operation, so it’s just an asset that’s in the ground, and some day when gold becomes much more valuable, will undoubtedly come out of the ground.


Jim Rogers co-founded the Quantum Fund with George Soros in 1973. By 1983 the fund gained more than 4000 percent.

Bullish on agriculture globally

There is nothing wrong with debt if you manage it properly. If you borrowed the money for productive reasons to build factories, improve efficiency, earn sales, make profits and pay off the debts, it's great. But if you didn't or make mistakes, such as to seek too much expansion, you will suffer.

Agriculture
I am bullish on agriculture everywhere, especially in China, as it has been depressed for 30 years globally.