The veteran investor provides a global roundup, with a preference for Asian stocks
At 75, veteran investor Jim Rogers remains as sharp and feisty as he was two decades ago when I first met him at Columbia Business School.
More importantly for investors in search of ideas — he’s just as opinionated.
Like him or not, Rogers is worth listening to because he has a respectable record. Sure, he makes mistakes. Most recently, he regrets not buying bitcoin ahead of its massive run-up, as a lot of people do (including me).
But he famously made a bundle alongside George Soros in the Quantum Fund. He also made a great call on commodities in the late 1990s when he turned bullish ahead of an extended bull run, and set up the Rogers International Commodity Index (RICI).
Given his experience and record — and all the uncertainties in the world — I recently checked in with Rogers in Singapore, on what to buy and what to avoid. Here are the highlights.
Lighten up on U.S. stocks
Rogers says he has little exposure to U.S. stocks. He thinks there’s a bubble forming in popular names that seem to go up every day, such as Amazon.com Inc. AMZ, -0.22% And he’s a little worried about narrowing market breadth, which can precede a selloff of the S&P 500 SPX, +0.21%
He’s not overwhelmingly negative on U.S. stocks, however. After all, the Federal Reserve will probably step in and save the day if there is another serious setback, he says. And like Ed Yardeni of Yardeni Research, Rogers thinks there could be a melt-up in U.S. stocks before there’s a meltdown. “There is enough easy money to keep things going,” he says.
Instead, he’s underweight U.S. stocks mainly because there are better opportunities elsewhere. Let’s take a look.
While U.S. markets are trading near all-time highs, Japanese stocks are still about 50% below their highs of a few decades ago. “And the government is doing more than America’s to keep things going,” Rogers says.
For example, Japanese Prime Minister Shinzō Abe and the Bank of Japan are “printing money” to prime the economy. They’re also using it to buy Japanese stocks. “This is ruining Japan, but it is fabulous for Japanese stock holders. I don’t know why the Japanese stock market won’t go back to its all-time highs, like markets everywhere else in the word.”
The Japanese economy has posted seven straight quarters of growth for the first time in 11 years.
“We expect the momentum to carry over into 2018,” says Goldman Sachs Japan strategist Naohiko Baba, who expects 1.5% economic growth next year.
Rogers doesn’t reveal exactly how he gets exposure to Japan — or any of the investment themes here. But he prefers passive investing via exchange traded funds (ETFs). That’s a lot easier than researching individual companies. So for exposure to Japan, I suggest iShares MSCI Japan EWJ, +0.82% WisdomTree Japan Hedged Equity DX, -0.14% or Deutsche X-Trackers MSCI Japan Hedged Equity DBJP, +1.14%
Along with the money managers I spoke with for this column, Rogers is bullish on Russia. One reason: It’s a “hated market,” he says. This suggests it might be a good place to put money as a contrarian. Indeed, its stock market looks cheap compared with forward earnings estimates. And Russia is in the early stages of coming out of a recession, which is often a good time to get exposure to a country. believes
Russia’s economic fate is linked to the price of oil, as it is a major energy producer. But this should be a tailwind because oil is probably in an uptrend from here, or at least in the process of bottoming, Rogers says. Outside of the U.S. fracking boom, known oil reserves continue to decline, he says.
Rogers expects more turmoil in Saudi Arabia, following recent steps by Crown Prince Mohammed bin Salman to consolidate power by having wealthy rivals locked up on corruption allegations. “They won’t just say ‘OK, I am going away.’ There is going to be resistance,” Rogers predicts. Further turmoil would again put a bid under oil because it would heighten concerns about instability in the Middle East.
Rogers also thinks Russian government bonds look particularly attractive because of their high yields.
To get exposure to Russian stocks, consider VanEck Vectors Russia RSX, -0.13% the iShares MSCI Russia Capped ERUS, -0.23% , or the VanEck Vectors Russia Small-Cap RSXJ, -0.36% Bond ETFs with exposure to Russian debt include ProShares Short Term USD Emerging Market Bond EMSH, +0.00% and Vanguard Emerging Markets Government Bond VWOB, -0.15%
And buy China
Rogers has been a big China fan for years. He even moved to Singapore from New York City’s Upper West Side to be closer to the action. Rogers remains a China bull. “Their economy is doing very well,” he says.
China has several qualities that help investors. The Chinese are big savers. China is a big exporter. So it has a lot of exposure to synchronized global growth. “If the world economy continues to be OK, China will be OK,” Rogers says.
China’s economic growth will probably come in at 6.9% this year. Morgan Stanley’s China research team expects the country to continue to outperform most other emerging markets next year, in part, because of continued income growth and progress on managing its debt levels.
Rogers concedes that large Chinese government debt is a “huge worry.” But he says investors face the same concerns if they put money in the U.S. or the U.K., which also have lots of debt. “If and when we start having debt-related issues, China won’t be the only problem in town,” he says.
To get exposure to China, consider these ETFs: iShares China Large-Cap FXI, +0.06% iShares MSCI China MCHI, -0.56% iShares MSCI Hong Kong EWH, +0.46% SPDR S&P China GXC, -0.78% and KraneShares CSI China Internet KWEB, -1.00%
Bullish on the dollar
“It has been nine years since the last bear market,” says Rogers. “That doesn’t mean one has to happen. But historically, it’s overdue.” Rogers expects turmoil to return to the financial markets at some point over the next year or two. What might spark it? There might be a debt-related financial crisis in Illinois. There could be war in the Middle East.
“The world is fraught with problems,” he says. “It is more likely that something is going to go wrong, than not.”
Rogers likes the dollar as a hedge against turmoil. “In times of turmoil, people look for a safe haven. People think the dollar is a safe haven. It is not. But people think so.” And that will be all that matters, when turmoil strikes.
Bitcoin has performed amazingly well, so it’s tempting to buy. Don’t bother, says Rogers. “It looks and smells like all the bubbles I have seen throughout history.” True, bubbly assets can continue to march higher than any rational person imagines possible. So there could be further gains. But messing around with bubbles is risky. Better to just stay away. “I have missed it, whatever it is,” Rogers says.
There is risk in the Swiss franc
Oddly, the Swiss central bank has big exposure to FANG stocks, or Facebook Inc. FB, -0.05% Amazon.com Inc. AMZN, -0.03% Netflix Inc. NFLX, -0.04% and Alphabet Inc. GOOG, -0.01% ( GOOGL, +0.06% That puts the currency at risk, Rogers cautions.
“The world has had financial problems since the beginning of time, and we will again.” When serious stock market sell-offs return in the U.S., “the Swiss franc will be a disaster,” he says.