'The next one has to be worse than 2008': Legendary investor Jim Rogers says you shouldn't trust the stock market's rally - and warns of a scenario where 'everything collapses for a while'

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'The next one has to be worse than 2008': Legendary investor Jim Rogers says you shouldn't trust the stock market's rally - and warns of a scenario where 'everything collapses for a while'
  • Legendary investor Jim Rogers says this pandemic has likely triggered the epic market crash he has been anticipating for years.
  • Rogers expects the current rally to be nice and possibly last through the election in November. But he eventually expects everything to collapse for a while.
  • He calls the Federal Reserve's response to the coronavirus crisis "absolute madness."
  • Rogers notes that 100 years ago the UK was the richest and most powerful country, and says they lost that spot because they spent a lot of money and went deep into debt. He believes America is now setting itself up for the same fate.
  • When asked how he would design America's response to the economic crisis caused by this pandemic, Rogers responds, "I would abolish the Federal Reserve and resign."
  • Visit Business Insider's homepage for more stories.
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Jim Rogers is the chairman of Rogers Holdings and is well known for the success of the Quantum Fund which he cofounded with George Soros.

In an interview with Business Insider's Henry Blodget in 2017, Rogers said he expected the biggest market crash in our lifetime within a few years. Now years later, as we face the coronavirus crisis we talk to Rogers about whether this pandemic will trigger the correction he has been preparing for. Following is a transcript of the video.

Sara Silverstein: Jim, we spoke to you a few years ago and you predicted the worst crash in our lifetime would come in the next few years. Is this the crash that you were talking about and what do you expect to see?

Jim Rogers: Well you know, Sara, first I was surprised that anybody paid attention to that because in 2008 we had a very serious problem because of too much debt. Since then, the debt has skyrocketed everywhere, so it seems to me self-evident. The next one has to be worse than 2008. People seem to be surprised.

Anyway, so yes, this is probably it. I'm sure that the rally is going to be nice. It already is a nice rally. You know, governments all over the world are spending huge amounts of money, printing huge amounts of money. There is an election in November, so the rally will probably be nice, but it's not over, Sara, it's not over.

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Silverstein: How far do you think the dip could go to the bottom of this crash?

Rogers: Well, Sara, I have no idea. You should watch Business Insider if you want to know that sort of thing. I can tell you in history, bear markets go down 50, 60, 70% this is just history. This is not an opinion and many stocks go down 80, 90%. Some disappear. That's just the way bear markets work.

It's not fun unless you're short or something like that. No, that's what bear markets do. If you're old enough to remember 2008 you can remember what happened to some stocks and some companies, and even gold collapsed for a while. Everything collapses for a while.

Silverstein: So what is your advice to investors who are worried about how to position their portfolio?

Rogers: My advice to any investor every day of their life is only invest in what you know. You yourself, don't listen to some guy you saw even on Business Insider, unless it's Sara, maybe. Don't listen to other people because when problems come, you won't know what to do and they might be wrong.

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So stay with what you know, and then you will know how to go through it. If you don't know anything, do nothing. Put your money in the bank and wait and watch the rest of us lose money.

Silverstein: And you talk about -

Rogers: Don't listen to anybody, Sara, if you are an investor in good times or bad times, stay with what you yourself know a lot about.

Silverstein: And you talk about all the leverage that we have right now. That was a big problem in 2008, we created a lot of things to protect against that and protect banks from that. Are things just as precarious as they were then?

Rogers: No, they're worse. They're much worse. Sara, in 2008 China had a huge amount of money saved for a rainy day. It started raining. They started spending that money and helped save the world. Now even China has debt. China has a lot of debt and who's going to... Nobody's got any money saved up for a rainy day. Maybe North Korea. They don't have any debt, but they certainly don't have any savings either.

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Who's going to save us? You know who's going to save us, Sara? The Easter Bunny. That's who's going to save us. If you listen to Washington DC or London or Tokyo, the Easter Bunny is going to save us. Don't worry.

Silverstein: That's very concerning. What is the fear of having everyone be in too much debt? It sounds like some people don't worry right now about the balance sheets of the countries. Is that something that we should be really worried about and what does the fallout from that look like?

Rogers: Sara, throughout history it's a simple lesson. Again, this is not some opinion. Countries that get too deeply in debt and get overextended wind up deteriorating.

one of the things that history teaches us is people don't learn the lessons of history.

In 1919, 1920, UK was the richest, most powerful country in the world. There was no second in 1920. Well, they started spending a lot of money, went deep into debt and they're not even in the top 25 anymore. Because they just went over the cliff and made a lot of mistakes.

Everybody does it. It's not an opinion, it's a simple fact of history. But you know, Sara, one of the things that history teaches us is people don't learn the lessons of history. They just ignore history and go on as though everything is different now.

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Silverstein: How do you evaluate the Fed's response to the recent crisis?

Rogers: Absolute madness. Incomprehension to me. If somebody had said 20 years ago, 30 years ago, that any central bank much less a responsible central bank could act like this, they would've stopped talking to you, you would've left the room. But it's happening and we're sitting here watching it. We know it's happening.

These guys, their balance sheet after 2008 went up by 500%. This is a major central bank. Never in history, and now they're going to double it again. I mean these guys are going nuts. This is not good for... You have kids. I know you have. You're young. I can see you're young. You should be worried. Worried about your kids and you. I'm worried about you. I'm worried about about me and I'm much older than you. I'm worried about all of us. These guys are nuts.

Silverstein: Would you have liked to have seen the Fed completely unwind its balance sheet and raise rates while things were good?

Rogers: First of all, they should not have done what they did in 2009. They thought there was saving the world. If you spoke to them in their unguarded moments, they would say, "Yes, this is an experiment. We don't know. We hope this is going to work."

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Now we're all going to pay a horrible price for them because if in 2008 the Fed's balance sheet was $800 billion with a B. Now we're talking trillions with a T, T as in tango.

No, this is all... I mean your kids, you, my kids, even me, it's going to be the same thing that happened to the UK in our lifetime.

Silverstein: What is the motivation? What do you think is misaligned about what the Fed is doing right now? Why are they doing what they're doing if it's not right?

Rogers: Sara, there's an election in November. You're on Business Insider. You know there's an election coming. Go over and ask Henry. He will tell you. There's an election coming up. What do you mean why are they doing it?

Why do you think the Bank of Japan is doing them? The head of the Bank of Japan goes to work every day, cranks up their printing presses as fast as he can and starts buying stocks and bonds. It's astonishing what's happening in Japan. It's astonishing what's happening in America, but Japanese too? This is supposed to be a legitimate central bank and a legitimate country.

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Silverstein: And the Feds expanded what they are willing to buy. Do you think they could expand and actually start buying stocks?

Rogers: Oh sure. Well you got to change a few rules first, but the Japanese changed the rules. They are now buying stocks. They were buying bonds and ETFs. Now they're buying stocks, having a wonderful time. The stockbrokers in Japan love what's happening.

Silverstein: Are they doing it just to keep the markets afloat, is that the motivation to keep the stock market elevated?

Rogers: Now, Sara, you know better than that. They're not going to say something like that, of course not. they're saying we're saving Japanese civilization and the Feds are saying we're saving American civilization for our children and grandchildren.

They are ruining our children and grandchildren. No, they're not sitting there saying, "We're doing this for an election. We're not doing this to get votes." They're saving civilization as we know it.

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Silverstein: As an investor, how do you think about something like that? If fundamentally you think that something is overextended from a valuation perspective, but you know that the Fed is there with a safety net. What are investors supposed to do right now?

Rogers: Well, I said before, there's a rally going on because central banks all over the world are playing this game and they've got a lot of money. They still have printing presses. We may run out of trees eventually, but so far there's still enough trees around to print money and I don't know what people should do. I will tell you that I expect the rally to go on for a while, not just in America and Japan or other places. Because everybody is behind this at the moment and so we can't, we should have a very nice rally. It could even turn into a bubble before this is over.

If they've thrown caution to the wind, Sara, they're saying, you've heard of MMT [Modern Monetary Theory]. Well, this is it. It's here. Whenever there's a crisis, people come up with the craziest ideas, things that 10 years ago people said, "That's not even worth talking about." Now they're doing it. Come on, it's a crisis. There's an election coming.

Silverstein: Where are you finding opportunities right now?

Rogers: Well, I bought some Chinese wine stocks last week. Russian transportation companies, shipping companies.

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I'm looking, there are things, and if I weren't talking to you, I'd probably be buying Japan right now. The Japanese market went down a lot. They don't care about anything except getting the stock market up, so they're going to be up. Again, this is not sound, this is not good for 12 year old Japanese, but what do they care? This is going to happen.

Silverstein: And how far would the US -

Rogers: And China too, China is doing a much better, a less bad job than most people with what's going on now.

Silverstein: How far would the US stock market have to drop for it to be a "buy" for you?

Rogers: Well, I don't know. I mean, again, I might even be buying tonight depending on what I find and what I see.

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Some of the airlines, some of the transportation, some of the travel, restaurants, hotels. I mean these guys had been wiped out as far as the market's concerned. If I weren't so lazy, I could probably find some things right now if I weren't talking to you.

Silverstein: And you think longterm travel stocks will come back?

Rogers: Sara, look out the window. We're not going to ride the bus. We're not going to take the boat. I assure you we're going to take airplanes again. Japan Airlines is going to be around the rest of your life. I assure you, and most airlines will be around the rest of it. Not all, some have already started going bankrupt, but many will be.

Silverstein: You mentioned Modern Monetary Theory, which basically says that it doesn't matter how big our balance sheet gets. It sounds like you don't buy it. Is that true?

Rogers: That's what they say. They say you don't have to worry. You don't even have to sell bonds. Just get the printing presses out and... That's what they're doing in Japan now. Got the printing presses out buying stocks. They've already changed their rules. They were buying ETFs and bonds. Now they're buying stocks.

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Silverstein: What is it that people fundamentally misunderstand in your opinion, about that?

Rogers: That someday you have pay the piper. There's no free lunch. Come on, you work for Business Insider. You go down and ask Henry if there's a free lunch. There's no such thing as a free lunch. We're all going to pay the price just like in 2009.

These guys said, "We're going to try this. We don't know if it's going to work, but we're going to try it." Well, they made it worse and now they making it worse and worse and worse. Sara, I'm older than you. I know there's no such thing as a free lunch.

Silverstein: You're in Singapore right now. Can you just give us some perspective of what things look like there from the coronavirus crisis standpoint?

Rogers: Well, Singapore has done a very good job. Very few people have it. They closed down everything last week. Schools closed on Tuesday or Wednesday. My daughter's doing school from home now.

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No, everything is closed. If you go out, unless you have a very good reason, they come around and give you a ticket. They give you a summons. You better have a good reason to go out or they will be harsh.

No, they've closed the place down and they think it's going to break the spine of the spreading. So far it's gotten worse, as you can imagine. Everybody's home giving it to each other now.

Silverstein: You talk about my children and 12 year old children in Japan. What is your concern? What is this going to look like 20 years from now?

Rogers: Compare the UK in 1919 to the UK in 2019, for instance. That will give you one example. There are many other examples in history. Somebody has to pay for all of this eventually. Yes, you can say, "No, don't worry. Modern Monetary Theory. We've solved the problem. We're just going to kiss the radio, kiss the computer and everything is going to be okay." It's not.

Somebody's got to pay for it, we can't keep printing money. Print it, print it, print it, print it, but I assure you somewhere along the line, Sara, somebody is going to say, "Wait a minute, I'm not going to play this game anymore." I've seen this movie. I know this doesn't work. You ever been to Zimbabwe?

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Silverstein: No, I've never been.

Rogers: Well Zimbabwe's a country in Africa. Wonderful country. Been ruined. But if all you had to do was just print up a lot of money. My goodness, Zimbabwe would rule the world right now.

Silverstein: So what country is poised to come out on top? Is it going to be whoever can actually pay for what we're spending now?

Rogers: Well, yes, that's the way it's always happened throughout history. That's why America replaced the UK as the most powerful country in the world. We weren't always on top. In fact in the 19th century people thought we were, Oh my gosh, they used to laugh at us. They thought we were... They thought "Those people are nuts." Well, you know the rest of the story. So there is a transition taking place. China's certainly done a less bad job than we have. Russia, even.

To my shock, Russia may be doing a less bad job than what we are doing.

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Korea, because the 38th parallel will open up and that will give... When you take on a disaster, North Korea, it gives you lots of opportunities. They don't have debt. They don't have anything. So that when you have a new frontier opening up, that could be great opportunities for Korea.

I'm looking for the same thing you're looking for, Sara, don't worry. I want to find out before Henry finds out, before you and Henry put it all over Business Insider. If I find it, I'll tell you after I buy, okay

Silverstein: Okay, that's a deal. What do you think about the US's response from the stimulus package side or the relief package, depending on who you're talking to?

Rogers: The cure can be worse than the disease. There is an election in November. They don't care about what happens after the election. They want to get elected, and that's what they do. That's their job. A good politician gets elected, whatever it takes to get elected. Doesn't care about your kids or mine.

No, in my view, this is great for them. It's not good for the rest of us. We're all going to pay a horrible price just as the UK did. Go back and look at many successful countries that took the wrong path.

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Silverstein: If you were to design the US's response to the economic crisis that has been piled on top of this terrible coronavirus crisis, what would it look like?

Rogers: I would abolish the Federal Reserve and resign. I would have to resign. I'd probably be assassinated or thrown out. I would not print huge amounts of money. I would let nature -

Sara, in 2009 we had a horrible virus, the H1N1. It started in America. Nobody called it the America. We didn't close McDonald's. We didn't print staggering amounts of money. I mean, the world has been having viruses, epidemics since the beginning of time. 2003 there was a horrible virus. It was called SARS. We didn't close down the world. I'm not sure why. Maybe because the politicians got hold of this or the press got hold of them.

No, this has happened before. 2009 McDonald's did not close. Delta Airlines did not stop flying and it was an American virus. Much less to the rest of the world.

The world has adapted for hundreds of years. Human beings have a lot of resilience, but doing this to get politicians elected in November, not my idea of a good time. Yes, it's good for the market. It's good for stockbrokers. I tell you, move to Japan and become a stockbroker. They love what the Japanese central bank is doing. The Americans stockbrokers love what the central bank is doing, I happen to worry about young people. I worry about you. I worry about you and your children, and you're younger than I am. I worry about me and you're younger than I am.

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