Jim Rogers, 75, billionaire investor and chairman of Roger holdings reckons that the “next bear market will be worst in his life”.

To call last weeks sell-off in assets a correction or the beginning of a new mild bear market would be too optimistic, according to the seasoned investor Jim Rogers.

The cumulative wisdom of some of the world’s top investors is warning of serious trouble ahead. Bear growls have recently been heard from Peter Schiff who also believes “that we are near the end game”.

Even Bridgewater’s Ray Dalio (the world’s largest hedge fund with AUM of US $119 billion in 2017) has flip-flopped from being a bull in stocks and now prefers to call the recent rout in risk assets a volatile period.

Jim Rogers, 75, billionaire investor and chairman of Roger holdings reckons that the next bear market will be worst in his life

 

So why does Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn and that the “next bear market will be worst in our life”.

In a word, the problem is debt, according to Jim Rogers. “Debt is everywhere, and it’s much, much higher now” said the veteran investor.

Indeed, global debt has reached the US $63 trillion, according to the visual capitalist.

Moreover, the US share of the global debt is 31.8% (US budget deficit is an unimaginable 20 trillion dollars). Japan is also burdened with 18.8%-US $12 trillion of the global debt.

So the global economy is extremely vulnerable to rate hikes.

 

“Debt is everywhere, and it’s much, much higher now”

JIM ROGERS

Jim Rogers believes that so much debt was accumulated during the financial crisis as governments tried to expand their fiscal spending to jump-start their economy. But the “recovery” built on debt led to lackluster economic growth which hasn’t replenished the government’s coffers with tax revenue.

Now we got to pay the piper the de-leveraging of debt isn’t going to be fun.

Jim Rogers is not surprised that US equities have resumed their sell-off, he expects it to continue.

But Jim Rogers isn’t going to be pinned down and say exactly whether the current sell-off is the “next bear market which will be worst in our life”.

“I’m very bad in market timing” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

Eventually, we will have a “severe bear market” he reiterated.

Eventually, we will have a severe bear market – Jim Rogers

So how severe could this bear market actually get?
That got me going back to the historic price charts.

This century the Dow plunged more than 50 percent during the financial crisis, from a peak in October 2007 through a low in March 2009. Moreover, the IT bubble the Dow sank 38 percent from its high during 2000 through a low in 2002.

But Jim Rogers says that “the next bear market will be worst in our life”.
So I went back even further in time to the great stock market crash of 1929.

The 1929 crash wiped 90% off the value of stocks. But the current bubble is so much greater by any measure. Could the coming fall of US stock markets be at least 95%?

Some say yes, that the end of the multi bull market propped up on QE could be just as devastating. Moreover, you would be mistaken to believe that the wait and hold approach worked out well for investors back then, as it took stock investors 26 years to get back to the 1929 level.

Perhaps Jim Rogers view that the “next bear market will be worst in our life” is not sensational, bearing in mind that today, despite all the monetary stimulus the Nikkei is still 40% below 1989 peak level, despite the BoJ’s massive money printing effort and zero interest rate policy. In the peripherals of Europe, the stock indexes have not recovered from the 2007 financial crisis.

Jim Rogers is known for his bearish views.
“Jim has been talking about severe corrections since I started in business over 30 years ago” said Alibaba Group Holding Ltd. President Mike Evans, a former Goldman Sachs Group Inc. banker. “So I’m sure he’ll be right at some point.”

Jim has been talking about severe corrections since I started in business over 30 years ago – Mike Evans (President, Alibaba Group Holding Ltd)

Moreover, don’t count on the new Fed Powell to save the day, bearing in mind that the US President Trump can only appoint a Fed chair from a selected group of candidates given to him by the Fed’s private shareholders.

Moreover, Fed transcripts show that Powell had little enthusiasm for quantitative easing QE3.

“I’m supporting (the decision) with a certain lack of enthusiasm, and I am somewhat uncomfortable with the road that we are on,” Powell said at the Fed’s September 2012 meeting, when policymakers agreed to begin buying $40 billion in mortgage-backed securities a month to help keep interest rates low and boost hiring and investment.

Powell himself has stated that he was concerned that quantitative easing would end up being habit-forming for the markets.

But surely President Trump who campaigned stating that the stock market was a “big fat ugly bubble” only later to take credit for the fake bull market when he got elected will prevent next bear market from being the worst in our life.

The President’s Working Group on Financial Markets or better known as the Plunge Protection Team (PPT) will step in to prevent a crash.

Sure, those “elevator” vertical moves upwards in the price chart suggest PPT intervention. But it is a very short-term fix, in the absence of buyers price discovery will follow then we will see prices take the “escalator” downwards again.

Perhaps it would be unwise to ridicule Jim Rogers; “next bear market will be worst in our life” view. Ultimately the market will do what it wants to do, it is like the tide-you can’t stop it.

TRADING SOFTWARE

Dan Loeb targets Sony. Dan Loeb is an activist investor and founder of Third Point, which oversees about $14.5 billion in assets.

Last year the activist investor viewed Campbell soup as a bargain when Third point reported that the soup maker could fetch a takeover value of $52 to $58 per share.

A year later and the activist investor Dan Loeb targets Sony

Dan Loeb's activist hedge fund Third Point is raising an investment vehicle to generate between $500 million and $1 billion so it can continue to buy Sony shares, according to a recent report in Reuters.