‘Worst recession of my lifetime’: Jim Rogers issues stark warning on US economy

The recent stock market slump in the US has raised concerns about President Donald Trump's economic policies such as tariffs, immigration crackdowns and federal budget cuts. Will these policies eventually benefit the market and investors?

This seems unlikely, said Jim Rogers, a renowned global investor, author and commodities guru. Rogers has already sold US stocks and his money is going to the US dollar, which has been strengthening. 

In an interview with Mint, he said while he believes Trump wants to 'make America great again', his administration will find it hard to walk the talk. He also said he expects the US economy to soon be hit by the worst recession of his lifetime. He said while he is tracking the Indian market, he will invest in it only if asset prices fall further. 

Here are some edited excerpts from the interview.

Why have you sold your US stocks? How much scope do you think President Trump has to ‘make America great again' and at what cost?

I sold my US stocks because I believe America is going to have problems. The country has not had any problems since 2008 – the longest such period in American history. This is why I believe the country will have problems.

Also read: Why Trump’s trade war with China is bad news for Indian chemical exporters

Whether it will be due to actions taken by the President Trump or anyone else will only be known in the future, but we will have problems. It has been 15-16 years since the last recession, so it's long overdue. Brace for an economic slowdown, recession and inflation troubles.

How do you see Trump tariff war playing out? What is the US administration is trying to achieve with tariffs?

President Trump does not know what he wants to do. He keeps changing his opinion. He keeps saying he does not want a recession in the US economy and he wants to see America successful. That's great. But merely saying it does not mean that it will happen. We are surely going to have economic problems in the US in the next few weeks if the tariff war continues.

The dollar index has already started falling amid concerns of recession. How bad could the potential recession be?

I suspect that the recession will be the worst in my lifetime because it has been so long since we've had one. I don't want it to happen, but we can't prevent it.

What should the US administration do in the current scenario?

US politicians have very rarely done the right thing. In my view, they should cut spending dramatically. They should cut debt and taxes, too. They are not going to do it. They never do the right thing, but this is what I would have done and should be done.

Do you think an aggressive US Federal Reserve will ease interest rates to support the US economy if it is hit by the proposed tariffs?

They will surely cut interest rates at some point in future because they don't know anything else. Central banks in most countries don't have very smart people. This is especially true for the US. All they know is cutting interest rates and that is what they will do. They will hope it causes the recession to be less bad and the economy to get better consequently, but this will not happen. They will still hope so and go easy on interest rates.

Gold prices have already rallied on global uncertainty. Should investors be in silver now?

I hope I am smart enough to buy more gold if it goes down tomorrow. I certainly hope that I will buy some more silver, too. It was already down. I want to buy both. Both will continue to do well and I believe both will be a good place to invest. Gold is down from its all-time high and silver is down 50% from its all-time high. I will buy more gold, but silver first.

Foreign investors have gone back to China. Is this a temporary phenomenon or has China got its mojo back?

America and the West is going to send more gold to China because the country has continued to buy more gold and silver. I suspect more gold will keep going to China partly because the Chinese do not want American currency. They are worried about the strength of the US currency. You will see more money going to China from the West.

Also read | Truth or dare: Close the deficit in clarity over the impact of Trump’s tariffs

Which emerging markets look good to you?

I would mainly look at China if I were looking to invest more money because most other markets have done well in the past few weeks.

Where has your money moved?

I am mainly invested in US dollars because in my view when people are worried they tend to invest in dollars. They feel the US currency is safe. So big money will go to US dollars. That is where my money is going, too.

What about the Indian market? Do you see valuation comfort after the recent fall?

I am optimistic about Indian markets. I really think people in Delhi now understand that they have to have a sound economy and prosperity. They used to say it but now they understand it too. 

I have invested in India before, but never with a lot of enthusiasm. For the first time in my life I can feel enthusiasm to invest in India as prices are going down, but it is not down enough for me to buy.

Also read | Trump reciprocal tariffs: Here’s the best-case scenario for India 

The Indian market hit an all-time high not very long ago. I want to buy India but not yet, despite the recent market correction. Timing the market is difficult. I hope I am smart enough to buy Indian shares if prices go down further.

This is the second part of a five-part series on global investing. Read the first part, on how to invest in China, here.