Emerging markets are going on for a ride and India could be one of the hottest pieces of the pie to have right now, says US-born investment guru Jim Rogers.
Indian blue chip indices have surged over 50 per cent from their March lows, and midcap and smallcap indices have seen an even better rally climbing up to 80 per cent, thanks to support from the central bank and hopes of a Covid-19 vaccine. “There is so much money being printed nearly everywhere and spent. So it has got to go somewhere. Emerging markets were also beaten down a lot. So we are seeing them rally. Look at what is happening in India. Everyone is investing there now. It is hot,” said Rogers, who co-founded Quantum Fund and Soros Fund Management.
The septuagenarian investor, however, said currently he is not invested in India and he rues it. He partly blamed his laziness for this. “Clearly, anybody who is invested in India has been very smart and very wise,” he said in a telephonic interview from Singapore. Rogers is extremely bullish on precious metals and says gold and silver should continue to rise as people will keep buying them, resulting in new record highs. The veteran investor himself has been piling on gold and silver continuously since 2019 and says he will keep doing it for a while.
This year, gold and silver have outperformed most other asset classes. Year to date, silver is up 50 per cent and gold 28 per cent. “I expect gold to continue to make new highs; silver is down about 45 per cent from its all-time high. I would expect silver to make all-time high too, before this is over. Silver is certainly cheaper than gold on a historic basis. I would expect both to continue to do well, because the world is going to have problems in the next few years,” he said.
In recent months, many veteran investors have shown their affinity towards bullion. Even Warren Buffett, who often derided the precious metal, bought $563 million worth of shares of a Canadian gold miner in hopes that a rally in precious metals will lift the stock as well.
Explaining the phenomenon when pro-risk asset classes such as equities are rallying along with an anti-risk asset class gold, Rogers said it is just a reflection of loss of confidence in the governments.
“Throughout history, when people lose confidence in currencies and governments, they have always bought gold and silver. We are in a period like that again. It is my view when there will be less and less confidence in governments and central banks, gold will go up. People everywhere are losing confidence in money, as central banks are printing a staggering amounts of it,” Rogers said.
Rogers said he would bet on China and Japan this year, especially he has been buying Japanese ETFs. “I know that the Bank of Japan goes on printing money, and then buys bonds, buys other stocks, buys ETFs. So I would buy Japanese ETFs, because that is what they are doing and they have more money than I do,” he said.
“I would also invest in emerging markets, and certainly places like India, if one has the expertise and knowledge. Agriculture is still very depressed there,” he said.
Agriculture has been one of the silver lining in the slumping economy. Agricultural GVA grew 5.7 per cent year on year during April-June 2020, as per data released by the government. This was in contrast with an overall contraction of nearly 24 per cent in the economy. Shares of agritech and fertilizer companies have also rallied, as India has seen record kharif sowing. Even tractor sales, a high frequency indicator of rural demand, has seen massive growth in recent months.
Rogers, who has seen many ups and downs of the markets, says he sees signs of bubble in the tech stocks rally, echoing the thoughts of his peer Mark Mobius, who is also known for his expertise on emerging markets.
“What is happening now is there are bubbles developing in some parts of the global markets. Some American stocks never go down; they go up nearly every day and that has always turned into a bubble. Some of these stocks are going to go down dramatically. Stocks that seem to never go down currently are going to go down a lot some day and many people are going to suffer. Be careful,” Rogers warned.
He also thinks sovereigns piling on debt to deal with the pandemic could be detrimental to the health of the world economy 3-5 years down the line. His criticism was directed at the US, which has rolled out huge stimulus packages by borrowing from the market.
US debt is projected to exceed the size of the entire economy next year as per the Congressional Budget Office. It will be the first time the federal debt could be bigger than the US GDP since 1946, just after World War II.
“Countries that have resorted to such measures are ultimately going to suffer. It slows down growth, when you have huge amounts of debt. Everybody wants to get elected in November (during US elections), but a couple of years from now, people are going to be saying oh, what do we do now?” Rogers said.
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