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Jim Rogers Just Said Something Fascinating

by Matt, SGT Report:

Having just returned from Prague for a few days I’ve been behind on some podcasts that I normally listen to, a small list of YouTube interviews had built up and I’ve been gradually working my way through them.

The one I want to highlight here is a podcast from the ‘Ask The Expert’ series featuring Jim Rogers with Craig Hemke on behalf of Sprott Money. At just under 2 minutes into it Mr Rogers said something that made me sit bolt upright.

“Historically, once the Fed raises interest rates 3 times, it usually means the stock market is going to have problem. If it doesn’t happen after 3 times, historically it’s always happened after 4 times. So we will have another interest rate hike and that may be the death knell for the stock market and maybe even for the economy.” – Jim Rogers

I’d urge everyone to give it a listen

I may be biased here but I nearly always listen to what Jim Rogers has to say as he was one of the few early people to wake me up to what was going on around me. Having read Investment Biker back in the late 1990’s I immediately liked his approach to understanding how things worked and have read all his works since. I find them invaluable lessons and are well worth a read.

More recently he was one of the few that was mentioning that Gold in 2011 had had 12 years of increasing value and need a correction, which would be normal. 5 years into that correction he still thinks it can go lower but ultimately will be going to moon.

So it’s fair to assume I consider him to be a prescient indicator of what’s going on, all other things considered.

Essentially what we have is a well respected investor saying that historically once the Fed starts raising interest rates then by the third attempt you should be seeing signs of trouble. If you don’t then upon the fourth one they’ve never made it to a 5th one without calamity.

So, some backgound;

Only July 6th 2006 the Fed hit a rate of 5.25% (Link). Following the Housing Bubble Collapse the Fed took rates all the way down to 0.25% on December 16th 2008 where they remained for what seemed a lifetime.

The Fed started raising rates on December 17th 2015 and so thus far we have;

Dec 17 2015 up to 0.5%
Dec 14 2016 up to 0.75%
Mar 15 2017 up to 1.0%

The Fed’s rate hike on March 15th then was the third in a series of increasing rates so if Mr Rogers is correct, historically we should start looking for signs of trouble in the markets.

If he’s further correct, when the Fed next makes a rate hike then that’ll be the last before a crash.

It should be noted that he does add a small caveat that never before in history have they been coming off practically zero so maybe it could be different. I don’t think so, but maybe.

As more and more people seem complacent with the tremors of 2008 long gone and feel a sense of calm, I take the opposite approach. I sense unease ahead.

I hope I’m wrong, but it’s time to be prepared nonetheless.

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8 comments to Jim Rogers Just Said Something Fascinating

  • Ed_B

    Jim Rogers IS worth listening to but like many other pundits, we need to temper the words of others with our own thoughts and experience. Historically, we have never been at an interest rate as low as 0.25% and neither have we ever held such a low rate for such a long time. This has induced a surreal feeling in this market as if it was not quite real or like any other market ever experienced by anyone living today.

    Because of this, my focus, as an investor, has been to look at the history of the market and the Fed to see what an average long-time interest rate has been. My research shows this to be between 4.5% and 5%. Some say a little lower, some say a little higher, but this is a pretty good average. If we split the difference here and call this average 4.75%, that still leaves us with 15 of these little baby-step 0.25% rate increases. Fifteen! And that only brings us back to AVERAGE, not to a high rate of interest or an all time high but just average.

    So, I am not concerned about a few itty bitty interest rate rises or their ability to crash the market. Company earnings will massively outweigh this aspect of investing. That said, it is foolish to take the stability of any market for granted. There is no need or reason to panic but we DO need to be watchful. Paying attention to what is happening in the world is the difference between those who make money and those who lose money in the stock market. Be wary but do not be timid or frightened.

    • Eric

      You should check out his books sometime Ed. Hot Commodities is a must read. The rest are very good also.

      Don’t forget to subtract the CPI from that interest rate.

      4.75% – 2.7%CPI = 2.05%

      Then subtract food and energy price increases to find the real rate of return.

    • Johny Comelately

      Your logic is right, but you are forgetting something. With low interest rates come more leverage! Therefore, even an itty-bitty rake hike will have the same effect as a “normal” rate hike with less leverage. So the 4th rate hike could be the death knell!

  • Craig Escaped Detroit

    Markets / Farkets. This is better than a good, suspenseful Horror Flick. We know the monster is gonna come crashing into everything, we just don’t know exactly when it will arrive.

    Shields up. Gates closed. Defensive weapons at the ready. Now just sit tight and go about our business.
    —-
    Fill up a few of those SEED TRAYS with potting soil and started a variety of seeds (each tray has 72 “cells” and a plastic-roof-greenhouse cover. Wonderful items.

    72 cells planted with sweet corn, 24 cells planted with Daikon Radishes, 12 cells of watermelons, 12 cells of eggplant, 12 cells of Spaghetti Squash.

    72 cells of garlic, and 72 cells of onions. I already have about 100 row-feet of potatoes just starting to come up, and about 100 pearl-marble sized onions planted too.

    In the next few days, I’ll be planting a bunch of other things too.

    So, if THIS is the year when the SHTF, I’ll be ready for it, and if we don’t get the crash? Then I’ll just have a BUNCH of fresh, chemical-free food to eat and won’t even have to go to the grocery store to buy it.

    You never heard of Daikon Radish? Also known as Japanese white table radish. Bigger than a carrot, but if left to grow until winter, can be as big as a large squash. 18 inches to 2ft long and as fat as a softball.

    These are commonly used both as a winter cover crop, and to add humus to the soil when a freeze kills the crop. These make a long tap root-feeder/sucker, up to 30″ deep, break up the soil, and bring nutrients UP from deeper down.

    I’m gonna plant the entire garden, in the fall, with Daikon & winter-peas together, to add nutrients to the garden for spring. When this stuff is getting mature & big, I’ll mow it down and let it die & rot “in place”. You plant the radish, about every 6″ “on grid”. When it rots in the spring, (and stinks), it leaves holes like somebody pushed a baseball bat into the soil at every position. Breaks it up well. The winter peas add nitrogen. Ready for spring planting.

    OK everybody, get ready in your own way. For now? We’ll just put up with the boredom of waiting for the pot to boil.

  • KRELL427

    SGT Sean interview with V on rogue money. https://youtu.be/zlfP4TjXQbY

  • cmore butts

    Who knows how long thi s dog and pony show will go. Somewhere between big brother and usurping 4th amendment to allowing private banks to run our gov’t and do what they do best enrich themselves. Oligarchs vs peasants. A handful of old geezers with liver spots are steering Americans like cattle to the slaughter house. Only now are people beginning to wake up. Probably too late. America stood and voted against hillary….then the majority went back to sleep after voting a business man into office who has no political experience. Memo to trump: I handle the business side let pence handle the political side. Hire an arsenal of attorneys to keep the wolves at bay with the neo Nazi prpaganda….unload the SS….we secret service. Bring in dedicated servicemen like narines..to guard u…..think about what AS did to Kennedy.
    .

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