Jim Rogers Was Right About the Credit Crisis…20 Years Ago

Famed hedge fund investor Jim Rogers has often said he is not a “trader”, as that term is used, because he can never get the timing right. He says he almost always is too early on a trade.

In the last decade, his timing seemed to be more “on” than “off” as he predicted the rise in commodities that we saw up through 2008- along with the rise in China as an economic force to be reckoned with on the world stage.

But maybe Jim Rogers is famous for simply being “right” every once in awhile. You know the old saying- that even a broken clock is right twice a day.

I was struck by how hard it is to be an economic and investment forecaster while I was reading a book called “Market Wizards: Interviews with Top Traders” by Jack Schwager.

It’s a roadmap, of sorts, for those who want to be superstar traders.

The version I was reading was from 1988, and was published right after the Crash of 1987 when it seemed that the bull run of the American stock market could be coming to a swift end even as the markets bounced off of the 1987 lows.

Jim Rogers was one of the traders interviewed for the book.

I was struck by how eerie his forecast was for the future.

Q: Given the magnitude of the deficit problem, is there anything that can be done at this point? (in talking about the collapse of the dollar)

A: The basic problem in the world today is that America is consuming more than it is saving. You need to do everything you can to encourage saving and investment: Eliminate taxation of savings, the capital gains tax, and dual taxation fo dividends; bring back the more attractive incentives for IRAs, Keoghs, and 401Ks.

At the same time, you need to do everything you can to discourage consumption. Change out tax structure to utilize a value added tax, which taxes consumption rather than saving a nd investing.

Cut government spending dramatically - and there are lots of ways of dxoing it without hurting the economy too badly. We would have problems, but the problems would not be nearly as bad as when they are forced on us. If we don’t bite the bullet, then we are going to have a 1930s-type collapse.

Sound familiar?

Rogers was just 20 years too early. The government didn’t do anything he suggested and the American consumer kept spending and a consumption lifestyle took over.

In other parts of the interview, he talks about how Americans saved only 3 to 4% of their income and that couldn’t be sustained.

Many investors and economists saw the impending economic crisis coming. Some warned of it way too early- as Rogers did.

He, at least, admits he stinks at market timing.

Where does that leave his current predictions though?

Commodities, Commodities, Commodities

He still believes we are in the middle of a multi-year commodities bull market, despite the recent downturn in commodities prices.

He recently told Seeking Alpha:

You’ve been bullish on commodities for a long time, recently you said you’re buying the Rogers Metal Index. Do you think that the Obama stimulus plan will create more demand for commodities?

Rogers: Well of course, anything that causes a revival of economic activity causes a revival of demand for everything including commodities. I mean if you’re gonna build bridges you’ve got to build them out of something you cannot build virtual bridges you have to build real bridges, etc.

As with anything with Jim Rogers- he could be right in 2009 or maybe 2010 or 2011 or beyond.

Investment forecasting isn’t easy- even for the “gurus” or superstar traders. Even they can be 20 years too early.