If you’re concerned about high inflation and geopolitical uncertainty right now (who isn’t?), there’s one person worth listening to: investing legend Jim Rogers.
From 1973 to 1980 — a time period marked by spiking consumer prices and elevated global tensions — his Quantum Fund delivered a whopping 4,200% return versus the S&P 500’s 47% gain.
Rogers attributed the success to several factors.
“I was working very, very hard. I still love what I'm doing. But I'm not working nearly as hard as I did them,” he told Kitco News earlier this year. “There were many opportunities that we took advantage of all over the world, and we used a lot of leverage.”
Could this be another opportunity for Rogers to apply his expertise? He’s certainly confident about what to do in today’s environment.
“If you can find assets that are going to go up in price during inflation, that’s one way to be successful, or if you can find hated assets. “
Let’s dig in and figure out what Rogers means by that.
Don’t count on central bankers
Central banks use monetary policy to manage inflation. Increased interest rates lead to higher borrowing costs and, in turn, discourage consumer and business spending.
Earlier this month, the Fed raised rates on its benchmark Federal Funds Rate by 0.5% its second increase this year.
But Rogers doesn’t think this is enough to put a stop to spiking price levels. In fact, he believes in not having a central bank at all.
“Very few central banks ever in history have gotten it right about anything,” Rogers says. “The best thing they could all do is resign, stop printing money and resign, let markets determine interest rates.”
Rogers points out that whenever central banks print huge amounts of money, it has “always led to higher inflation.”
So don’t expect price levels to drop anytime soon.
A very basic asset class
What are the specific assets that, in Rogers’ words, “go up in price during inflation”?
One asset class that certainly fits that description is commodities.
Commodity prices are commonly believed to be a leading indicator of inflation. When the cost of raw materials goes up, that eventually gets reflected in the price of final products — and consumer prices go up.
Rogers knows the importance of commodities. He created the Rogers International Commodity Index in 1998. The fund that tracks the index — Elements Rogers International Commodity Index-Total Return ETN (RJI) — is up 57% year over year and 25% year to date.
Rogers singles out agriculture as a particularly attractive commodity right now.
“Agriculture is still incredibly cheap on a historic basis,” he says. “More people study public relations than study agriculture in America. So something's got to happen. We're not going to have any clothes. We're not going to have any food. So I would buy agriculture.”
For an easy way to get exposure to agricultural commodities, Rogers says you can look into the Elements Rogers International Commodity Index-Agriculture Total Return ETN (RJA).
Rogers also believes in taking a contrarian approach to fighting against inflation, using the country of Venezuela as an example.
Rogers can’t invest in Venezuela due to U.S. sanctions imposed on the South American nation in 2019. But he thinks the long-term risk/reward tradeoff might be worth it for those who can.
“That's the kind of place that if you get it right, when there's a disaster on, you will probably be successful in a few years,” he says. “I'm not advocating Venezuela, it's illegal for me now. But it might have been an opportunity and is for some people where it's not illegal.”
A relatively safe way to gain exposure to Venezuela is through U.S. companies that have joint ventures in the country. Oil giant Chevron, for example, is ready to take control of its Venuezelan joint ventures if Washington eases its sanctions.
Earlier this week, the Biden administration said it was moving to ease a few economic sanctions against Venezuela.
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