James West: Quite the historical event. Brexit surprised everybody and delivered a “Leave” outcome. What do you see that doing for global markets in the near and medium term?
Jim Rogers: Well James we already have some countries and sections sliding into recession. This is just another straw that’s going to make it worse. Whenever bear markets happen, you always start having bad news, and makes them worse. We’re going to have a very serious problem in the next couple of years. You should be worried.
James West: I am worried. So how do investors play this right now? I mean is it a time to buy gold? Is it a time to buy treasuries? Should people be getting out of equities? Bonds? What should they be doing?
Jim Rogers: Well I can tell you what I’m doing but nobody should listen to me. They should only invest in what they themselves know a lot about. I’m short stocks in the United States, I’m long the United States dollar, I’m long agricultural commodities, I own some shares in China and a few other places. But basically I’m short the U.S. stock market and long the U.S. currency.
James West: I see. So Brexit really hasn’t changed anything for you?
Jim Rogers: No. You know, it just made it…I’m having a good day!
James West: Sure! Actually I was just looking over the last time we spoke a few months ago, and you very sagely said that markets were going to experience a higher degree of volatility, and I mean nobody could have forseen the Brexit vote which I guess was kind of an idea that David Cameron came up with. But certainly you were right in your prediction that volatility was going to be the dominant theme in 2016.
Jim Rogers: Well yes…you think 2016 is bad. Wait ‘til 2017. Its going to be worse.
James West: So you see this all moving in a general trend and bias toward more volatility, less stability.
Jim Rogers: Oh absolutely. You’re going to have Scotland leave the U.K., which is going to cause the U.K. to lose its oil income. You’re going to have Europe doing all it can to take business away from the City of London…The U.K. only has Scottish oil and the City of London. So when they lose both, you’re going to have a small country…England and Wales perhaps. But that’s going to have ramifications for financial markets everywhere, and when financial markets are having problems, it often leads to economic problems. This is not going to be fun James.
James West: Well it’s already not that fun…unless you’re a gold and silver investor. Gold’s up almost $80 at this point. The other interesting development that we’re noticing is that China markets are responding very favourably to the Brexit situation. Why would you think that is?
Jim Rogers: Well China – I’m not sure its responding favourably to Brexit. The China market has been down, and I think it’s probably just having a rally. Nothing else but a “dead cat bounce”. I don’t think it’s going up cause of Brexit.
James West. Hmmm. So you don’t think those two events are really related then?
Jim Rogers: If they are, I have no idea why. I’m not smart enough to know.
James West: I see. So in the face of volatility, you’re in agricultural commodities, you’re short U.S. stocks, how about precious metals?
Jim Rogers: Well I own some gold and silver. I haven’t bought them in a long time, but yeah, I certainly own plenty of gold and silver.
James West: I see, so you’re not adding to that position in the face of the Brexit outcome?
Jim Rogers: Not when something goes up six or seven per cent in a day, no.
James West: How does this affect your choice of primary residence? You spend most of your time as a resident of Singapore, is that correct?
Jim Rogers: Yes, yes yes.
James West: And is the reason for that because you see Singapore as a more stable or safer jurisdiction for protecting your wealth in the long term?
Jim Rogers: No James I wish I were that sophisticated. No I want my children to speak Mandarin, and Singapore is a Chinese country, so we moved here so my children would know Asia and grow up speaking Mandarin. And that part has worked in spades.
James West: Wow that’s great. So finally, what do you think the central bank response is going to be to this? I mean the Fed has obviously delayed again raising rates. But do you think there’s going to be a central bank response that seeks to ameliorate the volatility that Brexit has created?
Jim Rogers: Probably..they might go negative, but they certainly won’t go negative until after the election, if and when they do. The central banks all over the world – all they know how to do is print money, and drive interest rates artificially lower and lower. This is not good for the world James. This is not good for anybody. But they don’t know any better, but that’s what they’re going to do. You should be really worried.
James West: So is it safe to say that the central banks tools, which consist almost exclusively of zero or near zero interest rate policy, and stimulus, have exhausted their efficacy and there’s really nothing that anyone can do now?
Jim Rogers: They’re going to do it. It’s not going to work. It hasn’t worked so far. That’s one reason we have Brexit. Because when people are unhappy, they blame the foreigners. And so Brexit is the perfect example of that, and it’s happened throughout history. The British are unhappy because their economy’s not great, they’ve blamed the foreigners, they’ve come out of the E.U. It’s not going to help them – it’s going to make things worse. But people throughout history have often voted badly, and here’s another example of it.
James West: So would you say the success of the Brexit campaign is likely to have a positive effect on Donald Trump’s efforts to become president?
Jim Rogers: Ah well yeah although Donald Trump is more just the unhappiness of the American electorate, and by November, American’s are going to be even more unhappy. And I doubt it anybody will be even talking about Brexit in the U.S. in October and November. But they always look for a man on a white horse, or a woman on a white horse, when things go bad. And that has happened throughout history, and its going to happen again.
James West: So this event sort of underscores the rise of a nationalist sentiment in G7 countries, and do you think that then favors Donald Trump over Hillary Clinton in the election race?
Jim Rogers: Well not just G7, I mean Belgium may split up. This is now giving a lot of impetus to people in Spain who want to separate….Italy…there are many countries where people want to separate, and this will give them a lot of clout. Some of them will lead to elections. Even if they don’t separate, it’s going to lead to more turmoil and confusion, and unhappiness, and when there’s unhappiness and confusion and a lack of certainty, markets don’t like it. They never have. And neither do voters like it, and they’ll vote for the man or the woman on the white horse.