On a recent call with ETMarkets.com, no-nonsense economic guru Jim Rogers restated his concern that a bear market was on the way, and investors should be on the lookout for small signs to avoid another crisis like 2008.
Although Rogers could not give a timeline for the bear market to arrive, he did say that it will be the “worst in my lifetime,” a prediction he’s stuck by for a while now, and the key to spotting a market correction lies within smaller markets.
ow do you view US stock markets currently?
I am not investing in US stock market because I expect problems to come in the next year or two. I am not buying shares.
In the US market, some of the stocks like Apple and Google go up every day. They never go down, which is a dangerous sign in any stock markets. When you have a few stocks always going up and the movement has been concentrated and that seems to be what is happening in the US stock market.
Any timeline, any horizon that you have for this bear market that you are foreseeing?
No, I will just say it will be the worst in my lifetime. It has been over 10 years since we had a serious bear market in the United States. I would suspect by the end of this year or next year, it will start. These things always start small, where people are not looking and then they work to the major markets, and then you see them on the major news.
In 2007, Iceland went bankrupt but nobody noticed or cared. Then Ireland went bankrupt. Then a few weeks later, Bear Sterns went bankrupt and a few weeks later Northern Rock, the English Bank, went bankrupt. Then eventually Lehman brothers went bankrupt and by then, everybody knew there was a problem. But it had been there for over a year and it has always worked that way. It starts when we are not watching. It has already started. Latvia collapsed. Argentina, Venezuela, Turkey, some banks in India are having problems, Indonesia has started having problems. It has not made to evening news yet.
All these markets are small but until they make it to the big markets, people do not notice.
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Jim Rogers is the latest investing guru to venture away from active management by attaching his name to an exchange-traded fund.
The Rogers AI Global Macro ETF (BIKR) launches Thursday in New York. It’s based on an index that tracks a model Rogers, 75, and his team at Ocean Capital Advisors have created using machine learning to analyze global economic data. The ETF, which primarily follows U.S.-listed single-country ETFs, will rebalance monthly based on that analysis.
“We think it will hit a particular segment of the market that has followed Jim and is interested in following him in an ETF,” said Sam Masucci, founder and CEO of ETF Managers Group, Ocean’s partner in launching the fund.
The fund’s launch follows that of the NYSE Pickens Oil Response ETF (BOON)in February. Noted oil investor T. Boone Pickens’ firm, BP Capital Advisors, and the New York Stock Exchange created the fund to track both producers and consumers of U.S. oil and gas. Pickens, 90, has disclosed his health is declining and announced in January the closure of his hedge fund. BP Capital will still operate its energy-focused mutual funds.
BOON is up 7 percent this quarter.
“If you have the brand that these investors do, you might as well leverage it,” said Matt Markiewicz, former director at BlackRock iShares and director at Innovation Shares, which launched a blockchain ETF this year.
“Half of the ETF game is about marketing and distribution,” he said.
Rogers co-founded the Quantum Fund with George Soros in the 1970s, which in its heyday gave investors massive outperformance versus the S&P 500. Rogers then went on to launch the Rogers International Commodity Index, which is up more than 140 percent from August 1998 to December. He is now chairman at Ocean Capital Advisors.
“The internet and artificial intelligence are changing and have changed everything we know including finance and investing; Ocean’s new ETF is part of the same trend,” Rogers said in a statement. “I hope we get it right. We will all be extremely pleased someday if we do.”
Exchange-traded products track a basket of stocks or assets. The funds trade on exchanges like stocks, and their low fees have drawn investors away from the traditional, typically more expensive route of hiring a money manager to actively pick stocks.
That said, it’s unclear whether strategies well-known investors have used to make a fortune in hard assets such as commodities will translate well to an ETF. Simply having the brand of a well-known investor may also not be enough to attract money in the crowded world of exchange-traded funds.
