Why More Banking Crises Are on the Way

Wednesday, August 08, 2012

Libor, HSBC, Standard Chartered: Banking scandals have been a mainstay of news headlines for the last few months, damaging the public's perception of high finance. Politicians still eschew specific action against the banking culture that brought on the crisis, and Washington continues to deepen the national debt. 

Jim Rogers, an American investor and chairman of Rogers Holdings and Beeland Interest, saw this in 2002. And in 2008. And he says the cyclical pattern of economic downturns will almost definitely produce one in the next year or two. And with the debt so high and rising, this one is sure to be far worse. As a solution, Rogers believes that investors should turn to hard goods and commodities in place of stocks. 

"Every few decades throughout history, we've had periods when the financial types were the masters of the universe, followed by decline, and then when the drawers of water and the hewers of wood, the people who produce goods, were the masters of the universe," Rogers says. 

The recent recession on Wall Street is a sign for Rogers that the economy is turning away from shares and mutual funds, and towards those tangible goods. "The stock market has done nothing since 1999," he says. A reported 54% of Americans held stocks in 2011, which is the lowest since Gallup began recording individual stockholders in 1999. 

"We have a huge shortage of farmers developing," Rogers says. "The huge fortunes are going to be made by the producers of real goods, and that's where young people should go, and that's where investors should go." For those of us without green thumbs, the investor suggests going into the production of goods and services that support farmers — like selling farm equipment, or opening a chain of restaurants in the Midwest. 

 

The investor himself has done well in recent weeks due to the rising price of corn brought on by the recent drought that has had a chokehold on the American Midwest for much of the summer. His index, the Rogers International Commodities Index for Agriculture, has risen by 18 percent. 

 

"The place to have been and still is in in real assets," Rogers says. "Commodities [have] done 500 percent better than stocks." He lists materials like rubber, zinc, steel, and copper as the safe bet for investors due to their frequent use.

On a larger scale, the investor is particularly concerned about the national debt. He recalls the United Kingdom going from the richest nation in the world in 1918 to being bailed out by the International Monetary Fund in the mid-1970s. 

"The United States is the largest debtor nation in the history of the world," Rogers says. "No nation in history that's gotten itself into this kind of situation has woken up one morning and said, 'Oh well, that's behind us now, let's move on.' It leads to problems, and unfortunately, most people don't seem to understand [that]." 

Guests:

Jim Rogers

Produced by:

Robert Balint and Joe Hernandez

Comments [7]

jenniferzinman

I think it's great to say we need to be honest with ourselves about our debt level and that both sides have it wrong, but it's not enough. For once, I want to hear real, doable suggestions on what to cut, what revenues to raise and what the real world impacts will be. How can we advocate for change without having realistic goals.

Aug. 08 2012 03:34 PM
homebuilding from Oklahoma


Let's hear it for real skills, real knowledge, and real things we need to live.

That means an ascendancy of how we look at blue collar.

The coastal mavens may need to wake up to this reality.

As the guest says, before you get up, a lot of people were working on stuff that's your foundation for the day.

As to an earlier comment re how there won't be crops because of the drought...I'm just as certain that we'll come up with more bread for you, again next year. I'll leave it up to you to read a bit more broadly before you again swallow, whole, the misinformation that the rip and read beauties feed you.

Aug. 08 2012 03:10 PM
Henry

Jimmy grew up in the 60's when people "let it all hang out"; being candid & honest of feelings was "the thing".

T’ain’t like that today.

Thanks Jimmy for your "fresh air" thinking!

Aug. 08 2012 12:11 PM
Larry Fisher from Brooklyn, N.Y.

Hope Jimmy didn't mean farming in the drought areas of our Midwest... I bet you can buy some cheap former farm land in the midwest right now.

I am so investing in sugar, and rubber...

I can see this positive headline in our future...
"WORLD PEACE BREAKS OUT IN VIOLENCE!"

Aug. 08 2012 10:21 AM
listener

Well that was a bucket of cold water on the smug DNC talking points repeated in the media, wasn't it?
Who would have thought five trillion dollars spent in four years could be bad for our nation?
This is what fundamental transformation looks like. Is this what we bargained for in 2008?

Aug. 08 2012 09:58 AM

I usually enjoy listening to the "folksey" Jimmy Rogers. His advice "to invest in what you know" is not really that different than Warren Buffet or, for those with a longer memory, Peter Lynch.

He recommends "farming" or "Great Plains" real estate developer as prospective careers. Following his segment, the local NPR outlet (WNYC) "non-avertises) "MBA's" at Pace University's Westchester Campus, and features programing about condominium development at the NYC Woolworth Building.

Way to go Jimmy.

Aug. 08 2012 08:46 AM
Simon from NYC

Careful, you're rocking the boat with too much truth. American "Consumers" --as they accept to be labeled these days-- prefer mainstream "truths" that's kept them doing exactly what has been done for the past 40yrs and told it'll be different this time.

Yesterday you showcased Dr James Hansen, today Jim Rogers.
Who will be next? Chris Martenson? Dr Robert Hirsch? Richard Heinberg? Nicole Foss? Dmitry Orlov? Gail Tverberg? James Howard Kunstler? John Michael Greer?

If you bring on any of those, you might have to bring back Paul Krugman and Marketplace to lull "consumers" back to the nonesense.

Aug. 08 2012 07:19 AM

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