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]."