No sign of a recession, everything’s great and that’s a dangerous sign
“The Federal Reserve is setting us up for a horrible, horrible disaster …. it’s going to be the worst in my lifetime,” Jim Rogers exclaimed.
When he was grilled about the reasons for his doomsday prophecy, Jim Rogers had no tangible answers.
Instead, he propounded the feeble theory that the fact that everything has been running smoothly for so long is itself a sign that something has to give way sooner of later.
“If you look out the window now, everything’s great and that’s a dangerous sign,” he said.
He admitted that there is no sign of a recession anywhere at present.
“I don’t see one at the moment. But the problem is that they always come when you’re not expecting them. I would suspect by the end of this year or next, it’s going to start somewhere,” he said.
He claimed that the action of the Federal Reserve in driving interest rates to the lowest in recorded history is very dangerous.
“Interest rates are negative in many parts of the world, as you know. This has never happened in recorded history and it hasn’t worked and going to end very, very, very badly,” he warned.
Zero Credibility for Jim Rogers’ doomsday predictions
Jim candidly admitted that he is prone to making mistakes galore.
“I’ve made so many mistakes in my life that I can never be more sure. So I make many, many, many mistakes but I’m old enough and experienced enough to know I have to doubt myself for everything I do. If anything, I’ve probably become more self-doubting rather than more and more confident,” he said.
Members of the intellengtsia are not impressed with Jim Rogers’ prediction.
Jim Rogers has called 174 of the last 3 market declines https://t.co/RMUthf4Ieg
— MUGATU (@CovfefeCapital) June 9, 2017
Some pointed out that he been consistently issuing doomsday calls every year.
A reader sent this to me. If nothing else, Jim Rogers is consistent in calling for a crash every single year pic.twitter.com/SbIHQKSCNw
— Ben Carlson (@awealthofcs) June 9, 2017
— Matthew J. Renaud (@renaudandco) June 10, 2017
It may be recalled that Jim Rogers was once roughed up by the local Gurus for making outrageous statements against NAMO. He later sheepishly conceded his folly and expressed regret at the premature sale of Indian stocks and missing out on multibagger gains.
General market overheated hai, Reaction aa sakta hai: Vijay Kedia
While we are entitled to treat Jim Rogers’ doomsday theories with disdain, we dare not ignore the warnings issued by eminent Gurus like Vijay Kedia.
“Mere khyal se general market overheated hai. Reaction aa sakta hai,” Kedia advised in clear and crisp terms.
Mere khyal se general market overheated hai. Reaction aa sakta hai. https://t.co/Exoc91fW6r
— Vijay Kedia (@VijayKedia1) April 15, 2017
When investing becomes easy, market becomes uneasy.
— Vijay Kedia (@VijayKedia1) May 23, 2017
He also offered the soothing advice that there is no need for us to panic:
Reaction, whenever it comes, does not mean mkt is not bullish.I'm not selling any long term holding.Just be careful if u r new to the mkt. https://t.co/n1z1v2Xk8i
— Vijay Kedia (@VijayKedia1) April 16, 2017
Bubble has formed and correction is imminent: Sanjiv Bhasin
Sanjiv Bhasin, who is highly respected for his multibagger stock recommendations, warned that a “correction is imminent”.
“I am more cautious now because we are at the cusp of a global correction where all risk taking is at the highest. Locally also, we have run out of ideas now, We think that a correction is imminent and it will be healthy for the market. You have to be very stock specific. The risk reward is now very unfavourable for too much of an upside on the Nifty,” he said in a grim tone.
“We know when bubbles are formed and when markets make top. We are saying in the next one, one and a half month, definitely you will see at least a 7% to 10% correction,” he added.
Exit strategy – Buy defensive stocks like Pharma and InfoTech
At this stage, we have to give a glimpse of our own visionary abilities by asking that if there is a broad based sell-off and the markets tumble like a ton of bricks, which are the sectors that will benefit from the massive funds flow.
The answer is that the defensive sectors like Pharma and InfoTech sectors will benefit.
This is because the gush of funds out of the Country will cause the rupee to weaken vis-à-vis the US Dollar.
This will translate into higher earnings for all foreign exchange earners such as Pharma and InfoTech companies and lead to their surge.
Sanjiv Bhasin advised that we buy a basket of Pharma companies and sit quiet.
“Use this fall in pharma to accumulate. We very strongly recommend a SIP in five six of the leading pharma stocks. We are overweight on Dr Reddy, Lupin and Cadila also, giving that whole basket to our investors for the next 16 to 20 weeks to keep buying as a SIP,” he said.
“Pharma is an evergreen business, it is going through the weakness because right now the prices are in your favour and we know the circumstances which have forced that. But if you do not buy a basket then may be two can outperform or two can underperform, the idea is to make pharma your asset class for the next six months because this consolidation in the market can last right up till August September. Pharma can be a very good conduit for playing the market and with an uptick or any positive from FDA, there’s a possibility that almost 2200 patents will come on in the next six to nine months,” he advised with utmost clarity.
“In pharma, the worst is priced in and you could get a 15% to 20% upside in the next six to nine months,” he added.
Pharma Cos have business risks but not mortality risks: Kenneth Andrade
Kenneth Andrade of Old Bridge has also come out strongly in favour of buying Pharma and InfoTech companies.
“Look for an opportunity or look for a business which is not doing well, buy the guy who actually leads the entire business. You are probably getting it at a price point that you would never be able to buy it if that industry was doing well and that is our business,” he said, offering precious advice.
He also explained that it is a rule in the market that today’s outperformers become tomorrow’s underperformers and vice-versa.
“Look at the market right now. The underperformers three years back are actually the outperformers right now. You do not necessarily have to make a business case for the guys who are outperforming the market to continue to grow because the risk that you are actually putting or bringing to the table is that the multiples are already high,” he said.
It is better for us not to be daredevils and instead to tread with caution. It is advisable that we trim some of our positions in fancy sectors like Banks and NBFCs and route those funds into Pharma and Info Tech stocks. Then, if and when the correction does come, we will be able to coast on the path to riches!