Indian markets have surprised this year, somebody has done a good job: Jim Rogers

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Other experts we speak to say markets optically look like a high, because we were at the same level about 18 months ago and earnings have caught up. Markets are actually cheaper than what they were then...

I see the all-time high and I don't like to buy markets near all-time highs. I'm not buying America which is near all-time highs as well. When markets are near all-time highs I like to sit and watch and sometimes sell short. But I'm not selling anything short yet.

During our last conversation around the SVB crisis, you said that when problems like this come up it never stops. It's just the beginning of a problem. But it seems that the last three months have shown us an unusual kind of calm in financial markets. What's your reading now?

When you look around the world, most markets have been very strong. Even Japan after over 30 years has started going up. So nearly every market except China is doing well now. India has done very good. It’s amazing.

But how do you explain this? What we were anticipating at the beginning of the year was that it's going to be a hard path for financial markets to navigate because so much tightness has happened over the last one year. But we seem to be doing fine. Is this the new normal or is this the Calm before the storm?

Well interest rates have been rising in some countries. You're right about that. But the numbers don't show that they have tightened significantly. They will and I hope they do because they've got to kill inflation.

So what’s your stance now?

I am not selling shorts. So I don't know if I'm right or not. I'm not selling. I'm watching with shock in some cases. I would expect it to continue for a while. Nobody is tightening significantly yet so until somebody starts really tightening in a big way this can continue.

Money will flow to India, things will keep improving, present investment opportunities: Ed Yardeni

So in terms of effect on the economy itself how far do you think we have travelled in terms of the impact of interest rates on the global economy and the US economy? The Federal Reserve chairman said that we'll have to wait some more. But he also made a very important statement that the Federal Reserve itself does not see a recession coming. That's not their forecast anymore…

Central banks are usually wrong. Very few central bankers know what's going on and I rarely listen to a central bank except when they're either tightening strongly or loosening strongly. I would suspect that most economies will continue to do well because there's so much money printing all over the world. So until somebody starts really tightening in a strict way I would suspect that markets and economies will continue to be okay to my surprise and other people's surprise.

Do you expect more interest rate increases going into the rest of the year?

US has said it's going to raise interest rates. I hope they do. They should because inflation is certainly not under control anywhere. I would expect that rates will rise not just in the US but in other countries too.

Why do you say you hope they raise interest rates going ahead because much of the market wouldn't like that?

Central bankers are not supposed to pay attention to the market. I know they say they don't but they certainly do. Most central bankers have not been very good historically. India had a very good Central Banker a few years ago, unfortunately, he's gone. America has had one or two good Central bankers in our history. Unfortunately they're gone too. So yes, Central bankers are supposed to, as one of them put once, “take away the punch bowl as the party gets really exciting”. That's what they're supposed to do. But as you rightly point out they rarely do it. They rarely listen.

What is the probability you would attribute to future rates hikes in the US?

I think it's much higher than 20 percent. I'm sure it's going to happen unless something dramatic happens. Now I want to hasten to say that I would expect by next year that all of this will probably be coming to an end. But in 2023 I'm certainly not selling short. Not yet.

If we take this fact as the truth that markets are ahead of the Federal Reserve or central bankers or economy or companies and managements, the market seems to be telling a different story. Are you saying this is irrational?

I expect the markets to continue to be strong based on a US statistic. Usually in the third year of a four year presidential terms, the markets are strong and that’s because the politicians are trying to get everybody happy for the election in the next year. So I have many reasons including history that the American stock market will continue strong this year. I am worried about next year.

If you look at different parts of the world, where do you see relative opportunities?

Japan is certainly a relative opportunity. The Japanese stock market is still down over 25 percent from its all-time high which is a bit of a stunning statement. It's been over 30 years since the Japanese Market made an all-time high and that in any stock market history is significant. But now the Bank of Japan is printing a lot of money, buying ETFs and so the Japanese stock market is going up and I would expect that to continue for a while.

What's your prognosis for China? We expected a reopening-led growth and that hasn’t happened. What's your take now?

I own Chinese shares and I haven't sold any. I haven't bought any recently. But they had a huge property bubble in China for many years. They were trying to calm it down. But it looks like something has calmed down the property bubble; and historically, no matter what the country, when you have a gigantic property bubble it takes a long time to clear the effects. They're clearing the effects now but as you rightly point out the Chinese economy is not nearly as strong as others because they had this huge property bubble. But they also had the virus. They had the virus worse than many other countries. So there are specific problems or specific reasons in China for stock to be down. But I look at it as an opportunity. I haven't found anything but I'm sure I will find investments in China again.

So do you see China as a relative opportunity?

When the market is down, especially from historic levels, it's usually an opportunity. I don't think China is going to go away and disappear. You'll have some bankruptcies, yes, but that leads to opportunities. That's one reason the markets are down and it is one of the cheaper stock markets around these days. It's hard to find a stock market that hasn't boomed recently.

If you take a slightly longer-term view, let's say a one to three-year view where do you see opportunities from that time frame?

I would expect that in the next few months, markets will be strong enough so that I can start selling shorts. Now not many people sell short. Selling short is something you can do when you think things will go down. But I would expect my next opportunities will be selling short. Probably American stock markets.

What will be the trigger points that you will look for when you look to initiate shorts? Are there any data points or any other telltale signals that you will look for to initiate a shot?

When you see markets making highs and you see some stocks going up every day in America. There are eight or ten stocks that go up every day and that usually is the sign that things are coming to an end. And those will be the stocks that I hope I will sell short next year or whenever. I try to watch when there's wild hysteria when everybody's bullish when people think it's different now. It's never different. Those are very dangerous words. But those are the things I will be watching.

What would you define as characteristics of such stocks? You of course said that stocks that are on a continuous rise, which you see in US markets, which we also see in Indian markets. Anything else that you can explain about the build-up that should eventually create very good profitable short positions?

At the end of long bull markets, and we've had the longest bull market in American history - I'll use America because it's the largest, you're having the signs. A lot of new investors are coming in and they call their friends and they say I've discovered this new thing called the stock market and it's fun and it's easy and you can make money. You see lots of new investors coming in and getting very excited. By the way, this has happened in all bull markets towards the end. It's happening again. It's one of the signs that I noticed and that's why I say I am not buying in America now. I am waiting to sell short.

Tell us about your view on the dollar index?

I own a lot of US dollars. It's my largest currency position because when people get worried they turn to the US dollar as a safe haven.

Now the US is the largest debtor nation in the history of the world. It's not a safe haven but people think it is and I don't see another currency right now and that's why I own it. But I know nothing goes up forever, especially something with basic underlying problems. At the moment I own a lot and I expect to own a lot for a while but I know I'm going to have to replace my US dollars sometime in the next few months.

What is your view on oil because fundamentally it looks like it should be settling down. But it is not.

I would rather be long on crude than short. The world still is running out of known reserves of crude. Yes, fracking came along and helped for a while. But we now know that fracking was a bit of a bubble and is not going to last forever. So I own some crude. I don't expect it to go down a lot. It probably will go up and I'd rather own it than not own it.

There is huge anti-China sentiment in terms of investors wanting out from China. A lot of pension funds are looking at customised indices, global indices which are ex-China. Are we at an inflection point where ex-China indices could become mainstream?

Yes, there are people who are very anti-China right now. Some for political reasons, some for emotional reasons. That's why the Chinese market has been one of the worst in recent months. That's why I'm looking at China. I don't mind going against the crowd and if I find something good in China I will buy it or if I find something good in Japan. The best for me in Japan are ETFs because that's what the central bank is buying. They're buying the index. So I try to look where the money is going or likely to go.

What's your view on gold?

JR: I own some gold. If I were buying something today, I would buy silver. Silver is down over 50 percent from its all-time high. I will buy more gold if it's down. I would expect it to be a good space. Especially in the next two or three years. Because inflation is still here and we will eventually have problems in financial markets. When we have problems, many people look for a safe haven. They think gold and silver are safe havens.

Why is silver looking better than gold? Because of industrial uses?

I learned about silver investment from India. India has been one of the great silver investors for decades, for centuries. Indian housewives have huge amounts of silver. I learned silver mania from India. But silver is cheaper right now. It also has uses, solar energy, for instance. Many things.

So if you were to pick the top three investment picks globally today, what would they be? Apart from cash.

Agriculture and silver. I mean these are things that are depressed where I can see in the next two or three years there will be demand and reasons for those products or those Investments to go higher.

What kind of investment return can we expect in silver? The all-time high for silver is 50 US dollars.

Today silver is $24. I expect high returns. The Japanese stock market is down, it will probably go up to its old high again. Silver too will probably go up to its old high again in the foreseeable future. In the next two three four years I can see nice returns in Japan and in silver going forward.