Stocks Rally Won't Last, Investor Says
A rally in stocks is likely to follow the recent battering shares took globally because of fears of a U.S. recession, but such a rally would be short-lived, Jim Rogers, CEO of Roger Holdings, told "Squawk Box Europe."
Hopes that the Federal Reserve will cut rates by a further 50 basis points this week after last week's surprise 75 basis points cut lifted Asian and European stocks Tuesday, but Rogers said there should be no further monetary policy easing.
"It looks to me with so much panic in the market, we'll have a little rally," Rogers said. "In my view that’s a rally I expect to sell. I expect to sell and sell short."
Federal Reserve Chairman Ben Bernanke is making a "terrible, terrible, terrible mistake" by cutting rates and pumping liquidity into the market, Rogers said.
The credit crunch is not likely to ease too soon, and it will come to its worst in the second half of next year, Rogers predicted, because it will spread to other asset classes.
"We’ve had the worst credit problem ever in American history, maybe even in world history," he said. "You don’t clean that out in six months…it's going to affect credit cards, everything."
Better in Europe
Europe was likely to be more sheltered as there are not a lot of municipal bonds to be impacted by the credit crunch, although it will feel the effects of a U.S. recession, Rogers said.
Agriculture is the place to be, as food consumption is rising, many hectares of land are taken up by biofuels and food inventories are at their lowest since 1972, he said.
Some financial stocks are definitely to be avoided, but there are areas outside agriculture and commodities where investors could make gains, he recommended.
"I’m going to sell the investment banks," Rogers said.
"Airlines will be the great stars coming out. Might buy more airlines in the recession. Small utilities in the US will be bought up. Those are things which I plan to own and continue to own."