Jim Rogers spoke as part of the series of the Phillip Investment Festival on 1 Sep 12. It is my first time seeing Jim speak live. Read on for my thoughts on the talk.
As you would have expected, he has been bullish about agriculture, and his stand remains. He would go to say, “My statement about farmers driving Lamborghinis and stock brokers driving taxis stand”. I want to elaborate on agriculture. Interestingly, after Jim mentioned about disinterest in majority of people going to the farmlands, a lady said that she broke the convention by starting a farm management business 3 years ago. She was voicing the difficulties she faced in the business as it doesn’t seem to be lucrative given it being a low margin business. She was previously in diamond mining and she understand how lucrative the high margin business can be. Agricultural products, being a survival necessity, are consumed by people on a daily basis. There is concern if food prices become too expensive. Riots will occur and people will pressure government to implement price ceilings to keep the price under control. Jim acknowledged that the farming is the worst business to be in for the past 30 years. But that is precisely the point where we are seeing less people who want to farm. He added that the average age of farmers in US is 58 years old; 66 years old in Japan; and 58 years old in Australia. Supply and inventory continue to dwindle and agriculture commodities prices can only go up. He envisaged that one day it will become a high margin business and the farmers who pulled through the tough times will make it real rich. Jokingly, he offered his daughters to her as god children.
Nothing last forever and he expect a bubble will form for commodities one day. But he does not know when the bubble will form and collapse. Commodities have been bullish for 13 years and supply is dwindling in every type of commodity at the moment.
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He said that UK was the superpower in the 19th century. In the 20th century, it was the US. There will be a recurrent rise in China in the 21st century (China was already once a superpower). He bought Chinese stocks four times in his life and he has not sold any yet. There will be hiccups in the Chinese economy and these are opportunities to buy more Chinese stocks. He said he is not going to sell because these stocks are for his children and grandchildren. People must realise the holding period that he is looking at, which is probably at least another 30-40 years. A guy sort of accused Jim when he said he bought Chinese stocks in 2007 after listening to Jim’s bullishness about China. We all know what happened in 2008. Jim only bought Chinese stocks 4 times in his life and he did not buy them in 2007, and he did not intend to sell in his lifetime. Jim just said he is bullish on China because he is still long on the stocks, and this does not mean he wants to buy. This guy, like many others, read the wrong things. He wanted to buy and sell based on tips and become rich overnight. He got the entry, exit, and time-frame all wrong but expect to profit. Apparently he is not taking responsibility of his own mistakes. He wants to put the blame on others.
The US Dollar is going to lose its position as the world’s reserve currency and it is already happening now. It is going to be a gradual shift. However, Jim is currently long USD because there is still a large number of people who believe in USD as a safe haven if market turmoil is going to happen in the near future.
Chinese stocks have reached a 3-year low but it has no sign of panic so he is not buying now.
As this is an election year for US and Germany, the government will not let the EU colllapse in Jim’s view. The economy will be propped up by the central banks. But post election years in 2013-2014, Jim expects a bearish market as spending cuts will be implemented. He is one who believes in the Austrian School of economics – government should not intervene in the economy and let the boom and bust happen naturally. He believes intervention actually worsen the booms and busts.
Myanmar and North Korea are countries with potential and are undervalued. It is quite impossible to invest in both countries now unless you conduct businesses there. Myanmar used to be the richest country in Southeast Asia in 1962. But it has since become the poorest country. The positive sign is that it is opening up its economy. Jim sees the two Koreas would unite. North Korea is rich in resources and have a large 70 million-strong disciplined workforce. With capital inflow and sound management practice from the South, Korea is a force to be reckoned with.
He sees no opportunities in Singapore properties now as it is too expensive. Singapore is one of the most expensive places to buy a property. Hong Kong is a worse example. Someone popped the question if US properties are good buys. Jim reckoned that US real estate is cheap and he sees more opportunities in buying agricultural areas though. Jim does not like property investment because it is less liquid. He prefers an asset that he can sell quickly. He also expects interest rate rise and one must make sure he has the holding power to pull through the inflationary period. However, most owners must be able to hold on too, otherwise desperate selling will trigger a market panic.
Jim spoke about his passion – he enjoys finding out what is going on around the world. This curiosity has made him travel around the world twice and constantly poking his nose in socio-political happenings. With a bountiful of knowledge, he can smell investment opportunities which most of us cannot. My fear is that many people may be motivated by Jim’s talk and think that the best way to invest is his way. But few realised his investment success is a privilege of his undying passion about knowing more about the world. That is what makes most of us fail. There is no guru that you can follow. You have to find a passion in life and investing may not be your cup of tea. Most people get into investment because they want to be rich and that is the reason why they end up losing money. Even Jim said that most people are better off doing index investing. They are too disastrous to make
their own investment decisions by listening to gurus.
A young lady was asking about career choice and she is a economics graduate. Jim advised her to figure out what she loved to do. If she goes to a clinic and while waiting, what kind of magazine would she pick up? He said that finance is the hottest industry right now but it is going to be the worst place to be in the future. Each year there are so many MBAs being created and there are too much competition in the industry. He told her if she chooses finance, she better have to love it a lot. On the contrary, in the 50s and 60s, nobody wanted to go to Wall Street. Jim went ahead and he stumbled into something that he liked. I find it very amusing because he is consistent in the market as he is in his life. We know that he is a true contrarian against most market participants. But knowing that he chose a career where nobody wants to go into, he is also a contrarian in life!
How to be Rich?
I want to say this honestly to you – you may not be suitable to pick your own investments if you do not have passion in the market. Do not think investing in the market will give you the lifeline to escape the job that you do not like. You have to find the passion in your life so that it does not feel like work at all. Mike Bellafiore also shared this during the seminar. Trading is a tough business and you cannot trade without a passion in it. He said time stands still when he is doing trading research because he enjoys it. How many of us can say that we really are obsessed about the market? Or it is just an avenue where you can increase your wealth because your current job does not pay you enough and moreover you do not enjoy it. You want to get out of the rat race. Yes, you can grow your money while you work. But do it responsibly through index investing. It is possible you can grow your money to a few millions if you save and invest diligently. But it will take you 20-30 years. Most people are not satisfied. They want to be rich yesterday and they start to listen to hot tips and get themselves worse financially. The vicious cycle continues until they wake up from the fact that they are better off with passive investing. My advice is to stick to your passive index funds until you are sure you find your passion in the markets.
If you like the market and want to be ultra rich, Jim said that you should put all your eggs in one basket and watch it very carefully. Only concentrated portfolio can help you beat market returns but it is very risky as well. Jim will also tell you to buy low and sell high. His investment criteria is as simple as something that is cheap and he sees positive change in the future. He already mentioned this in his book, Adventure Capitalist.
PS: I have done all his book summaries. Have you read them?
PPS: Would you be interested if I can help you identify your investment approach in the market? Are you a passive investor, active investor or a trader?