In this interview with IG Group, the ‘investment biker’ Jim Rogers discusses the lessons he learned from two years exploring the countries he invests in – including why index investing is best.
Legendary investor Jim Rogers retired at 37. Despite earning ‘more money than he know existed in the world’ in the 1970s, his true passion is motorcycling – so in 1990, the Wall Street heavyweight embarked on a 65,000-mile, 22-month motorcycle journey around the world.
He documented his trip in his book, ‘Investment Biker: Around the World with Jim Rogers’, which was named as one the top 10 trading books by IG, a leading CFD and forex trading provider. Here’s an excerpt from IG’s interview with the man himself: Jim Rogers.
What’s the biggest lesson, economically, that you took away from your trip?
Well, I guess the best lesson is you better see it for yourself because the world is full of false propaganda and people who don’t understand, who have an axe to grind one way or the other. If you go and you see for yourself, you will be able to make much, much better investment decisions and economic decisions.
What would you say that you’ve learned about yourself?
Well, I think probably the most important was – and I knew this all my life – that if one wants to do something, you better persist. I’m trying to teach my children that the most important word is perseverance. Don’t ever give up if you want to achieve something.
The world is full of smart people who are not successful. The world is full of educated people who are not successful. The world is beautiful, but beautiful people are not successful. Talented people are not successful. The people who are successful are the nuts who just never give up.
Tell us about your ‘indiscriminate’ investing approach
Well, as most of us know from experience, when a country or an economy gets strong, then nearly everybody benefits. And when the stock market is strong, nearly all stocks go up.
Index investing is something we’re all familiar with now, thanks to ETFs. So that has been proven over and over again. In fact, index investing outperforms most investors, professional and amateur, over and over again. So buying everything is often a good approach. If you’re a great stock picker, of course, pick the stocks, but most people are better off just buying the index.
One interesting point in the book is when you used golf memberships to analyse Japan’s economy. How did that work?
Well, as you might remember, in 1990 or 1989, Japan was in the middle of a gigantic bubble. I mean, the stock market is down nearly 50% since then. That’s 29 years ago. So you can see what kind of bubble it was. And property, including golf memberships, were selling through the roof. Everybody thought that nothing would ever, ever decline in value in Japan. And golf memberships were one indication of what was going on. I mean, a golf membership sold for more than a car, more than a house in most of Japan.
The Japanese stock market went down, 80-90% since then. It’s up now, but it went down a great deal.
How did you use black markets to measure corruption?
Well, there’s not always a black market. If there’s a black market that immediately tells you there’s something wrong. It doesn’t tell you what’s wrong, but it’s like taking your temperature. If you have a fever, you know something’s wrong. If you have a high fever, you know something’s seriously wrong.
Likewise, if there’s no black market in the country, there’s one thing that’s not wrong. But if there is a black market, you know there’s something wrong. The black market will tell you how extensive the problem is, if there’s a huge premium. And I go to the bank to change money, so I can find out what the normal rate is, and also to see what real money looks like. Because on the black market you might get counterfeit, you might’ve got paper money that’s not real.
I assure you, when you go to a country, the black market will find you. You don’t have to find the black market. If it exists, they will say ‘oh, there are strangers in town, foreigners in town, let’s find them’. And then you will know what comes next. You change your money, but you have to make sure you’re not getting counterfeit money, as best you can.
What do you look for in a country to invest in?
Many countries get into trouble throughout history because of deficit spending, or money printing, or for all sorts of reasons. And when they do, you usually have inflation — sometimes rampant inflation. Values go down for stocks and bonds and other things.
If you see politicians and bankers, central bankers trying to correct things, it usually leads to a great opportunity. Venezuela right now, for instance, may be a good example.
Venezuela is a catastrophe. It’s totally collapsed. I would like to invest in Venezuela, but I’m an American so I can’t because of sanctions. But I have learned that when a country collapses – such as Argentina has done in the past – and you invest, you will normally be okay in five or six years. In fact, you might make a lot of money. And there are certainly examples of that around right now, Argentina and Venezuela being two of them.
You’ve talked about the importance of staying to the sidelines when you’re not sure. Why is that lesson so important for you?
Well, one of the things that successful investors do is nothing – most of the time, or even a lot of the time. I’ve learned that if there’s nothing to do, don’t do anything. Just sit and wait, because there’ll be plenty of opportunities coming along. And if you have an investment, it may be good to sit and wait too. Wait for the investment to mature. Wait for the stocks to go higher and higher and higher, until the supply and demand get out of whack again. And then you sell.
Now, I’m not a short-term trader. There are a lot of great investors who are terrific short-term traders. I am terrible at it. I may be the world’s worst. My way is to find something cheap where there’s change taking place and then to invest and wait for it to mature and go up. And if you get that right, it may go up for years, decades.