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April 2010

Adventure Capitalist

Travels throughout the world have given investor and author Jim Rogers a unique perspective on the business of life

By David Adams | PODER Magazine
Martin Morcillo

STORY TOOLS

Famed investor Jim Rogers retired in 1980 at age 37 and set off to discover the world on his motorbike.

A quixotic quest, perhaps. But Rogers has a well-rehearsed answer to that. “It makes you a better investor if you know the world,” he says.

Offbeat as his style may be, it’s hard to argue with Rogers’ record. Just as the Motorcycle Diaries of Argentine-born guerrilla icon Che Guevara became a bible for leftists, Rogers’ biker wisdom is legendary among investors.

“He’s completely unorthodox. He’s a globetrotter, gonzo-financier who always tries to stay ahead of the curve,” says Ian McCluskey, veteran Latin America analyst and president of Thought Leadership International.

Together with George Soros, Rogers founded the Quantum Fund, the top performing mutual fund of its time. He later created the Rogers International Commodities Index, and famously predicted the South American commodities boom in the early 1990s, as well as the subsequent Argentine financial meltdown a decade later.

Now Rogers is using his instinct to bet again—this time against the United States economy. In 2007 he moved his family to Singapore, and advises investors that the U.S.’s best days are done. “The 19th century was the century of the UK. The 20th century was the century of the U.S.,” he says. “The 21st century is going to be the century of China, and I think that the best skill which I can give to my children [born in 2003 and 2008] is to speak Mandarin.”

His forecast is extremely bleak, going far beyond the current economic downturn. What bothers him is the same thing he noted in Argentina a decade ago: a refusal to face up to a mounting debt. “Never in wartime did debt go up so fast,” he says.

Rogers doesn’t even think the U.S. has hit crisis point yet. “Some people have lost their jobs and their houses. But I’m talking about a national crisis,” he says. Unless the U.S. makes drastic cuts, he foresees a rolling problem, with each crisis bigger than the last. “In places like China and Brazil their lows are higher than the previous lows, and their highs are higher than the previous highs. Whereas in the U.S. it’s in reverse,” he says.

His “West is in decline” thesis has frustrated many economists who consider his predictions too dire. Nobel prize-winning economist Paul Krugman recently criticized Rogers’ understanding of basic economics, complaining in his New York Times blog, “Jim Rogers makes my head hurt.”

Yet Rogers’ remedy for the U.S. is hardly original. “You’ve got to let people who go bankrupt, go bankrupt. You have to let people who fail, fail. The way the system is supposed to work is you let competent people come and take over the failed assets from the failed people, and start over ... But what we are doing this time is we’re going and taking the assets away from the competent people and giving them to the incompetent people ... That weakens the whole system.”

A pint-sized, Alabama-born former rowing cox, he studied history at Yale before going on to Oxford where he studied politics, philosophy and economics. While at Oxford he coxed for the winning crew in the 1966 Oxford-Cambridge boat race on the River Thames. Rogers favors jeans and running shoes over business suits. He’s also a best-selling author, turning his global travels into several books. Christened the “Indiana Jones of finance” by Time magazine, he co-founded the Quantum Fund with Soros before he was 30. In its first 10 years the portfolio gained 4,200 percent while the S&P rose less than 50 percent. He has also taught at Columbia University’s business school.

His reputation within the industry remains high, with traders eager to hear his analysis on everything from sugar, to gold and oil. “The fundamentals he uses for looking at the world in terms of raw supply and demand for physical things is pretty much unmatched,” says F. Rafael Leon, an independent commodities analyst formerly with MB Wealth in Hollywood, Florida. “He is the best at asking the right questions and putting together the answers.”

 Most recently Rogers has turned his attention, and writing skills, to fatherhood.

His latest book, A Gift to My Children, is written with his trademark witty candor. In it he encourages his daughters (for whom the book was written) as well as any future potential investor, to seek the truth for themselves, not relying on the judgment of others, but trusting their own instinct.

“Be skeptical, learn Chinese, question everybody ... everything,” he says. “Figure out the real story, not what you read about in the press or what everybody thinks. If everybody’s thinking the same thing that means somebody’s not thinking, and you should not be that person.”

To do that, of course, he emphasizes the importance of traveling the world.

Rogers began his biking in 1980 with the aim of going around the world. But it was the time of the Cold War and the Iranian Revolution. He went to China in 1984 trying to get permission. To his amazement he got permission to ride around one province in 1986. Then he got permission to ride across China in 1988. His seven-week ride across China on a BMW was turned into a documentary for PBS, The Long Ride. Next he crossed the Soviet Union.

In 1990, he went around the world, motorcycling 100,000 miles across six continents, a feat that landed him in the Guinness Book of World Records. It took 22 months, and he had such a good time he did it again in 1999, this time by car.

He chronicled his one-of-a-kind motorcycle journey in the book Investment Biker, following that up with Adventure Capitalist. His book, Hot Commodities: How Anyone Can Invest Profitably In The World’s Best Market, was published in 2004. Another book, Bull in China, describes his experiences in China as well as the changes and opportunities there.

Wherever he went he was always playing close attention to what he might learn from an investor point of view. The example he likes to give is Argentina. Rogers invested there in 1990 during a round-the-world bike tour. He was impressed with how inflation there was under control and the currency was stable. By the time he went back in 2001 he saw things were different.

“It was out of control, the government was borrowing huge amounts of money, and the currency was tied to the U.S. dollar, which meant prices in Argentina were not competitive with the rest of the world,” he says. But it was while traveling the roads that he realized how broke the country was. “There was a huge blizzard and they couldn’t clear the roads because they didn’t have the people or the machines. Literally one of the main east-west arteries was closed for weeks, just because it snowed. That was one of the tip-offs that they were out of money. That’s what I say now to my little girls. Figure out what it really means. Don’t just let them say ‘the road is closed.’ Ask, why is the road closed?”

Rogers got all of his money out of Argentina and put it into euros. It was pretty shortly after that the peso collapsed.

On another trip across Africa he visited Botswana. He was so impressed he decided to find out more about the country, before making a series of successful investments.

Occasionally he gets it wrong. In Bolivia someone made off with his money, and then claimed to have died of HIV-AIDS. Rogers managed to track him down —alive and well—in Peru.

Rogers isn’t one for sitting behind a computer, making short-term trades. “I’m not any good at that. My way is to find something that is cheap and there’s a positive change taking place and to invest and own it for many years.”

His travels have given him plenty of yardsticks with which to measure the nature of the U.S. financial crisis. He believes the U.S. could learn from the Japanese crisis in the 1990s, in which Japan fell over backwards not to let anyone fail, dragging out the crisis more. He notes that the Japanese stock market today is still 75 percent below where it was in 1990. “That is not a typo. It just didn’t work,” he says. “We are following exactly the same track.”

A better example to follow is Scandinavia, which got itself in trouble in the 1990s but chose to let people go bankrupt. In contrast to Japan, Scandinavia has been booming for the last decade.

He doesn’t buy the idea that China’s rapid progress could blow up in his face. When America was rising to glory in the 19th century it survived major setbacks, going through Civil War, economic depression, human rights abuses, a lack of rule of law, and political corruption.

“China is going to have plenty of problems. I don’t know what or when, but I know the nature of the beast is that you have plenty of problems on the rise to power and glory. And everybody will. There’s nothing unusual about it.”

Rogers began cultivating an interest in China in the 1980s. After his children were born he started them early on Chinese lessons. At the time he was still living in New York. “It was clear it was not going to be that easy, so I figured let’s go to Asia. Asia’s the future anyway.” The girls also get three hours a week of Spanish. “I want my children to grow up speaking mainly Mandarin, but also Spanish as their third language.”

Rogers keeps an apartment in Miami for his trips back home, and is a fan of the city’s multi-culturalism. If it wasn’t in the U.S. he says he’d spend more time there. “It’s a terrific city, it’s just they don’t speak Chinese.”


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