by Bruce Fenton (watch Globalization Video)
Like many things to do with global change, my conversation with legendary investor, adventurer and traveler Jim Rogers may be scary to most Americans. This fear is exactly the kind of thing Mr. Rogers sees as potentially harmful to the US. His thoughts make one wonder if the US is like the General who asks where his troops are so he can go lead them. As striking as the changes in our world are, even more striking is how few Americans are aware of and participating in these changes. Could isolationism cause the US to miss the boat? Worse yet, will it place us aboard a sinking ship?
The experiences of Jim Rogers seem to make him uniquely qualified for such questions. Co-founder of the Quantum Fund with George Soros (among the most successful funds of all time), Mr. Rogers is recognized by John Train in Money Masters of Our Time as one of today’s leading investors. His extraordinary track record and insights set him apart from his peers but possibly most interesting is Mr. Rogers’s view of the global economy and his Guinness World Record travel adventures.
In 1990-1992, Jim traveled over 100,000 miles on his motorcycle chronicling his adventures in his book, Investment Biker. At the turn of this century Jim and his wife Paige undertook an even more ambitious journey: 152,000 miles and 116 countries in three years. More than an exciting adventure: this trip was another learning experience for a man who already may have known more about our global financial system than anyone.
Jim and Paige saw up close the changes in our international economy, absorbing details and the feel for places that cannot be gleaned from economic reports. If an uneducated teenager with no investment background traveled such a journey, he would emerge a wise expert on the world. When you place a leading authority with a decades-long travel and investment record on such a journey, the exponential growth in Rogers’s already extensive knowledge base is nearly incomprehensible.
Travel Channel star and Chef Anthony Bourdain says “travel makes one smarter”. If so, Jim Rogers may be the smartest person on earth. In any event, his travels, insights as an investor and his uncanny track record make Mr. Rogers someone very worth listening to.
Jim’s latest book, Hot Commodities, praises commodity markets and his view of their strong potential. Jim and Paige’s daughter, born not long after their return from their journey in 2002, is now able to speak both English and Mandarin Chinese, the language that Jim Rogers believes represents the future of business in this century.
Jim’s website, www.jimrogers.com, includes a chronicle of his adventures as well as some fascinating discussions with experts like the brilliant Daniel Yergin, author of The Commanding Heights: The Battle for the World Economy. Mr. Roger’s books are available at Amazon.com or from his website.
Bruce Fenton: You may have seen our article about Dubai.
Jim Rogers: Yes
Bruce Fenton: One of the things that really surprised us was how staggering the misconceptions are. Most Americans seem to think [Dubai] is a terrorist state and they envision Al Qaeda.
Jim Rogers: You don’t have to tell me.
Bruce Fenton: Why do you think that is? Why is there such a staggering difference from perception and reality? And what do we do about it?
Jim Rogers: There is a staggering misconception about China about Japan, about Europe, about everywhere. Most Americans can’t even find Japan on a map and don’t even know why they should be able to find Japan on a map. Most Americans can’t find the Pacific Ocean on a map and don’t know why it’s of any interest to them to find anything on a map. They can’t even find Oklahoma on a map! [laughs]
It’s unfortunate because of our history and our geographic location we are very isolationist and always have been, we have very little knowledge of the rest of the world. Our press doesn’t help. Most press companies don’t even have foreign offices anymore.
I mean, if the middle of Africa blew up we wouldn’t know about it for two or three weeks…the rest of the world might, but we wouldn’t.
Bruce Fenton: You see oil going up to $100 a barrel in the future; that seems to bode well for places like Dubai. What are you thoughts on Dubai and the rest of the Middle East?
Jim Rogers: Dubai doesn’t have much oil, you can see this from doing your homework, Dubai will be out of oil in five years or something. Dubai is doing their best to become a center for the Middle East: for shopping, for finance, for technology, for everything else, because they are running out of oil. Abu Dhabi has plenty of oil but that’s a different world. We’ll have to wait and see what happens with Dubai.
They are certainly doing a brilliant job of what they’re trying to do. As you know they have the best horse race in the world and the best golf tournament in the world and the best everything in the world. So it’s a question of “will it be successful down the road”. I don’t know…who knows. I have no idea if all these massive investments are going to pay off in the end. You might be a better judge of that since you’ve been there more recently.
They are certainly investing large amounts of money on the idea that they will become the major center in the Middle East. If it works, then clearly it will be great. If it doesn’t work, or if there is a war, they are a sitting duck. I don’t know whether it’s going to work. Bahrain is trying to do the same thing, Qatar is trying to do the same thing, Kuwait is trying to do the same thing so well have to wait and see. And all the others by the way have much more money than Dubai does because, as I say, Dubai is running out of oil, the others aren’t.
Bruce Fenton: Also Saudi Arabia has King Abdullah Economic City, and they are trying to copy it.
Jim Rogers: Well said. Even the Saudis are now trying to copy. Everyone is trying to copy what Dubai set out to do before. Dubai had to do it out of necessit
y because they were running out of oil. The others are trying to do it because they are now trying to compete.
Bruce Fenton: Obviously commodities are what you are recommending now. They are still terrifying to most investors and even most people on Wall Street. What would you say to those people? Are they really just missing the boat?
Jim Rogers: First of all I’d say that the fact that it’s still terrifying to most people is a great sign because that means it is still an un-invested and untouched asset class. In the world there are something like 70,000 mutual funds containing stocks and bonds for the public and fewer than 50 for the public to invest in commodities. So this has a long way to go, a huge way to go.
And I would point out, as I do in my book, that you can invest in commodities the same way you buy IBM. If you buy IBM most people put up 50 or 100% of the money, well you can do that if you want to buy cotton as well. Most of the terrifying stories about commodities are because of huge leverage that people have used and gotten wiped out with short term fluctuations. So don’t buy it that way.
I would also point out that everybody knows a lot more about commodities than they know about stocks. I mean nobody had a clue about dot com stocks: what they were, what they did or anything else, yet they were rushing out there buying them in a big way. Most people don’t even know anything about IBM or Toyota for that matter. Toyota’s got hundreds of thousands of employees and operations all over the world etcetera.
Everybody before they get to work uses most commodities. Before you get to work you use sugar, coffee, orange juice, rice, wheat, corn, rubber if you go running, wool, cotton silk, zinc, lead, gasoline. We know what this stuff is. It’s a lot easier to analyze commodities than it is stocks. I did not say it was easy. I just said it was a lot easier. So people have no reason to be terrified, in fact they should be embracing it enthusiastically. They’d probably make a lot more money.
Bruce Fenton: Now on to China. Most of the focus has been on how China will change. How to you see us changing? Do you think that there will be a lot more Americans like you daughter learning to speak Chinese? Are we going to change or will we remain the same and shrink global market share?
Jim Rogers: A little of both. Certainly more Americans are going to learn Chinese for many reasons partly because so very few speak Chinese now. But I’m afraid we’ll go the way of Great Britain. The UK: in 1918 they were the richest most powerful country in the world; their currency was the major world’s currency at the time etcetera, etcetera. Well, they sort of were over the top. They were over extended and there were many flaws within the underlying system. We’re sort of there too at this stage: over extended in every way and unfortunately I don’t see anything that’s going to change. Certainly no attitude here: you’ve already pointed out some of our shortcomings and that’s going to get worse, not better.
The best opportunities I know are in Asia and in commodities. Learn Chinese and start investing in commodities. Commodities are the single best way I know to protect yourself from the things you have come up with in your analysis. That’s where the money is going to be made in the next 10 or 15 years. If you’re clients don’t invest in commodities, they should be. There are plenty of ways to do it, you can buy indexes, you don’t have to buy specific commodities. These days there are a lot of structured products in commodities where your principal is guaranteed if your clients are worried about that kind of thing.
Urge your clients to get their money out of the US Dollar, whether that’s commodities or foreign currency or what. I’ve told you where the opportunities are.
Bruce Fenton: Thank you very much for your time, we appreciate it.
Bruce Fenton is Managing Director of Atlantic Financial Inc., which specializes in investments and global wealth management and is based outside of Boston, Massachusetts. Atlantic Financial advises corporations, endowments and individuals on international investing including Asia and the Mid East region.
Bruce welcomes comments and is available for speaking engagements, interviews and consultations. Bruce can be reached at 800-559-2900 or email Bruce Fenton.
Please Note: Commentary in this interview may not be appropriate for all investors. Always consult an investment professional before investing.
This information does not represent a recommendation to buy, sell or hold any security. The views and opinions expressed are the author’s own and not necessarily those of Cantella & Co., Inc., there is no implied endorsement by Cantella of any advice or trading strategy.
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