Jim Rogers, more Guru than Gump

Will Hodges on his encounter with one of the world's leading hedge fund managers.
Commercial awareness
Politics and economics

Jim Rogers might be the most modest of today's financial masterminds. Rogers plays down the claims of one audience participant who herald him as a 'genious', maintaining that he is still the same guy who came from, Demopolis, a tiny hamlet in the back lands of Alabama, where the phone number for his family home was 5. "Because none of us would have been able to remember a larger number; he adds, to the audience's delight. But looking at Rogers' CV, it is hard to believe that he shares much in common with rural Alabama's other celebrated son, Forrest Gump. A graduate of Yale and Oxford, Rogers began his career as an investor in 1970, aged 28, alongside the acclaimed hedge fund manager, George Soros, helping him to set up the hugely successful Quantum fund which posted returns of 4200% over a ten year period. Following the success of the fund, the now unimaginably rich Rogers decided to retire at the age of 37. The second part of Rogers' life has been no less eventful.

He has been a guest professor of finance at Columbia School of Business and has undertaken two round the world trips, the latter is the subject of his 2003 book, The Adventure Capitalist, the subject of this week's book review on the adjacent page.

Six years have passed since he made the trip and the world has changed considerably since then. As Rogers explains, when he began the trip in 1999, the world was coming to the end of a bull market for stocks which had seen stock markets across the world post massive gains throughout the course of the 80s and 90s, creating huge wealth across the US and Western Europe. However, as he goes on to explain, the popularity of stocks as an investment opportunity is a relatively new and potentially short-lived fad. In 1980, when visiting cities like Milan or Madrid, he would regularly ask people to direct him to the central stock exchange, a request that was invariably met with a perplexed look. "People has now idea what stocks were" he explains "It is only their success as a financial product over the last 30 years or so that has projected them into the public consciousness".

According to his prediction, however, the bull market for stocks is drawing to a close. "My two girls have never held stocks or bonds" he says, referring to his daughters, five and seven months old, respectively "they have only ever invested in commodities". And this brings him onto to the crux of the argument he has been building. Commodities are where Rogers sees the next big bull market materialising. By his logic, commodities are the only assets with solid fundamentals and which have the potential to be a sound investment opportunity over the next decade.

In his warm, southern drawl, it's easy to find yourself agreeing with his prediction, the fact that he is one of the most successful hedge fund managers of all time certainly adds to his sway. "Silk, cotton, wool, orange juice, coffee - it doesn't matter what the product is, if people use it there is demand and that's enough to make it investable". He elaborates - with credit markets as they are, the supply of raw materials in the US and Europe has taken a battering. Farmers can't get loans to buy fertilisers, businesses can't obtain credit to start a lead mine, the supply of vital materials such as these is declining at a time when worldwide demand is set to explode. Never one to beat around the bush, Rogers cuts to the quick of the problem. With income levels and standards or living in Asia rising all the time, there are three billion people who are going to need more food, more clothes and more energy over the next decade. Oil is running out, that much is no secret, but the rate of decline in its supply is set to take us all by surprise. China's oil consumption per head is currently a tenth of that in the UK, but this won't stay as it is for long. As Rogers points out, no one is more aware of this than the Chinese themselves. The Chinese government has been establishing links with every country in Africa over the last ten years, a continent rich in oil and other commodities. "How many US presidents have been to Africa in the history of the United States?" he asks, rhetorically. The answer is two, and you begin to see how Rogers might be beginning to have a point.

As a man who have travelled the world on two occasions, looking for investment opportunities, it makes sense to take his advice when it comes to choosing which countries to back, and Rogers is nothing if not bullish about China's rosy future. "If you want to give your children or grandchildren the best possible future, teach them Chinese". As has been the case with his views so far, what might seem like a half-hearted remark by someone looking to make an impact in front of 300 anticipative listeners is actually a genuine piece of heartfelt advice. Rogers' eldest daughter is already fluent in Mandarin at age 5 - he hired a Chinese nanny when she with born with strict instructions not to speak to his daughter in anything but her native tongue. Earlier this year, the father of two sold the family home in the US and moved the whole family to Singapore to position them closer to the forefront of the Asian growth story. This is a man who puts his money where his mouth is, and when you have a fortune the size of his that is no mean feat.

So, what does Rogers make of the prospects for his own country in comparison? The answer is not much. Speaking in the UK, a country which has revealed itself as one of the most fervent supporters of Obama's presidency, Rogers has no qualms in expressing his view that the election of the world's most popular president might turn out to be a horrific mistake for the United States. As a native of Alabama in America's Deep South you suspect that this might be his in-built Republican loyalties speaking but, again, his views are backed up with enough though-out logic to make you think that he might just be talking sense. "Obama's economic proposals during his campaign were based on two fundamental plans. The first was to increase taxes and investments, the second was protectionism.

Let's just hope that this was just campaign talk and he didn't actually mean it". As Rogers goes on to explain, America is a country floating on a sea of debt, $13 trillion of it. Its people have become the world's biggest individual borrowers. The average Chinese citizen saves or invests 35% of their income, in America it is a fraction of this. Any policy which inhibits saving or investing can only be disastrous for America's future. So too Obama's plan to protect US businesses by raising import tariffs. "Protectionism has never worked" he elucidates, "They tried it in the 1930s and look how well that worked. If they try and introduce it now it could prolong the recession and severely hamper our efforts to get out of it". As a living testament to the benefits of free-market entrepreneurship it is easy to see why Rogers is sceptical about the recent bail-out plans orchestrated in the US and Britain. "If I was Ben Bernanke I would resign" he states calmly. "China and the East are embracing capitalism, whilst we seem to be going the other way. Why would anyone want to invest in the West whilst this is going on. There will be no competition, no dynamism left in our economy. All that Bernanke and his buddies have done is to take money from the competent people and give it to the incompetent ones. That is not capitalism."

By the end of the talk I find myself almost feeling a bit embarrassed that I had announced myself as such a strong advocate of Obama in my last two issues of The Gateway. Like many of his followers amongst my age group, I expect I jumped on the bandwagon without really taking the time to look properly at his economic policies. What Rogers has taught me in this one-sided 30 minute confrontation across a crowded lecture hall is the value of questioning our world and our society. It would have been pretty easy for Rogers to have rested on his laurels, having become a billionaire in his late thirties. Instead he set out on a twenty year voyage of discovery, travelling a world for up to three years at a time. Paradoxically, it is his self-proclaimed lack of genious that has driven him to learn and has been the making of his success: "I'm not the kind of guy who has the answer to everything, if I need to know something I'll look it up." For those with an eye on a future in financial markets you could do worse than look up Roger's unique brand of financial travel writing as a place to start.

Jim Rogers was speaking at The Money Show in Westminster.

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