This is a continuation of Jim Rogers Review at Shares Investment Conference.
After giving about 40 minutes of his keynote address, Jim Rogers spent the rest of his allocated time answering questions from the audience. The questions came thick and fast with long queues at the microphones. The answers were also lengthy, and the entire thing reminded me of the Berkshire Hathaway AGM which I visited in 2011.
The questions were also not one-way, as Jim Rogers would always engage in lively conversations with the questioners to find out more about them. All asked in a candid and non-offensive manner.
Quite a number of people who asked questions were actually not native Singaporeans, and included people from places like Brazil, Italy, Czechoslovakia, Japan and China.
There were good questions, the typical Singapore question of “What stocks should I buy now?” and even weird questions like “In the event of World War 3, how should we protect ourselves and where should we go to?”. The student who asked that question was quite persistent in getting a reply and Jim Rogers duly flashed the world map showing his travels on the screen and told the student that the place to be in would be a country that was not involved in the war. 🙂
And the question that drew the biggest laughter from the crowd was when someone asked Jim Rogers what was the biggest mistake that he ever made and he replied “My first wife”.
There was also a noon time panel discussion which talked about “What happens without the Euro” and an end-of-the-day questions and answer session. The Q & A session was dominated by questions meant for Jim Rogers and at one point, the MC had to intervene to ask whether there were any questions for the other speakers.
It was a pity that we run out of time at the end. If not for the time constraint at the venue, I think many in the audience probably wouldn’t mind staying there the whole night just listening to the questions and interesting replies from Jim Rogers.
A summary of some of the questions and replies (edited and rephrased) can be found below. [warning]Note that these notes were taken down live and is not an exact transcript. It might also contain some inaccuracies.[/warning]
Questions for Jim Rogers
What are the signs to watch out for to know that another currency is taking over the USD as the world’s dominant currency?
The signs are already happening. The USD as a percentage of the world’s reserves has declined over the past ten years. People are already moving away from the US dollar. Venezuela won’t take US dollars anymore. China has started to sell their trade obligations in other currencies other than the US dollar.
This is not something that will happen overnight. But it will happen gradually until one day people realize that the USD is no longer the world’s reserve currency.
Some of the currencies Jim holds include the Singapore dollar, Japanese yen and the Swiss Francs.
Since the Singapore dollar has been appreciating against the US dollar in the last few years, what do you think are the chances of investment into US real estate?
I have been slowly shifting my assets out of the United States. I expect there to be some kind of capital control against the shifting of assets out in the future. If I really have to invest into the US, I will look to buy into agriculture farms. The farmers are the people who are going to get rich. They are going to drive Lamborghinis and the taxi drivers are going to be the stock brokers.
What is your take on Miami and Singapore property?
Miami is a great place but I do not own any property there. Miami is the gateway to Latin America and has turned into a very exciting Latin city. If I have to look for a place in that part of the world, I would pick Miami. But I am not.
I also do not own any property in Singapore. I want to look for a place near my children’s school but I’m not looking with any great enthusiasm because I expect prices to come down. There will be higher interest rates and greater turmoil in the world.
Also, the Singapore government has been trying to control prices. And as you know, when the Singapore government tries to do something, they are usually able to do it. So, I’m not rushing to buy property in Singapore at the moment.
What advice would you give a person setting up a fund or starting his own business?
Buy low sell high (to laughter from the audience).
If you can buy low and sell high, once you have a track record, people will come to you and ask you to invest their money. It’s an extremely difficult way to make a living. I have my own style which might not work for you. Listening to me or any other person might not be useful for you. You have to find your own way to make money and people will love you for it.
When I graduated, I found Wall Street and fell in love. I really wanted to know what was going on the world. I found that Wall Street would pay me accordingly. Figure out what you love the most. Let’s say you go to a doctor’s office, pick out the magazines which you love the most.
Maybe you like gardening. If you tell that to your parents, they will be horrified. But you should still do it. People who follow their passions never go to work, they can’t wait to go to work. Someday you might have a chain of gardener shops all across Asia. You might even get it listed on the New York Stock Exchange. And then your parents will say they have always encouraged you. 😀 Even if you are not successful, you will be very happy. Many people are just pursuing things that their grandmother said they should do.
Finance is going to be a terrible place to be in the world economy. If you were a Wall Street partnership in the old days, you would have had little debt. Nowadays, the government really hate financial institutions and the evil speculators. You’re either going to love it a lot or have a terrible time.
What do you think about the future of Japanese bonds in general?
Japan is the second largest international creditor nation in the world but they a huge internal debt.
I cannot conceive buying Japanese government bonds. I bought a few Japanese shares during the tsunami. Japanese currencies is one of the currencies that I own. Tokyo is one of my favorite cities in the whole world. But Japan has got serious problems – declining birthrate and they don’t accept immigrants. Singapore is lower, but (used to) accept immigrants. The staggering internal debt going up by huge amounts every year, population is declining and aging, therefore I cannot conceive of owning Japanese bonds.
Would an international political system and international law be a way to keep our world more (eco) sustainable in the long term?
I cannot think of an international body that has been successful for an extended period of time. I don’t remember a single war that the United Nations has prevented in the last 65 years. The World Bank has been a hopeless failure. I do not think we need another layer of bureaucrats and politicians.
There have been very few politicians that have been successful in the past 1000 years. The best way to solve problems is to have people use their minds. The market will adjust to reflect this. Rather than having more politicians.
Do you think that the USA market has recovered since the DOW has been hitting a 3 year high now?
I do not have confidence in the US market. I have sold short US stocks (Jim Rogers is bearish for the next two years). Mr Obama and the people in power are spending as much money as they can to get elected. This is one of the reasons why the stock market has been going up. Things feel good for many people, in many cases it Is artificial good news. I am worried about the world after the election. Germany has an election coming up as well. Merkel wants to get re-elected as well by spending a lot of money.
What is your time frame for your short positions in the US?
It won’t happen overnight. You want prices to collapse after you short it but it doesn’t work that way. I expect serious problems in the US in the next couple of years, 2013 and 2014. So, I would expect more opportunities on the short side.
Do you think there will be a QE3?
The central bank is already printing money. QE 1 and 2 were hopeless disasters, they are going to be embarrassed about having a QE3. However they will do it, they will print money, especially if the world economy does not get better. The only way to earn more money is to own real assets.
I read a suggestion that the US should go back to the gold standard. What is your view?
There are people who feel that the gold standard is a better system. It has been tried many times in the world history. Politicians have always found ways to cheat. When they had coins, the Romans would start to put base metals into gold or silver coins. Eventually, what started out as 100% silver ended up as 1% silver.
The gold standard would work for a while but politicians would eventually cheat and we would go back to where we were.
Is it better to invest into the Singapore stock market, Hong Kong or the Shanghai market?
I am not investing into Shanghai at the moment. I only invest when there’s a collapse. The China market has dropped for a few years but a collapse is when people are throwing stocks and saying never mention shares to them again.
If I had to buy one (out of the three), I would buy into one that is dropping (Shanghai) than rising.
Do you have any stocks or ETFs to consider buying for China or Singapore?
I’m not here to do hot tips.
If I told you what to buy, you wouldn’t know what to do if the price goes up or down. Because you will not know why you bought it. You will not know it when I sell.
For you to listen to anyone about investments, you must be involved with them on a continual basis.
If you do not know what to do after what I have told you about where I think are the good areas to invest in, then you shouldn’t invest.
You mentioned you hold Singapore shares. Which ones? (laughter) (There were a few attempts by the questioner to get an opinion on some individual companies but they didn’t work).
For most investors, investing in the index is the best way to invest. Many studies have shown that index investing will outperform almost 75% of money managers.
Since you are bullish in commodities what is your view on precious metals, would you invest in the bullion or the mining stocks or gold mining index?
I own gold, silver and precious metals. For me, the best way is to invest in gold and silver coins because they are more marketable and liquid. In Singapore, it is difficult to buy coins or bullion because of GST. That tax is being removed so I suspect you will see a much more vibrant and dynamic market in Singapore.
Gold mining shares are extremely cheap right now. If you can find the right company, you will be able to do extremely well. If you do not know how, you will have to do index investing. If you are a stock picker and you know which stocks to pick, then that is the best way to go.
However, more money has been lost in gold mining shares than in any other stock.
Do you have any comments on Brazil and its Brazilian currency?
Brazilian football players and dancers are the best in the world. Their alcohol is one of the strongest.
They generally do well when commodities are in a bull market. But when the next commodities bear market comes, Brazil will not do so well.
Normally when the bear market comes, the Brazilian politicians will start doing foolish things. But the present government have already starting doing foolish things. I am worried about Brazil and have no investments in them.
Question about interest rate
I think interest rates world wide are going to go much higher in the future. There’s going to be currency turmoil, higher interest rates. The debts are going through the roof. If I told you how high interest rates are going, you will stop listening to me. If you can lock in any loan at current interest rates for a long period of time, you should.
In the low interest rate environment, the people who do everything right and the prudent savers are being wiped out. Pension plans, endowments and insurance companies are being wiped out.
The people who run up big debts and speculators are being rewarded.
I am skeptical on how long this can go on.
Panel Discussion on the Euro (less than 20% of the discussion is covered)
Jim Rogers: Euro is going to change several times in the next few years. Some politicians will try to win their elections by saying they will take their countries out of the Euro. There will be turmoil when countries leave the Euro but some kind of Euro is going to survive. We can let Greece go bankrupt but the politicians might not do it. In America we have states that have gone bankrupt and the United States has survived.
Merkel will do whatever she can to hold the Euro together till after the German elections next year. I suspect once the German elections are over, a lot of forces will be unleashed. The market is bigger than the Germans.
Mike Bellafiore : The best thing is to let some of the weaker players exit. The thing that strikes me as being so disappointing is that those who push for the Euro zone didn’t consider that those countries wouldn’t play by the rules. I actually don’t hope for a mass exodus for three or so at the same time, even though that would actually create an awesome trading situation for my company.
Problem is that historically, if we take a look at productivity of workers of Greece to what they are paid, they are expected to work less than other countries and be paid more. If you tell them to go into austerity, you are essentially changing everything about who they are and what they want. Sure they’ll sign up for a couple of years and try to be responsible, but what happens when the person gets docked their pay cheques?
Sandu Avtar : Politicians do cook their books and this is quite apparent with Greece itself where the books were cooked and Greece went into the Euro. Strong countries could leave the Euro as well, but that is not likely to happen. Weak countries would most likely leave the Euro. Greece, but if you look at history of countries leaving and breaking up, volatility is in fact different from what analysts tell us.
