Trading the World’s Markets
By Leo Gough 10 March 2000
Interviews with the great global investors.
financeasia.com
It begins with Gough tracking down Jim Rogers at a hotel gym in Xi’an in China and chatting with him throughout the day as they visit a Buddhist temple, the site of the ancient
terracotta army and finally to dinner. Rogers – who made his money with Soros – later became famous for writing the book Investment Biker in which he scouted investment
opportunities as he drove around the world on a Harley Davidson.
It is structured – as are all the interviews – as a Q&A.
They begin by talking about protectionism. "I have seen no instances where protectionism should be encouraged," says Rogers. "Even in America there is this ludicrous
rationalization that we protect our sugar industry because of national defence. When we can’t think of any other argument to defend protectionism, they always resort to ‘national
defence’, but why the sugar industry helps national defence is a mystery to me."
Rogers fears a resurgence of protectionism in the West. He adds: "You can sit down and say, look guys, why don’t we just take all the steelworkers in America and close down the
inefficient steel factories? We’ll teach them new businesses, we’ll give them $50,000 a year, and if we can’t teach them anything new, fine we’ll give it to them for the rest of their
lives. They’d be better off. We’d be better off, the country would be better off. You can explain that, you can even do the numbers, but then you go out and talk to the steelworkers
and they get all emotional and they talk about their culture, their way of life."
He also pours scorn on the idea of the West knowing better. "Do you think we’re smarter than everyone else? When things are going right we think we’re smarter than everybody
else. In the 1980s everybody thought the Japanese were smarter than everybody else. People said, you have to understand the Japanese market is always going up because they’re
smarter. They do things differently than we do. They don’t put their trousers on one leg at a time. They wake up in the morning and somehow their trousers are already on."
He is not keen on Indonesia. "Indonesia isn’t a real country – it’s not going to survive as a country. It’s going to split up into – you pick a number. It comprises around 15,000
islands, but the Dutch sort of put them together and said, okay guys now you’re a country. One of the reasons I am not buying Asia in a meaningful way is because it is inevitable
that Indonesia will collapse. When it does I’ll want to rush in. I try to understand history. Indonesia isn’t a real country and it’s going to collapse the way the Soviet Union did."
He is long term bullish on China, although he does not own any Chinese stock. "The reason is that all of China’s neighbours have devalued. China is now in a difficult competitive
position, whether it knows it or not. They keep denying this and say they are not going to devalue. Maybe they won’t, but somewhere along the line they are going to have to float
the currency. At that point the currency will probably go down. By the way, if does I would rush in and buy at that point."
He thinks interest rates are on a long term trend up. "I would strongly urge you to borrow as much long term money as you can right now. I don’t think we’re going to see these days
again. Just the fact that you have it will be useful in a few years time when it will be much harder to borrow money."
He predicts a coming correction in US stocks. "Day traders are multiplying by the millions in America, because ‘stock always goes up’. I don’t know how it will end when the margin
calls start coming."
Nor is he keen on the profusion of mutual funds: "Right now there are 9000 mutual funds in America. Surely, we don’t have that many smart 29 year olds? At the moment it’s like all
of them are geniuses. Suppose I came to your door and said, ‘Look, my name is Joe Smith. I want you to write me a cheque for your life savings and give it to me and I’ll take it to
Boston and invest it. But I am not going to tell you what I am going to invest it in. You’d probably slam the door in my face and call the police.
"The mutual fund industry has done a brilliant job of marketing. I know many people who say, ‘I don’t want to invest in stocks because that’s dangerous. I want to invest in funds
because that’s safe.’ My only worry is when the day of reckoning comes, a lot of people are going to get badly hurt."
He predicts that America will not be the richest nation in the 21st century, in fact he predicts it will break-up. "If you were to say to Americans that, in a hundred years, there’s a very
good chance that the country as we know it will no longer exist, you would be met with cries of disbelief and outrage. Americans are convinced that we’re better than any nation, any
group, any political entity that has ever been. It’s conceivable that you could have a large part of the southern United States essentially saying, ‘Well wait a minute we don’t speak
your language [we speak Spanish], we don’t like what’s going on, you’re going bankrupt and you stole us in the first place.’ People can always revert to history when they need an
excuse." |
