Market Review: How To Stay Out Of Trouble

"Some people want to buy baseball teams or chase women, but I’m told the number one dream that comes to mind when young people are asked is: ‘I want to see the world.’ I’ve been around the world twice now. Once on a motorcycle. Once in a Mercedes. So I guess that means I’m crazier than most people."

– Jim Rogers,
The Adventure Capitalist

Here at the Daily Reckoning we’re a suspicious lot.

We’re suspicious of television news… politicians… tech stocks… tech stock touts… the Internet… the moon- landing… neocons… California reds…Martha Stewart… and Alec Baldwin. Among other things.

We don’t trust anything we don’t have personal experience of… and even then, we have our doubts. It’s not a position we choose without reflection; but with humility. We recognize we only know enough of what goes on in the world to get ourselves in trouble.

When our friend Jim Rogers returned from his Guiness-record breaking trip around the world and then published a book about it… we thought the time is right to hit him up for a few secrets on staying out of trouble.

It would take a resourceful man, after all, we thought, to keep a bright yellow custom-made four-by-four convertible Mercedes on the road for 152,000 miles across some of the world’s most barren and politically treacherous landscapes… with a fianc? and an Internet/satellite crew in tow.

Naturally since Jim has been physically on the ground in more places than any other human being (at least by car, that is) and looking at each country through the lens of a hyper- successful investor – we were intrigued by what he might have to say:

"The reason that I love traveling around the world," the ultimate ‘erfahrung’-investor (erfahrung = experience-based knowledge) told us, "other than the sense of adventure, and I certainly love the adventure, is it’s the only way I can figure out what’s going in the world. I don’t trust the newspapers, TV stations, or government pronouncements. That’s what everyone else knows. I want to see it for myself, close to the ground.

"You learn a lot more about a society by crossing a remote border, finding the black market and changing money or talking to the local madam, than by talking to bureaucrats or economists at the IMF and the World Bank. or by watching CNBC.

"By the time I cross the border in the jungle, I know 25-30% of what I need to know about a country. I know the bureaucracy. I know the infrastructure. I know the corruption. I know the status of the economy and its currency. And I know whether I stand to make money investing there or not."

During Jim’s travels he crossed most of the former Soviet Republics… some stuck in Saddam-style repressive dictatorships, still others remarkably progressive and successful under regimes taking advantage of trade with the West.

He points out that Mongolia – formerly "Outer Mongolia" and synonymous in English with a dirty backwater – has leapfrogged about 3 generations of technology. Ulan Bator, the nation’s capital, he says may be the most digitally connected capital city on the planet.

Likewise, as you may have read in the Daily Reckoning last week, he’s convinced the world’s best capitalists reside in Communist China. These are observations you can only make if you’ve been there – close to the ground. Press reports, obviously tell a different story.

Rogers makes the trip back from the Pacific through Russia, where he reports most of the country still in the hands of organized criminals who simply seized factories, farms and stores as the Soviet Empires fell apart.

In all, the voyage took him, Paige (who is now his wife) and the techies through 116 countries – mostly where tourists fear to tread: Saudi Arabia, Myanmar, Angola, Sudan, Congo, Columbia and East Timor. He and Paige (they got married in England on the eve of the new millennium) lived it up in Europe, crossed the Sahara… twice and South-east Asia… Australia… and up the spine of South America… finishing their sojourn at his family’s home in Demopolis, Alabama.

It’s an impressive romp (and his book about it is well worth the read)… but one question popped up repeatedly for us as we talked to him: What if you don’t have the time or the money to make a world record setting 3-year journey around the planet in search of personal investment opportunities… how are you going to know what’s the next thing to do with your money?

Jim Rogers had an answer for that, too: "The only other way to know what’s going on is to study history," Rogers told us.

"If you want to be successful," he continued. "you’ve got to understand history. You’ll see how the world is always changing. You’ll see how a lot of the things we see today have happened before. Believe it or not, the stock market didn’t begin the day you graduated from school. The stock market’s been around for centuries. All markets have. These things have happened before. And will happen again."

"Alan Greenspan has gone on record to say he had never seen a bubble before. I know in his lifetime, in his adult lifetime, there have been several bubbles. There was a bubble in the late 60’s in the U.S. stock market. There was the oil bubble. The gold bubble. The bubble in Kuwait. The bubble in Japan. The bubble in real estate in Texas. So what is he talking about? Had he not seen those things, he could have at least read some histories. all these things and others have been written about repeatedly.

"The current bubble which Greenspan does not see is the consumption bubble he is causing. He has the lunatic idea that a nation can consume its way to prosperity although it has never been done in history."

By way of an alternative Jim suggested, despite having been criticized for his policies regarding personal freedom, Lee Kwan Yu, prime minister of Singapore, knew how important it was for the citizens of Singapore to save and invest: so he forced them to do that, too.

"Forty years ago Singapore was a slum. Now, in terms of per capita reserves, it’s one of the richest countries in the world.

"One of the reasons Singapore was so successful is its dictator, Lee Kwan Yu, insisted that everyone save and invest a large part of his income. There are lot of other dictators or politicians you can condemn, but they have nothing to show for it, and in fact they’ve been worse. Whatever Lee’s policies toward personal freedom, at least, he forced people to save and invest.

"History shows that people who save and invest grow and prosper, and the others deteriorate and collapse."

The man who started his career on Wall Street in 1968 with just $600 bucks in his pocket and finished in 1980 at the age of 37 with enough money to satisfy a lifetime of adventure might know a thing or two about saving and investing…

Having made ‘the ultimate investors road trip’ – finishing up at the age of 62 – he might know a thing or two about staying out of trouble.

Despite a tax system rigged against the very idea… and a society hell-bent on consuming every cent… spend less than you make and invest a little piece of the rest. Other than that, have a good weekend…

…and read your history!

Addison Wiggin,
The Daily Reckoning
Paris, France
June 7-8, 2003

P.S. As our colleague Dr. Steve Sjuggerud put it about a week ago: Jim Rogers is the real deal. He co-founded the Millenium Fund with George Soros and retired at the age of thirty- seven. His first trip around the world was by open air and open road… on a motorcycle.

Adventure Capitalist, his book about his latest trip is a fascinating read. I brought it with me on a recent trip to the States. On several occasions I was stuck in airports (once in at Atlanta and another time in Newark) and I found myself not minding the wait at all, enthralled as I was by Jim’s travels.

If you do nothing else this summer: buy this book. Apart from the obvious lessons you would expect from going on the road with one of the world’s most successful investors… you’ll savor the hours… the book is full of humor, intrigue and ribaldry.

Adventure Capitalist


MIA’S WEDDING (06/06/03)
by Bill Bonner

"…At some point, a man has to stop thinking. He has to stop because no amount of thinking can get him where he needs to go – such as, to the altar. Getting married is not a rational act, it is a desperate one. He has to feel his way to it. You can make money by figuring things out. But if you spend all your time figuring things out, you’ll never figure out what you can’t figure out by figuring…"

SCREW THE LIMIT (06/05/03)
by Bill Bonner

"…Over this 36-year investment life span, in other words, neither shares nor bonds defeated risk. Perhaps we need to think more long-term. But if you can look seriously at an investment term that exceeds the human life expectancy, why stop at seven decades? Why not 10 decades…or 100? If investing for the long term really does pay off, where are the long-term investments that have done so superbly well?…"

by Eric Fry

"…Generally speaking, yield spreads narrow (‘tighten’) during strong economic times and widen during recessionary times. Lately, yield spreads have been tightening. So…is this a harbinger of growth to come? Or is it merely the result of yield-hungry investors buying up riskier bonds in a ‘grope for yield’?…"

by Addison Wiggin

"…As well-intentioned and brilliant as the idea may have appeared at its outset, the welfare state – the promise Western governments made to care for their citizens from cradle to grave – is fast running out of time…and money. "So what should be done about it?" the politically disaffected will invariably ask. Our cheerful response: do nothing…"

by The Mogambo Guru

"…Watching Greenspan addressing the Congressional Joint Economic Committee, I constantly interrupt myself by vacillating between gagging in revulsion and laughing hysterically at what is being said…"


HEADLINE, NEWS And INSIGHT: Bubble in bonds? Then, what?… Wall Street next in line for a regime change…

Bonds – An "Unbeatable Investment"
by Martin Spring

"…Bonds weren’t on the radar screen of individual investors, or their advisers. If I insisted on buying them, I was told, I should prefer shorter-dated to longer-dated, corporates to governments. Later, I was told that shares should be bought for recovery, as they were higher-return investments long-term, and/or that bonds were too expensive. All this advice was completely wrong. Fortunately, I disregarded it…"

Time for Regime Change on Wall Street
by Dan Denning

"…Only fools believe that Wall Street plays by the rules. You have better odds in Vegas than you do in New York. Investing in a single stock and making a fortune is not just a myth anymore, it’s a lie, even a fraud. Nearly everything you were told about how to invest successfully in the last 10 years is no longer true…"

The Daily Reckoning