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Recently I have had to opportunity to read Jim Roger's book "Street smarts - adventures on the road and in the markets". Before reading this book, I did not know much about his personal life, only that he was a regular and popular financial commentator, particularly when it came to commodity markets. Today I would like to share with you some interesting observations gained through reading his book.

Overview

Rogers has travelled extensively through his lifetime which has given him better insight into World current affairs and their affect on financial markets. Firstly, he grew up in Demopolis, Alabama and studied history at Yale University in New Haven, Connecticut - a distance of over 1600km - a long way to go for a 17 year old freshman. He got his first taste of Wall Street as an intern at "Dominick & Dominick LLC" in their research department answering broker's questions.

All of a sudden my studies of history and current events were more than theoretical exercises - they had practical value.

He then went on to philosophy, politics and economics from the University of Oxford, in Oxford, England, United Kingdom. Over his lifetime he has travelled around the World twice, once in a car and once on a motorcycle. This travel during his life has helped him to develop an astute understanding of World events and their cause and effect relationships in financial markets.

Future of farming

Rogers believes that farming has a bright future, claiming the last bull run was in the 1970s and the boom-bust cycle caused devastation in terms of oversupplied markets and low prices.

Food prices are on their way up. Complain all you want. If they do not rise much higher, we are going to experience we have never experienced before - no food at any price.

In the past, the students wanting to get ahead in life got MBAs and went to the financial centres of the World. Contrary to today, he believes that students would be better off studying "agriculture and mining degrees" [1].

Benefits of short selling

During the early 1970s, Rogers worked at investment bank Arnhold and S. Bleichroder, alongside investor George Soros. By 1973, both had left their jobs at the bank and went on to found the hedge fund, Quantum Fund. At the time, and arguably in my opinion even today, he believe their is a public misconception that short selling is evil; since short sellers make money from falling stock prices. Short sellers provide a automatic stabilizer for the market. When the market is in a "mania", short sellers provide liquidity by selling stock. When the market is in a "panic", short sellers are buying stock to cover their short positions. As this implies, short selling adds "liquidity and stability" to the market [1].

Investment advice

Similarly to author of "Rich Dad, Poor Dad", Robert Kiyosaki, Rogers suggests to invest in your own financial education and things that "you know a lot about" [1]. This could be anything, for example, cars, computers, or fashion. By focusing on what you know, you will be motivated to learn and read about it he argues. Moreover, in doing so, you will understand trends and their cause and effects, and know when to buy and sell to maximize profits.

Contrary to mainstream financial commentators, he actually argues against diversification.

If you want to make a lot of money, resist diversification.

The reason being is because diversification, although safe, delivers sub-optimal returns compared to actively investing in trends within different markets over time.

Lastly, he also advises that investors should not be changing their positions often. Rather, they should be not doing anything most of the time.

Warren Buffet rarely changes his holdings

Scandal

Rogers first run in with the law was when his co-founded company "Quantum Fund" invested in a company called "Computer Sciences Corporation". The Security and Exchange Commission (SEC) claimed that they were short selling this company's stock only to be buying back the stock at a lower price in the upcoming initial public offering (IPO). It is alleged, Rogers' partner, George Soros, was engaged in stock manipulation.

George my reputation is worth more to me than a million dollars.

To which, as Rogers recalls, George says "not to me it's not" [1].

Another incident happened in 2005 involving dodgy accounting at Refco, a futures trading company, of which Rogers was investing. The company went bankrupt when the company shifted money from a government-regulated account to a cash-strapped offshore entity, when management had no authority to do so. Multiple managers at Refco were given criminal cases against them for securities fraud, of which some got convicted.

The rise of xenophobia

Rogers now lives in Singapore which is "staggering successful" with "so much accumulated wealth and expertise" [1]. Singapore is a nation of immigrants which he argues is good because it brings in "capital and expertise" and helps reduce the demographic problem associated with a low fertility rate [1].

The most vehement anti-immigration sentiment sometimes comes from immigrants themselves.

Decline of the American Empire

A key theme that Rogers has is that America is a declining empire and that future growth and prosperity will come from Asia.

• Failing education system - Continual news coverage showing "European and Asian children outperform American students in standardized tests." [1]
• Bloated tertiary education system - In relation to tenure, if you work for 7 years you get a lifetime guarantee of a job [1]. As Rogers puts it tenure is "where incompetent teachers find refuge." Huge college tuition and the rise of international competition closer to Asia and also on-line learning will lead to the eventual decline of this bubble he believes.
• Third world conditions - As Rogers puts it "fly into a New York airport, you are flying into a third world airport. Then you get into a third world taxi, you ride on third world highways, and even if you stay at a five star hotel, you are staying at a third world five star hotel." [1]
• Failure to permit bankruptcy - Rogers maintains that "too many people are bankrupt" [1] for a reason behind the lack of economic recovery - it is not a liquidity problem. Countries that allow bankruptcy, such as Sweden, have had a severe downturn but have come come out of the economic malaise much stronger. This is somewhat of a paradox against American capitalism.
• Overrun by Lawyers - As Rogers puts it "The explosion of litigation accounts for a significant part of the expense of doing business in this country." [1] This impacts all businesses, most obviously the health care industry, making them less internationally competitive.
• Diminishing freedoms - As Benjamin Franklin put it "those who would give up essential liberty to purchase a little temporary safety deserve neither liberty or safety." Examples Rogers is particularly scathing of include anti-immigration laws, particularly in his home state of Alabama, and the Foreign Account Tax Compliance Act (FATCA).

Given the pessimism towards America and the political and financial systems that govern it, is it any wonder he chose to live in Singapore as a permanent resident.

Concluding thoughts

Overall I found Jim Rogers book "Street smarts - adventures on the road and in the markets" an interesting insight into Rogers personal and professional life. I think the most endearing traits that Rogers has is his international awareness on current affairs. This, combined with his educational background in history, allows him to identify trends happening around the World well before they hit the mainstream media and become common knowledge within the financial community. As George Santayana once said "those who cannot remember the past are condemned to repeat it"; certainly history has proven time and time again that patterns repeat themselves over and over again - for better and for worse. In his early life, he seemed to be a workaholic which may explain why he became a multi-millionaire by 38 and "retired". However, later in life, he seemed to become more humble and is enjoying his family life with his wife Paige Parker and his two daughters Beeland Anderson and Hilton Augusta. Moreover the book was a rich tapestry of Jim Rogers life and many historical inferences that gives the reader a deeper understanding of how Rogers sees the World.

Reference

[1] J.Rogers, Street smarts - adventures on the road and in the markets. New York, Crown Business, 2014, pp. 13, 26, 51, 59, 61, 66, 77, 115, 119, 130, 155, 166, 178.