21 May 2017

In this episode, Preston and Stig talk to world renown investor, Jim Rogers.  Rogers rose to a legendary status in the 1970’s when he obtained a 4200% return during his ten-year ownership of the Quantum Fund.  During this same period of time, the market only advanced 47%.  After Roger’s time at the Quantum Fund, he became a professor at Columbia Business School. In 1998, Jim formed the Rogers International Commodity Index at a time when commodities were severely depressed. During the following decade, his decision to create the index proved extremely lucrative.

In addition to being an investment titan, Rogers is also a Guinness Book Record holder for traveling around the world on his motorcycle.  He is the author of numerous best-selling investment books.

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  • Jim Rogers’ positions in the market.
  • Why he is holding gold, but does not add to his position.
  • If India is a good financial market to invest in.
  • What happened when Preston followed Jim’s advice to short junk bonds in 2015.


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh  0:02  

Hey, how’s everyone doing today? So we are super excited about today’s guest, Jim Rogers. For anybody that’s in finance, they definitely know who Jim is. 

Jim was the Co-founder of the Quantum Fund with the legendary investor George Soros, from 1970 to 1980. During that 10 year span, Jim and George Soros had a 4,200% return when the S&P 500 only had a 47% return. So, they definitely went down in the books as being two of the brightest traders during the 1970s and into the 1980s. 

After that time, Jim retired and he went on to teach at Columbia Business School for a little bit. Then, he started doing some amazing things where he literally drove around the entire planet, on a motorcycle, and then he did it again in a car. 

He’s written numerous best selling books. He’s an expert in commodities and currencies and he really doesn’t need too much of an introduction because I’m pretty sure anyone listening to this show probably already knows who he is.

Stig Brodersen  1:09  

In this episode, Jim Rogers reveals what he’s currently investing in. We’ll talk about why he is currently holding gold. But that’s not actually his position, and we’re going to talk about India, and whether or not it’s a good financial market to invest in. 

Finally, we got to talk about what happened when Preston followed Jim’s advice to short junk bonds back in 2015.

Preston Pysh  1:31  

Let’s go ahead and hop to it.

Intro  1:35  

You are listening to The Investor’s Podcast, where we study the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected.

Preston Pysh  1:56  

I can’t even tell you how thrilled I am to have you on the show, Jim. I’m a huge fan. I’ve been reading your material for years at this point. 

The first thing I want to talk to you about is gold. A lot of people are saying to buy gold, and you’re one of the few that I’ve read over the last couple years that you have a position in gold, but you’re very hesitant to increase that position at this point in time. We’re recording this, for people listening to this in the future, we’re at the second quarter of 2017, just to kind of give you a reference of time here. 

So, Jim, you haven’t been increasing that position and I have a similar opinion as you as to not taking a position in gold at this point. But I’m really curious to pick your mind as to what are some of those critical things that you’re looking for that would change that opinion for you, where you then start taking a position again.

Jim Rogers  2:47  

What would change? I don’t know. Gold claps to $950 and out. I would probably rush in and buy a lot of gold. Price, I guess, is the main determinant or time, if this were 2019, I might rush in and buy some gold. 

Gold hasn’t had enough of a correction yet for me, and there’s still too many bugs. It has too many bulls, you know, it’s everybody… Millions of gold bugs out there and they give up. I hope I’m smart enough to buy gold. 

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Preston Pysh  3:17  

So you’re really looking at it more from a psychological standpoint of there’s too many people talking about how it’s a good trade. Whenever everyone’s gonna say you got to run for the hills on gold, it’s a disaster. That right there is when you see that as a prevalent narrative in the market. That is when you know it’s the right time to buy. Is that a correct statement?

Jim Rogers  3:36  

Preston, when they say, “I never want to invest in gold again, as long as I live,” that’s when I want to invest in gold. That’s true of many things. You know, when everybody gives up and throws it out the window, that’s usually a good time to buy anything, including gold. And so far, there’s still too many people who love gold.

Preston Pysh  3:57  

For me, I was kind of expecting you to come with more of a quantifiable approach to it, I guess. So, I’m really surprised at how qualitative it is.

Jim Rogers  4:08  

Investing is qualitative, quantitative. It’s everything. I mean, I wish it was so simple. I wish you could just look up to turn to page 37 and say, “Ah, there’s the answer.” There is no simple answer in the investment world. It’s a combination of everything. And that’s the case with gold and everything else. 

Gold has been around for thousands of years. Gold has had many peers when it’s been in a bull market, many peers when it’s a bear market. Gold is just another investment. I know that many people think it is a currency, a blah, blah. It’s a this. It is a that. 

Gold is just another investment like everything else, just another commodity like everything else. Go back in history and you will see the gold is just another investment like everything else, whether we like it or not.

Preston Pysh  4:59  

So I have one question on this. I’m sorry to keep hogging the questions here, Stig. But when it comes time for you to put on this play and put it on thick, what do you think would be the best approach for an investor to take? 

For me, I’m thinking the best way for me to do it, and I really want you to shoot holes through this idea is what I want you to do, Jim, but for me, I’m thinking the best way to do this would be to put a two and a half year call on some gold mining companies. 

Why is that a bad idea? Or talk me through how you would say that that’d be a terrible approach or a great approach?

Jim Rogers  5:31  

Well, Preston, if you get the timing right, please call me too and tell me it’s time. A two-and-a-half-year call would be fantastic. If you get it at the bottom, there’s no question about that. You got enormous leverage with calls and stocks. Stocks usually go up more than the item itself. 

You can also do it with futures because the futures on gold itself can also get enormous leverage. If you get it right, you get the timing right and the products right, then you get enormous leverage. And that’s what you’re looking for. 

So, futures or calls at the right time on the right item will make you a staggering amount of money. Now, once you do it, you please call me, okay? Because I need to know when the bottom is too.

Preston Pysh  6:18  

So I love that because you’re telling me that it’s a good idea, but only if you’re really good at timing the market, which I think you’re very suspect of anybody who’s good at timing the market and is that a correct statement?

Jim Rogers  6:29  

Well, I’m not a good market timer. I’m the world’s worst market timer. I’m the world’s worst short term trader. So yeah, that’s why I’m asking you to call me when it’s the bottom. But Preston, if you had told me that in 2014, then you had done it. You would have lost everything. 

Your call would have expired by now, and we’d be sitting here talking about, “Gosh, let’s talk about baseball or something,” because you lost your whole investment. Fortunately, you didn’t tell me that in 2014. I might have followed up on [it].

Stig Brodersen  7:02  

So Jim, I have a next question here. I know that you have always been on the forefront of various markets. You wanted to buy Danish kroner, though it seemed like no one knew where. It might be even worse. 

Can you talk to us about these ideas that might sound crazy to many people? And how do you validate those thesis before you put in money?

Jim Rogers  7:21  

Well, I have learned in life that the more people ridicule you, and the more people question you and laugh at you, that you’re probably on to a good thing. No matter what it is. There are times in life that if you are an observer, and you find change, to me, the most important thing is to find something that’s cheap. 

And if it’s ridiculed and ignored, it’s probably very, very cheap. Touch the Danish kroner was in a way, nobody even knew what it was, back in those days. You’re probably going to make a good investment, if you buy and change.

Preston Pysh  7:56  

Kind of going on that theme, Jim, when you think of investments that I mean, so much of our audience is in the United States. When you think of areas in the United States markets, whether it’s currencies, commodities, bonds, stocks, where do you see that where a person could actually kind of apply that thinking and that thought process to a pick in the United States?

Jim Rogers  8:18  

Well, you look out the window, you look at the market, you read the newspapers, you watch the Investor’s Podcast, whatever, wherever you see that people are down on something, and it’s depressed, and there may be an investment opportunity there. 

Agriculture in America is pretty depressed right now as you probably know, and maybe an area where there’s an investment opportunity. Just because something is depressed doesn’t mean you should be investing there because it could stay depressed for a long, long, long time. 

You have to find the change that’s taking place as well. To say something can be depressed for 15 or 20 years, you have to find the change. And change doesn’t happen every day. But if you can find something cheap, and if you can find a positive change, maybe you should do more homework and find an investment

Stig Brodersen  9:11  

Could you talk to us about catalysts because you’re talking about how difficult it is to time the market or to time a depressed asset? Some people would be saying that value in itself would be a driver. But how do you assess [the] catalyst? And when do you see that something is about to change so it will realize its intrinsic value?

Jim Rogers  9:32  

Well, Stig, you hit on it again. I mean, that’s that’s the important part. What I have learned about me, because I’ve been investing a long time, is that I’m usually too early that I see something happen, and I assume everybody sees what I see. I now know they don’t. I now know I see it much too early. So I’ve learned to wait a year or two. 

But [to] change the catalyst, as you call it, could be anything. But again, I want to emphasize… Even when you see the catalyst, it doesn’t do any good with everybody else seeing the catalyst too, unless the effects come through pretty quickly. And in life and in the world, it usually takes a while for the catalyst to work its way through.

Preston Pysh  10:16  

So Jim, I want to hit on a theme that you talked a lot about in your book, “Street Smarts.” In your book, you talk about this idea that the capital flows are drastically changing from what the US had experienced over the last 75 years. And you feel that a lot of the big opportunity is now being presented over in China, Singapore, in most of Asia, and leaving Europe, leaving the US, and leaving Japan. 

When I was reading through your book, I kept thinking through this Ray Dalio narrative with these long term credit cycles. Is that how you see this? Is that how you’re able to see maybe this trend that you’re talking about in your book, you see it in a similar light as Ray?

Jim Rogers  10:57  

Ray is a lot smarter than I am. A lot of people are smarter than I am. But I do perceive that the world is changing. Our world has always been changing, no matter what you think is true today, [in] 2017, is not going to be true 15 years now. 

What all of us think right now, you pick a year in history, and you look 15 years later, and everything that people thought in 1900 or 1920 or 1950–pick a year–15 years later, the world was completely different and everything changed. 

So yes, that is happening, but in an even bigger picture than 15 years ago. I mean, look, whether we like it or not, I don’t particularly like it, but Asia is rising. Asia is where the money is. Asia is where the energy is and where the ambition and drive is, and the brains. 

China puts out something like 10 times as many engineers every year as America does now. That’s going to have an effect. Someday, maybe not this afternoon, maybe not this weekend, but it’s going to have an effect someday. And so, the world is changing once again. 

In 1807, the smart people moved to London. In 1907, the smart people moved to New York. Well, in my view, the 21st century is the century of Asia. You can ask me. Then, in 75 years, we don’t know.

Stig Brodersen  12:24  

You are too early, Jim. I already know that.

Jim Rogers  12:29  

You’re right. I’m always too early.

Preston Pysh  12:33  

Jim, I got a question about the root cause of that. Do you really pin that on central banks, the root cause of why that’s happening?

Jim Rogers  12:40  

First of all, in the historical context, we haven’t had central banks for most of history. But at the present time, yes. A lot of what’s happening in the world is because of central banks. In America, we’ve had three central banks. The first who disappeared, in my view, this was going to disappear too, because they’re making so many hopeless mistakes. 

But yes, central banks are a powerful, powerful influence in the world right now. They have enormous amounts of money, and therefore power. And a lot of what’s happened in the world, for better or for worse, is because of central banks, especially the American Central Bank, the Federal Reserve. They have more influence and more money than everybody else.

Preston Pysh  13:22  

So one of the problems that I have wrapping my head around macro, is when you see the actions of the Federal Reserve and all these crazy policies that we’re seeing now. How is it that the dollar keeps getting stronger relative to these other currencies?

Is it because the other central banks are even worse than the US Central Bank? Or…explain to me how the dollar can have this surge from 2013 until now? The dollar has just been on a rampage. Explain to me how that happens. I just don’t understand.

Jim Rogers  13:51  

I own a whole lot of US dollars. I hope I get this one right. But the reason the US dollar is so strong, the reason I own it, anyway, is because you said part of it. The others are so bad. They’re so hopeless. I mean, the Japanese Central Bank, the head of the central bank said, “We will print unlimited.” That’s what he said, unlimited amounts of money, if we have to. 

I mean, anybody thinking about the Japanese yen has to think about unlimited amounts of money and Japan has staggering internal debt, huge internal debt. But, you look at the euro. I mean, the euro is a wonderful concept, but the execution has been hopeless. So, you look around the world, not many alternatives. 

Now, the US dollars got horrible, horrible problems. It’s a terribly flawed currency but when people think about safe havens, the first thing they think of is [the] US dollar for historic reasons. And second of all, and they look out the window and they say, “Well, I don’t want to buy euros. I don’t want to buy yen, etc.” 

So, the US dollar is a place where people put money. What’s going to happen is the dollar is going to get overpriced. It might even turn into a bubble as the turmoil gets worse and worse. At that point, I hope I’m smart enough to sell my US dollars and buy something out.

Preston Pysh  15:12  

Jim, just another question about this and how it occurs because this is hard to really find a lot of easy to understand riding on this, and how it kind of unfolds. So, when this starts to go into this spiral, which is where I would classify the Bank of Japan right now. I’ve read different things where it says that in three years they might run out of bonds to basically buy off the market… I mean, what do they own? 

I forget the stat. It’s something like the central bank in Japan owns something like 10% of the stock market. It’s some crazy number like that. I apologize for not having the stat at hand here, but when they run out of those assets to basically swap currency for whether it’s bonds or even stocks at this point, is that when we start to see the current currency to just go into the hyperinflation mode? 

Or is it just different because of the fact that we’re dealing with central banks and that’s not something that we’ve necessarily seen in history?

Jim Rogers  16:09  

Well, it is somewhat of a closed economy and closed society. It’s a little bit unique in that, you know, they can continue to trick each other for a long, long, long time. They can say everything is great and NHK, the Japanese TV network, will say everything is great. And the Emperor will say everything is great. And so, everybody in Japan will believe it. I don’t know when this is going to happen. 

But Preston, I will tell you that we have had economic problems every five to 10 years since the beginning of time, and we’re going to have them again, no matter what the press tells you. And when they happen again, it’s going to be worse next time because of some of the things we’ve said. Not just in Japan, but worldwide. [The] Japanese will print… He said, “We will print unlimited amounts of money,” and he’s got an unlimited printing press. And NHK will say every night, “Don’t worry, everything is okay. The Emperor [is] still in the Imperial Palace. And this is not going to end badly.” It is going to end badly, whether we like it or not.

Preston Pysh  17:17  

We’re not even talking about the impact of negative interest rates.

Jim Rogers  17:20  

Preston, right now, many, many pension plans are being ruined. Many people who saved… Their parents said you save your money, you invest for the future, and everything will be okay. All of those people who did that are being ruined, because they save and now they’re getting negative interest rates at zero interest rate, whether it’s the pension fund of Illinois or the downward curve, XYZ University. 

They’re all getting ruined in an attempt to save. The people who did it the other way. The central bank says, “Oh, these people borrow too much money. They didn’t save. They spend money they didn’t have, we’re going to save them.” But that’s at the expense of the people that your parents said to save your money for the future. We’re ruining the people who save for the future at the expense of the people who did the other way.

Stig Brodersen  18:16  

So let’s talk about India. There’s been a lot of focus on India at the time. I also know that you have taken a position in there as well. Could you talk to us about the sustainability of the Indian economy? 

It seems to me that when you look at North East Asian economies that have done really well. They have this form of cultivating the land, going into manufacturing, having policies, especially in terms of the financial institutions of how to support the agricultural sector and the manufacturing sector. 

And when you look at a country like India, it kind of seems like you want to skip the steps and go directly to IT and more advanced services. So how do you look at the sustainability of the Indian economy? Am I wrong in that assessment?

Jim Rogers  19:01  

Well, not in my view, but I haven’t been a very good predictor of India. But you’re exactly right. But you have to remember, Stig, tes, there are 1 billion Indians. You and I know about IT in India. But that’s such a tiny, tiny part of the Indian population. 

The Indian government loves to tell you that things are great. When you go to China, you go to India, and you can see, even if you don’t accept government numbers, which I don’t anywhere, you will see that things in India [are] not nearly as well as they are in Korea or some other places looking out the window. 

I have invested in India. I’ve sometimes gotten it right, usually gotten it wrong because of the timing. India has a lot of debt. The Indian government doesn’t like to talk about them, but the debt to GDP ratio is very, very high in India, and it’s getting higher and higher and higher. That usually means you kind of grow at a rapid rate.

Stig Brodersen  20:01  

It’s really interesting what you said about the IT sector, which is basically what we think about in the West, whenever it comes to India. We’re talking about less than 3%. And when we’re talking about manufacturing, *inaudible historical in being the thing that really takes a lot of countries to the next level in terms of development. 

We’re only talking about 14% employment, which is very, very little in comparison to other countries. So, what is the driver for a country like India? Where do you see this going if we’re looking at sustainable growth?

Jim Rogers  20:29  

Unfortunately, I don’t see a lot more sustainable growth in India. You look out the window, you don’t see any Indian products. We all know Japanese products, Korean products, German products. 

I doubt if you can name more than one or two Indian brands or names of products that you buy. Look around your office, your home, you’ll see products from a lot of countries. I don’t think you’ll see any products from India. 

And the reason for that is there aren’t any. They haven’t had great manufacturing success or acceptance though a few IT countries. So, I don’t see it. India used to be one of the great agricultural countries of the world. 

They’ve got the weather, the soil, the rain, labor and everything else. Although, the government in India is protected. The farmers, farmers in India cannot own more than 12 acres. That’s for their own good. That’s to protect them from the evil forest, etc, etc. 

Well, how can somebody with 12 acres compete with Australia who could have 120,000 acres or a million acres, whatever it is? How can I compete with 12 acres? But then, [the] Indian government is protecting all of those poor farmers like they protect many, many parts of Indian economy. And that’s one reason that India has not done as well as China or other places.

Preston Pysh  21:52  

Jim, I want to talk about in your book, you briefly talked a little bit about your time with George Soros. I’m curious, and I really appreciated you addressing your reasons for why the split ultimately occurred. 

But what I want to talk about is the time that you were working with George. What would you say was the one thing that was just his total strength, which you took away from; that you really kept for yourself and that you kind of learned from him? And then, what would you say you gave him?

Jim Rogers  22:20  

I left there 37 years ago. You weren’t even born, but I haven’t had any context then. But I will say that both of us were dedicated, passionate of what we would like to do. He was a great market timer. 

Preston Pysh  22:34  

Jim, sorry to interrupt what gave him that skill, though, would you say?

Jim Rogers  22:38  

I don’t know. I don’t think you go to learn to be a great trader. You either have it or you don’t.

Preston Pysh  22:44  

The timing part of it was really him but the research and why you might take a position for over the next five years and continue to hold it through that duration was a lot of you’re doing this for as the teaming that you two had.

Jim Rogers  22:56  

Back in those days, yes. I haven’t seen him in 37 years, so I have no idea what he’s been doing. Everybody knows that. That’s what we did. 

Preston Pysh  23:06  

I appreciate you talking about it, because I know a lot of the things that I read about you today, Jim, it’s usually not brought up. But for a lot of your fans and for people that really kind of want to understand those early days of what was your return for the first 10 years?

Jim Rogers  23:21  

In the 10 years of the 70s, we are 4,200%. Impressive. So what?

Preston Pysh  23:32  

Jim, Jim, you got to understand your fans, people like Stig and me. We want to hear these stories. This is amazing stuff that how many people can say they ever had such a return? It’s just unbelievable. It’s absolutely amazing. So, we appreciate you talking about it.

Stig Brodersen  23:46  

Jim, let’s talk about some of the things that you’re really good at, because people might be confused out there as they’ve been listening to you talking about all the things that you can’t do. 

If they were to do a Google search, they can see how successful you’ve been as an investor. Just talk about your more than 4,000% return in just 10 years. So, I know that you’re a very modest person, but could you tell us what you think your competitive advantage is in the investment field?

Jim Rogers  24:12  

Well, I don’t know, whatever success I’ve had, has been because I’ve found things that were very cheap, where there was positive change that you place and I invested usually too early, but then I held them for years. 

And if you get that right, and if you do it every once in a while, you’ll probably make a lot of money. If I have any comparative advantage, that’s what it is. That for some reason, I can see things changing, usually too soon. But then, if I get it right, and make some money. I make a little bit of money, when I get it right.

Preston Pysh  24:46  

Would you say these guys that are really good at the timing are very focused on the price action, or are they really focused on the news? Or is it a combination of both?

Jim Rogers  24:56  

Well, the price action is because of the news. Nearly all ways, when you see the news, disasters are happening. It usually leads to price action. And Mike or Roy or whoever they were, had that sense to figure out this is a buying opportunity. 

I love to see disaster, because disaster I know usually leads to opportunity too. But I’m not a short-term trader. If I see disaster, then I start thinking, “Okay, now what do I do? How do I check this out? Where do I go to find the opportunities?” 

Preston Pysh  25:34  

So Jim, I want to talk about an article I read back in December of 2015. And I was reading this article by this guy, his name is Jim Rogers. And Jim Rogers was recommending a ticker called SJB, it’s a high yield bond short. 

At the time, I was reading this article and I said, that is a recommendation that makes sense to me and this is something I’ve got to do. I’m not a guy that likes to short the market at all. I came on the podcast back in December of 2015, and I talked about this position. 

I have to acknowledge, I did not give you credit for the idea on the show. But now you are getting credit, which the position has gone down since I put that on. It’s gone down about 10%, I’d say from when I bought it. 

Up to this day, I still have this position because I still think it’s a good position to have on, because I think that the high yield bond market is ripe for explosion. 

It’s so exciting for me to ask you this question, because I don’t have a really big position on this. I just thought it was a unique idea. It was kind of fun to talk about on the show. I still get emails from people to this day about that position and whether I still have it on and I answered, “Yes, I still have it on, and I sleep well with the position on, even though it’s gone down 10%.” I want to hear your thoughts on this position.

Jim Rogers  26:56  

As I told you, don’t listen to me for market timing for goodness sake. I have learned that I see something and I have to wait a year or two. Well, we got to wait some more. I certainly own the position because I know like you that the junk bond market is going to totally disintegrate someday. But I’m hopeless at market timing. I still have my on.

Preston Pysh  27:22  

I still have mine on, too.

Jim Rogers  27:24  

I’m too late to change. I know it’s gonna fall apart someday. But in the meantime, because my market timing is so hopeless, I’m losing money just like you. Like eventually, the junk bond market is going to collapse. I hope I don’t collapse first. There’s no question. It’s a very simple thing. 

The world does not work, so the people can borrow staggering amounts of money and have very few assets, very little money making ability and continue to go on and on and on. No, of course it’s going to fall apart. But I may fall apart first because my timing is so bad.

Preston Pysh  28:01  

Yeah, I might need to increase my position on that. 

Jim Rogers  28:07  

I told you my market timing is hopeless.

Preston Pysh  28:09  

Jim, that was my way of cueing you.

Jim Rogers  28:11  

Oh, hold on. Let me find my phone. Let me call up and try to have some more.

Stig Brodersen  28:19  

Okay. So Jim, I would like to talk about size of positioning, because it seems to me whenever I’ve been following what you have been doing, it seems to me like you have many ideas, but you’re also very picky about which ideas you’re really going to pull the trigger on. So, could you talk to us about how you size your positions and why?

Jim Rogers  28:40  

I don’t have a preconceived position size. I bought as long as I think the price is right and the opportunities are right, and then when I run out of money, or run out of patience, and I stop. Part of the problem is I don’t have a committee. I only invest my own money. So, I don’t have to explain to a committee of wise people what I’m doing or why I’m doing it, and defend it. 

I just do it till I get tired, or run out of money or whatever. And then I stop buying, or until you know, something else comes along and I start putting my money there. I made it. It’s not disciplined, it’s sloppy, it’s hopeless. Maybe I should have a committee. But at the moment, I have enough money that I can get away with being sloppy. 

Preston Pysh  29:27  

Jim, I’m really curious to hear your response to this one, because one of the things that I’ve worked hard recently on is trying to come up with the indicators that I use to understand business and credit cycles. So whenever you’re at the top of a credit cycle, and it’s starting to contract, what are some of those key indicators that would tip you off to that part of the business cycle to occur? 

For me, some of the things that I have written down and I have a list of about eight to 10 different things that I’m constantly looking at, as like a reference. And when all of them are pegged in a certain area, I’m saying, I think we’re at the top of a credit cycle. 

So, just to give you a sample of what I’m talking about, the unemployment numbers, whenever I feel like the unemployment numbers are really starting to hit a bottom and plateauing and starting to actually turn up, I think that that’s a really critical thing to understand of where you’re at in the business cycle. 

Another one, Raoul Pal, who I know you’re good friends with, he likes the ISM, the manufacturing index as a good indicator. Another one that I use is the high yield bonds, when you’re starting to see high yield bonds start to turn.

Is my line of thinking for the three that I mentioned on track? Would you agree with that? And I’m really, really curious, Jim, seriously, if you can give us some metrics that you consider that you really pay a lot of attention to? Please tell us that because I would love to write this down and annotate it.

Jim Rogers  30:49  

Well, I mean, you see them throughout history. All bubbles look the same. All market tops look the same. All credit tops look the same. You have to get the timing, of course. But when you see everybody buying X, you have to start saying, “Well, wait a minute. I’ve seen this before.”

When you see everybody saying, “It’s different this time,” but it’s never different this time, Preston, [the] most dangerous words in the investment world are, “It is different this time.” It ain’t ever different this time. No, I’m not the first person to figure that out. 

When you see on the radio or the TV or the internet, everybody’s doing something. I hope that a little bell goes off in your head and says, “Well, maybe I better start thinking about going the other way.” 

Then, debt numbers skyrocket, borrowing skyrocket, junk bond, borrowing skyrocket. All of these things have happened many, many times in history. You and I are not the first people to see the top of a credit cycle. Go back and read right there. It’s anytime in history. It’s always they’ve always been said and done the same thing. 

Preston Pysh  32:02  

Well, in our opinion today, in the second quarter 2017, Stig and I both believe that that’s kind of where we’re at right now. Well, now whether it runs another year or two, we have no idea. But we really believe that we’re seeing that happen right now in the US. Do you agree with that? Or you think this thing has a lot more to run?

Jim Rogers  32:22  

It’s correct. It’s simple. As I said, it always happens the same way. You look at any kind of debt measure you want, whether it’s margin debt, household debt, corporate debt. You look at it, they’re all making historic highs. Everybody is convinced that they cannot lose money in bonds. I mean, these things have happened before, and it’s happening again. 

We’ve always had problems every five or 10 years. In the world, economic problems, we’re gonna have them again. The next time it’s going to be the worst in your lifetime, and mainly because there’s such staggering debt everywhere. 

We had a problem in 2008 because of debt, look out the window, the debt is much, much, much higher now in 2017 than it was in 2008. And it’s going higher every day. This is kind of [a] very, very big problem. You and Stig are right.

Preston Pysh  33:17  

I got a question for you, when we’re thinking through what’s going to be the catalyst. The first thing that comes to my mind is European banking. I think European banking, if the whole Deutsche Bank credit, Swiss Italian banks, if that really starts to unravel itself, similar to what we saw in 2008 in the US, I really think that that could have the potential to have a very substantial shock to the system. 

When I think through all the other events, I think that they could cause credit to start to contract and start getting into that situation. But I really, really believe that the European banking is probably the scariest thing that we face, from a fundamental standpoint. Would you agree with that, or do you see something else as being a major threat?

Jim Rogers  33:57  

These things usually start where we’re not looking. In 2007, Iceland went bankrupt or excuse me, Iceland, what’s Iceland? They had banks, but it went bankrupt. And then, that snowballed and the next thing you knew Ireland went bankrupt and the next thing you know, Bear Stearns went bankrupt and left. That’s how these things nearly always work. 

So right now, there’s probably something running into trouble that you and I are not paying attention to or it’s not registering. And it’s going to snowball. Yes, that’s European banks are gonna have problems down the road. Some are going to go bankrupt, but you think American banks don’t have problems? Oh, my gosh, are you kidding? 

In America, we have something called the FDIC, Federal Deposit Insurance Corporation. It’s bankrupt. It’s still there. And there’s not a run yet. But the FDIC, once you start having problems in the American banking system, the FDIC is bankrupt. It can’t meet its obligations. It’s going to happen in many places. Deutsche Bank is a good name to use. There are plenty of them.

Stig Brodersen  35:04  

So what’s the correct strategy here? Now we’re talking about how so many assets are overpriced. We are also talking about how we can’t time the market either of us, perhaps Preston. But we can’t time the market either. So, we will have a lot of people asking, “Okay, so we’re not going to short the market, but we still want to invest our money somewhere.”

Is this a play where we are going to flock to the US? And in terms of the US dollar, because if it crashed, we will see that rally, or how do you position yourself when everything is overvalued as it looks right now?

Jim Rogers  35:39  

Well, I’ve mentioned some things I own a lot of US dollars. I short junk bonds. Agriculture, I’ve mentioned agriculture has been a disaster for a long time. I own China, although some parts of the Chinese economy are going to collapse, and there are going to be bankruptcies. 

Some time the Chinese economy has got to do fabulous. China’s a horrible polluted nation. The government is spending unbelievable amounts of money to clean it up. So, the people cleaning up China’s pollution are going to do well even if Europe disappears and because it’s such a horrible problem. 

So some parts of the Chinese economy got to do well no matter what, while others go bankrupt and Russia’s hated. I’m optimistic about the changes in Russia. There are places that are depressed, where one can put money if you want.

I own gold and silver. I’m not buying gold and silver at the moment. There are opportunities. I’m sure that [there] are many opportunities. I’m just too lazy to get around to. 

Preston Pysh  36:39  

All right. So Jim, we seriously cannot thank you enough for coming on the show as big fans of yours. We’re just so honored to have you here. I’m starstruck talking to you. So, this is really exciting. 

I want to tell our audience the two books of yours that I’ve read are “Investment Biker” and “Street Smarts.” Just fantastic reads if you want to get a glimpse of what it’s like to go country by country around the world on a motorcycle. Some of the stories of crashing and not having the parts and just, I mean, oh my gosh, just unbelievable stories. 

If you want to be entertained and you’re interested in investing at the same time, you’d be crazy to not pick up his book, “Investment Biker.” But Jim Rogers, thank you for coming on The Investor’s Podcast. We are honored.

Jim Rogers  37:27  

Thanks, Stig. Thanks, Preston. I hope we can do it again someday.

Stig Brodersen  37:31  

Thank you, Jim. We’ll definitely take you up on that offer. Alright, guys, that was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week.

Outro  37:41  

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