Sources of Information

Slepko: What kind of people and groups do you make a point of interacting with when you go to a new country or market?

Rogers: I just walk down the street. I go to the shops. I go to the restaurants. If I am investing, I have to have an account, so I go to where I have to open it and make sure its okay. I try to find the black market, if there is a black market, since that tells me a lot about the situation in a country. [He writes in A Gift to My Children, “The difference in parity between the official and black market rate indicates the level of problems…the greater the gap in parity, the deeper the problem,” and in Adventure Capitalist, “While I have never patronized a prostitute, I know that one can learn more about a country by speaking to the madam of a brothel or a black marketeer than from speaking to a government minister.”] If there’s a company I want to visit, I visit it. An even better answer is to cross the border and drive to the main city because by the time you get there you are going to know a whole lot about a country.

Slepko: What kind of information do you seek out? What numbers do you trust? You clearly reject government numbers, do you trust documents produced by the Big 4 accounting firms? How do you correct for the flaws in public data that you use?

Jim Rogers: It’s just like in America, you have to have lots of sources and cross-reference. Yes, I read the IMF numbers. The World Bank, the CIA. Yes, I look at all those numbers, and frequently they are the same because most bureaucrats are pretty lazy and they just rely on each other. But then there are some things like the Indian numbers that never make sense to me once you go to the country and drive around – and Russia and America as a matter of fact! The reported inflation numbers in America are an embarrassment. You have to double-check, cross-check. Cross-check I guess is the best answer, I got to have those numbers from everybody, but do I rely on any source? No, no source.

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Interview with Jim Rogers: Adventure Capitalist, Commodities King, Sugar Daddy..., part 4

By Nick Slepko - January 23, 2012 | Tickers: RJI | 0 Comments

Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

[Continued from part 3.]

Jim Rogers is a popular travel writer because he is not a silly, unwashed Leftist backpacker, but at the same time he is not a corporate professional that travels in a Potemkin bubble. Rogers checks the strength of the country’s basic institutions such as the rule of law, consequences for corruption, and a legal system that facilitates ethical corporate behavior. He also regularly implores others to “do their homework” before investing, and gives examples on how he does this in all his books. His practical approach to gauging the market was particularly pointed when he was asked by a reporter about his recent visit to the United States:

I was surprised how much optimism there is [in the United States about the economy]. Everybody still thinks that things will be okay. We've all been brought up over the last twenty, thirty years with everything being okay…Unfortunately, I think there's false optimism. I would have been more impressed had I seen a lot more depressed people, but I see optimistic people.

Rogers has also written about another fatal experiential flaw in today’s experts:

After a bull market in stocks that has lasted longer than the careers of many of today’s financial managers and consultants, not to mention the journalists who feed off them, it is understandable that most investors and their advisers have trouble wrapping their minds around the prospect of investing in commodities. The last time serious money was being made in commodities, these people were in college or maybe even junior high school. Some may even have been in diapers.

Certainly, Rogers’ number crunching and analytical skills are formidable (though as he states frequently, “I haven’t met a rich technician”), but it is his curiosity about the intangibles combined with a gut full of practical experience which has made the Rogers International Commodities Index (AMEX: RJI) so successful.

Slepko: What kind of people and groups do you make a point of interacting with when you go to a new country or market?

Rogers: I just walk down the street. I go to the shops. I go to the restaurants. If I am investing, I have to have an account, so I go to where I have to open it and make sure its okay. I try to find the black market, if there is a black market, since that tells me a lot about the situation in a country. [He writes in A Gift to My Children, “The difference in parity between the official and black market rate indicates the level of problems…the greater the gap in parity, the deeper the problem,” and in Adventure Capitalist, “While I have never patronized a prostitute, I know that one can learn more about a country by speaking to the madam of a brothel or a black marketeer than from speaking to a government minister.”] If there’s a company I want to visit, I visit it. An even better answer is to cross the border and drive to the main city because by the time you get there you are going to know a whole lot about a country.

Slepko: What kind of information do you seek out? What numbers do you trust? You clearly reject government numbers, do you trust documents produced by the Big 4 accounting firms? How do you correct for the flaws in public data that you use?

Rogers: It’s just like in America, you have to have lots of sources and cross-reference. Yes, I read the IMF numbers. The World Bank, the CIA. Yes, I look at all those numbers, and frequently they are the same because most bureaucrats are pretty lazy and they just rely on each other. But then there are some things like the Indian numbers that never make sense to me once you go to the country and drive around – and Russia and America as a matter of fact! The reported inflation numbers in America are an embarrassment. You have to double-check, cross-check. Cross-check I guess is the best answer, I got to have those numbers from everybody, but do I rely on any source? No, no source.

Slepko: What other anecdotal and gut measurements do you take when assessing opportunities? For example, you have mentioned the gap between the currency value in the black market and the official market as being a major tell. Also, you seem to note immigration flows (Chinese migrants return, Russians don’t seem to). Does the presence of McDonald’s or Coca-Cola indicate anything?

Rogers: I don’t go to McDonald’s in the States, so I wouldn’t know the comparison. If I’m traveling, I do things like buy fuel. When you travel overland you get exposed to lots and lots of aspects of the local economy including things like the road system. I look around. I see what’s going on. Just by living a normal life that teaches a lot. If I eventually see something that piques my interest I can pursue it. I try not to go with preconceived notions because that is always dangerous. It’s best to go if you can with a tabula rasa and let things happen which will send you in the right direction.

Slepko: What’s the optimum time you would devote to a new country or new market that you wanted to get a handle on?

Rogers: There’s no answer to your question. Most countries I already have some background in my poor brain because I have traveled lot, know a lot about the world. Myanmar started opening up recently. I drove through Myanmar ten years ago, and I have been watching Myanmar for a long time. It took me about eight minutes to figure out it was time to invest in Myanmar. But that eight minutes was based on lots of previous experience with that country and other countries. It was like back in college when I was asked by other classmates how many hours I was going to study for a test. I was perplexed because that’s not the way I do things. I studied until I thought I was ready, or studied all I could. I do things until they are done, or at least as far as I can.

Slepko: In Investment Biker and Adventure Capitalist, you recount hunting down a Bolivian broker that absconded with some of your money. You wrote, “A cardinal rule of mine when investing internationally, especially in emerging markets, is always to have the brokerage account with the largest bank in country. If the bank gets in trouble, you do not lose everything because the government will take it over. Your shares do not disappear.” In your three most recent books [Hot Commodities, A Bull in China, A Gift to My Daughters] you cover other investing rules that you live by. When do you decide to take a chance on another Bolivian broker?

Rogers: If you find a country that’s cheap and depressed and where you think that positive changes are taking place, then you find a way to invest. Normally you have to have an account and I go to one of the largest firms in a country. It is unlikely that Bank of America will go bankrupt – well, it is unlikely that you as an individual with an account there will lose everything. That may not be the case if you are investing in some hot shot smaller firm. I never ask these guys for advice – in fact, I don’t want their advice. All I want is someone to execute an order, or change money, or whatever mechanical things are necessary.

Slepko: While researching a piece on investing in North Korea it became evident that the Chinese entrepreneurs north of the border were finding success in cross-border trade and in fact creating a market that was destabilizing the North Korean regime. How would someone invest in those small Chinese entrepreneurs that are dragging North Korea into the global market? How can that sort of activity be encouraged?

Rogers: The way you get involved is you have to go up there. Go up to that border, though you probably can’t cross it – especially if you are an American. Look around, walk down the street, talk to people, go to restaurants. If you see something interesting, like a lot of trucks from a certain company crossing the border a lot, then read their sign, go find them, and ask them what they selling. That’s how an investor learns the how and why.

Bacon's success as a trader over the years required both resources and discipline, say people who have worked with him. Before the Internet brought news to his desk at the flick of a button, he had copies of Barron's, the weekly market tabloid, flown to his London office from the U.S. via courier. Nowadays, say people familiar with the matter, the bedside tables in his numerous properties are set up so that he can scan market data immediately upon waking without lifting his head off the pillow. A technology worker in Moore's midtown Manhattan office travels frequently to make sure the bedside data feeds are in good working order.