It’s easy to get overwhelmed by personal finance decisions. But you should never make investment choices under stress. That’s why I always like to take a step back and look at the big picture. Jim Rogers is one of those individuals that I always turn to when I need fresh investment insight. He has “seen it all” when it comes to economic problems, bad leadership and crazy markets. He also happens to be one of the most successful investors in history. (And did I mention he also traveled around the world… twice?)
Not long ago I had a long conversation with Jim (which I’ve written about in articles you can read here and here and here). Below, he talks about a few other big issues investors should be worried about… and how they should protect themselves.
The Federal Reserve and the end of the world
Me: When you look at Asia right now, what do you see as some of the risks to investors in the coming months and years?
Jim Rogers: Well, the biggest threat to all of us is the central bank in America [the Fed]. It has no clue what it’s doing… and this is going to end horribly. And usually, when you have bad times, it often leads to strife, war, at least a revolution, civil war and all sorts of things.
So, the coming economic problems are going to change everything, you know? And when we come out the other side, many institutions will have disappeared, ways of life, countries, [political] parties. A lot of stuff will have changed dramatically after the next [period of] economic turmoil.
… just one of the lessons of history is that nobody learns the lessons of history. First of all, nobody knows the lessons of history, but the people who actually figure out the lessons of history, they ignore them. They said, “That was then… It’s different this time.” That’s a very dangerous word. They always say it’s different this time.
First of all, it’s not very different this time. And second, you better learn the lessons of history. And one of the lessons of history is that trade wars always lead to bankruptcy. Well, we got people advocating trade wars in the United States big time. Trade wars always lead to bankruptcy. Nobody’s ever wanted a trade war. And often they lead [to the] worst kinds of wars.
How to protect yourself
After elaborating on some of the world’s other problems, Jim also explained that investors need to protect themselves…
Jim Rogers: … how you prepare yourself is up to you. Best thing [you could] do is buy a farm. But if you don’t like being outdoors and working in the sun, don’t become a farmer. I’m not going to do it, I told you, it’s a great thing to do but I’m not going to do it. I’d be terrible at it.
Gold and silver, I own some gold and silver. Thinking of buying at the moment, haven’t bought gold and silver for five years in any significant way. If it goes down, I expect I’ll buy more. Hopefully I’ll buy a lot more.
I own a lot of U.S. dollars not because I have any confidence in the U.S. dollar, I care because it’s our currency. America is the largest dealer nation in the history of the world. Not just in the world, in the history of the world, it’s getting bigger everyday. I own a lot because in the turmoil, the coming turmoil, everybody is going to look for a safe haven. I think the dollar is a safe haven, it’s not, but people think it is that’s why I own a lot of them. Hopefully, when it gets overpriced or [if it turns] into a bubble (depending on how bad things get) then I’ll have to sell it. I don’t know what I’ll do then. I could see some scenarios but that’s a waste of your time and mine.
But those are some of the things that I am doing because of what I see happening in the world. I do own Chinese yuan, I do own Russian rubles. But really, I need that U.S. dollar.
Professor Rogers’ reading list
Me: Speaking of insight, and I’m guessing the things that you read are some of the things that the rest of us read, but…
Jim Rogers: I read your newsletter [the Asia Wealth Investment Daily]. Every day. I read The Financial Times. When I used to be a professor, I told the kids they had to read The Financial Times or The Wall Street Journal or The Economist. And then after that it depends on what you were focusing on. But as your basic foundation, that’s where you start.
Me: The thing is, a lot of what you read in the media goes through a sort of prism. How do you learn how to sort through it?
Jim Rogers: I’m trying to teach my children – they’re still very young – to get information from five or six different sources, preferably contrasting sources, left-wing, right-wing, call them what you will, from different countries and then you figure out what’s really happening. If you read the Communists and the Fascists and the Nazis and the Capitalists or the religious, if you read them all, you get all sorts of different views but it’ll help you figure out what really happened.
Sometimes, I get interviewed by different kinds of people. A few will say, “Well, why are you talking to them? They’re nuts, they’re crooks, they’re blah, blah,” whatever they have to be. And I try to say, “No, no, first of all, the one problem in the world right now is we don’t talk to each other. We should be talking to everybody, no matter what you think of them. And second, that’s how you get your message out. If you talk to them, they have to listen to you no matter how nuts they are. And also, you can help possibly change the world.”
So talk to everybody, read everybody. The weirder the better.
Publisher, Stansberry Churchouse Research