ROGER & OUT
Investment legend Jim Rogers on Bitcoin, bubbles, and surviving the next big financial crisis.
If Jim Rogers’ general investment advice to the public had to be summed up, it would probably be his three most frequent refrains: “Do not listen to me”, “I hope I am smart enough to sell” and “Stick with what you know”. An investment living legend and media darling, Jim has been one of the most important voices in global finance for over 40 years, beginning with his co-founding of the iconic Quantum Fund that gained 4,200% in just 10 years. Being one of the fortunate few to have retired before the age of 40, Jim has since made two Guinness World Record trips around the world; founded the Rogers International Commodity Index (RICI); sold his New York City mansion for US$16 million; and moved to Singapore to be closer to soaring Asian markets.
But apart from growing pride in his two daughters’ fluency in Mandarin, not much has changed for Jim since his move to the East. His sharp wit, contrarian views and eagle eye on global markets remain as keen as ever, as was apparent when he delivered his keynote address on ‘What happens to money now?’ at The MillionaireAsia Blockchain & Cryptocurrency Summit 2017 in Singapore. Despite openly admitting that digital knowledge is not his strongest virtue, what Jim undoubtedly does know is markets – the constants and variables of which remain integral to any financial product, blockchain included. Tapping into this knowledge, MillionaireAsia had the chance to have an insightful one-on-one with the man himself as he addressed cryptocurrencies, world economics and how to ride out what may be the biggest crash of our times.
Group Publisher & Managing Director of MillionaireAsia, Brian Yim, with Jim Rogers at his residence in Singapore.
Please share some of your insights on what the future of money could hold – what is going to happen to money now?
Well, fortunately money has always been changing. No matter how you define money, it changes all over again. The computer has changed everything we know. My children will probably never go to a bank when they are adults; or to a post office or even to the doctor for that matter. So money is going to change too, very dramatically, one way or the other. That being said, I would remind you that 60 years ago there were many computer companies: you have heard of IBM but you have not heard of the company that invented computers, or many others. 125 years ago there were hundreds of automobile companies but now there are 20 or 25 left, the ones that survived. Somebody will come out on the top – more than one, in fact. I do not know who will come out on top but I do know that our money is going to be on the computer in the future.
Where does the digitizing of currency leave fiat currencies?
Governments may turn fiat currencies into digital fiat currencies, which is the risk. I am more inclined to think that fiat currencies are going to self-destruct because of the many problems which are taking place. The United States is the largest debtor nation in the history of the world and debts are going through the roof all around Europe. So fiat currencies are going to lose credibility and governments are going to lose credibility. What will replace it, who knows? But I do know that whatever it is, it is going to be on the computer.
You were always sceptical about cryptocurrencies, especially Bitcoin. What are your thoughts now, considering its astronomical growth in recent times?
I never bought any bitcoin, so I am pretty foolish. If I had bought bitcoin I would be rich now, so I am the wrong person to ask. That being said, if you look at the past 9-10 years, there were no cryptocurrencies. Now there are at least a couple of thousands, depending on who is counting. If you look at some of the charts or imagine if I just told you about an asset that went from zero to 2000 in nine years and the charts all went straight up, you will say to me: whatever that is, it is a bubble. Maybe it is not a bubble yet but it certainly looks like one in formation, if nothing else. I would suspect we are going to have a wash out. We already have some currencies that have no secondary market and disappearing in value. Some are going through the roof, including bitcoin. Whether bitcoin succeeds or not, the risk of bitcoin is that it is successful. But if it is successful, governments are not going to easily accept a way for the people to escape taxes and regulation. So they are going to try and bring it down.
So we should expect strict regulation?
We should definitely expect something – whether it is strict regulation or outright banning. The cryptocurrency leaders are going to say that they will not let this happen, because they are stronger than the establishment, and I hope this is true. It would be wonderful for the world if we could find a way to circumvent political control. I do not trust the establishment.
What are your thoughts on the hot topics like Initial Coin Offerings (ICO), which are helping companies raise more money much quicker than traditional venture capital funding?
This kind of excitement is something that we have seen before. I can still remember the dotcom time when companies would change their name to put the word ‘Internet’ in it. It did not matter what kind of company it was, they would just add ‘Internet’ and their stock would go through the roof. By the way, bubbles do not end just when someone says “that is a bubble”. They often go on and on and on. The most dangerous words in the investment world are: “This time it’s different.” It is never different; never has been in any way. But maybe this time it is different. Guys like me, if I short a bubble, I often short it too soon. And I lose money for a while. So do not listen to me.
ON GLOBAL ECONOMICS
Let us talk about Donald Trump. You were one of the few who predicted that he would become president, and now he is. What is your take on the controversial Trump presidency so far?
The problem with Mr. Trump is that he says a lot of things but then he does not do them, or he changes his mind. He promised us that he will have 45% tariffs on the Chinese and the Mexicans his first day in office. He has still not done it – although I am glad he has not, it goes to show that he will say ‘x’, and the next thing you know he says ‘y’. And then he says ‘x’ again, or he says ‘z’.
Do you believe there is a method to the madness?
Mr Trump said he was going to come in and drain the swamp and clean out Washington. That would be so wonderful but he has not done it. Every time you turn around he is doing the same old things, only worse. I do not know what he has against Iran, or China, or anybody for that matter. Opening up Iran is one of the best things that can happen in the 21st century – especially if it is done peacefully. Some bureaucrats in Washington are leading the charge against Iran and it seems like Mr Trump is listening to the same old guys, just like all the presidents before him. But maybe this time it is going to turn out worse.
Investment wise – how should investors navigate the Trump presidency?
Currently the American stock exchange is going through the roof, so anybody who did invest in America is making money. There is no question; American bonds have been very strong and interest rates are at an all-time low. Property investments especially have been very good since Mr. Trump came along. Will it be the same five years from now? I am sceptical. But who knows, I have been wrong many times.
Let us move on to Brexit: did the UK do the right thing?
Ideally what they should have done is abolish Brussels. The problem is not so much with the European Union (EU) but Brussels and its power-blind bureaucrats and government characters. That is what Nigel Farage and others were really against. But unfortunately, abolishing Brussels was not an option. The only way they could see out is to leave the European Union. Ultimately it is not going to be good for anybody, including the UK. Maybe they will figure out some ways to sort this out.
Otherwise, open markets and open borders are far better than closed markets and closed borders. The world has learned this many times over. History has shown us that overwhelming bureaucracy with bureaucrats making huge amounts of money and passing regulations day after day is not very good. However, I wish they could have found a way to abolish Brussels and kept a common market in the European Union.
How will Brexit affect the future of Europe?
Unfortunately whenever things go wrong, people will always look for somebody to blame. You already see it happening. Brexit, they were looking for somebody to blame. The Scots almost left the UK and they may still leave the UK. We see separatist movements in Spain, in Belgium and even if they do not succeed, the fact that Brexit went as far as it did, and then Scotland and now Catalonia – other politicians are going to say I can do that too. They will say that they can become rich and famous by starting a separatist movement. So we are going to see more separatist movements, especially since we have an increasing number of economic problems. There is going to be a lot of turmoil in the next decade or two in Europe.
Closer to home – do share your views on the Asian region. Which countries and sectors would you put your best bets on?
Well I am not allowed to put money in North Korea but I am optimistic about the changes that are taking place. I have money in China, Russia, Vietnam, South Korea, Taiwan, Indonesia and Singapore – is there anything left? Some would say Myanmar as well but the problem there is that there is no stock. There is a stock market but today it is still illegal for foreigners to invest and there are only two or three stocks. I would love for them to get the stock market up and running and go beyond just a few stocks. But at the moment, they are like North Korea. So it is a little impractical.
China’s One Belt One Road Initiative is also quite a major happening taking shape.
It is not often in history that geography changes. When the Spanish and the Portuguese started sailing around the world 500 years ago, the whole world’s geography changed. 200 years ago the railroad did the same and so is the One Belt One Road. Some people are going to make absolute fortunes and some are going to lose fortunes if they are at the wrong place. In America, Chicago only came into existence because of the railroad – so you can imagine how big a fortune can be made. Those who are not on the One Belt One Road are not going to do very well. It is perhaps the single most exciting physical thing happening in the 21st century so far.
Jim's first book, Investment Biker, was based on his first trip around the world on a motorbike. He went on to write five more bestsellers after.
ON THE BIG CRASH
You have recently been talking about a big crash that is coming – perhaps the biggest yet. How did you come to this conclusion?
We have always had economic problems. In America, for example, we have had bear markets every four to eight years since the beginning of the republic. Sometimes they have lasted a long time. We do not have to have problems every four to eight years but we always have. And we will again. The head of the central bank in America, Janet Yellen, has said that we will never have financial problems again because she and the Federal Reserve Bank in America have got things under control now. If you believe Mrs. Yellen, do not listen to me. But I know we have always had financial problems and I know we are going to have another one. I also know it is going to be the worst in my lifetime and that is saying something.
In 2008 we had a financial problem because of too much debt. But now the debt is much higher everywhere. There has been a lot of talk about austerity over the last several years but no one has lower debt now than they had last year – much less eight or nine years ago. So the next time we have a financial crisis, it is going to be a doozy. We should be worried. So first of all, you have to be informed and if you are not informed get informed. If you are informed, you will be very worried. And I hope you get prepared.
How would you recommend we prepare for the crash?
If and when the problem comes, the best way to be prepared is to put your money into what you know. If you listen to a stranger on the television or internet or the newspaper, you are going to lose everything. Stay with what you know, whatever it is. And if you do not know anything, put your money in the bank. It is better to earn a tiny amount of interest than to lose 30 or 40%.
So invest in what you know. Agriculture, precious metals are things where I have money. I have not bought any serious gold since 2010 but I own plenty of gold and silver. If they go down I hope I am smart enough to buy a lot more of them because before this is over, we are going to have a lot more turmoil. People are going to lose a lot of confidence in governments and paper money. Gold and silver are going to go through the roof and it could turn into a bubble. I hope they do not because you have to sell bubbles and I would like for my children to have the gold and silver someday. But if it turns into a bubble, I hope I am smart enough to sell when it does.
People should also learn to sell short if they are that worried. This is what I am doing. But nobody should listen to me. They should only listen to themselves.
Jim Rogers took up against five panel speakers at the MillionaireAsia Blockchain & Cryptocurrency Summit as they attempted to convince him on the merits of cryptocurrencies.
This article was first printed in MillionaireAsia Issue 46 - Nov 2017