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Jim Rogers


His Bio

Jim Rogers is best known for his many TV appearances and books about the commodities markets. Born in 1942 in Alabama, he got his first job on Wall Street in 1964 after graduating from Yale University. He futhered his education by getting a Master's Degree from Oxford University. In 1970, he met George Soros and they both co-founded of the Quantum Fund, which went on to gain 4,200% during the next 10 years while the S&P 500 advanced about 47%. In 1980, at the age of 37, he decided to retire. After his retirement, he continued to manage his own portfolio of investments and has been a guest professor at the Columbia University Graduate School of Business.

From 1990 to 1992, he famously traveled around the world on his motorcycle, covering over 100,000 miles in six continents, while doing investment research in each country he stayed in. This journey was listed in the Guinness Book of World Records and documented in his book Investment Biker (ThinkTrade review). Later, from 1999 to 2002, he did another trip around the world which he also documented in another book, Adventure Capitlist. In 1998, Rogers created the Rogers International Commodity Index because he thought that there were no commodity indexes available that accurately reflected the proper weighting of commodities relative to their actual use.

His Books

1995 - Investment Biker: Around the World With Jim Rogers
2003 - Adventure Capitalist: The Ultimate Road Trip
2004 - Hot Commodities : How Anyone Can Invest Profitably in the World's Best Market
2005 - A Bull in China: Investing Profitably in the World's Greatest Market
2009 - A Gift to My Children: A Father's Lessons for Life and Investing

My Opinion

I've been familiar with Jim Rogers since I started trading in late 1992. I watched him on CNBC and read Investment Biker back in the early 90's. I have always had mixed feelings about Jim Rogers for many reasons.

One reason is that he is always promoting commodities and has always been a commodity bull. I didn't mind this at first because, when I started trading, I was strictly a futures trader so I was interested in anything related to commodities. And because the commodity indexes was sitting at long-term lows, I also thought that commodities would go into an intermediate-term uptrend for a couple of years, which they did.

But after a while, I wondered how objective his advice actually was. One of the biggest signals that you should be careful about listening to someone's investment opinions is when they exclusively promote a particular asset class - especially a niche asset class. It reminds me of the forex trading infomercials you often see on TV telling you how the forex markets are better than other markets. So I'm not crazy about his explicit bias towards investing in commodities.

To be fair, his bias doesn't just stem from a seemingly personal preference for commodities but is also supported by the recent academic studies that have shown that returns on commodities as investments have rivaled those of stocks over the past few decades. This is in addition to the fact that the lower correlation of commodities to stocks (compared to other asset classes) will give a decent boost to your risk-adjusted return. So, given the fact that the commodities markets attract comparitively little interest (in terms of both investment capital and media coverage) despite having such attractive qualities, I can definitely understand Jim Roger's campaign to give the commodities markets more visibility as a legitimate investment vehicle.

But the reason why his relentless promotion of commodities bothers me is because of the high level of risk involved. Although the risk profile of the raw commodities themselves are not that much different from stocks, the primary way investors participate in commodities is through the futures markets. But the futures markets have tremendous amounts of leverage and involvement in these markets would be suicide to an average investor. Anyone who has read Market Wizards knows that even the best traders in the world blew out futures accounts as beginners. The average investor would do even worse. The way Jim Rogers trumpets his "Hey, just look at supply and demand and you'll be fine" attitude dangerously oversimplies the skill needed to navigate these markets. The aggregate losses created from retail investors getting into the futures markets, en masse, would make the dotcom and subprime mortgage meltdown look like a walk in the park.

Another thing about him that bothers me is his method of analysis. Many of his investment opinions are famously based on his experiences of traveling around the world and spending time in different countries. Although there is nothing wrong with using this method of analysis as one of your research methods, he seems to be very light on data-driven research. The research he quotes to back up his opinions are mostly comprised of stark, anecdotal observations. In one interview, he was asked if he continuously assesses the supply and demand fundamentals and how often he looks at them. He replied: "I don't have an answer to that. If I see in the headlines that they've discovered a gigantic oilfield, I'll notice and I'll think about it."

In most cases, a reluctance to do an ongoing analysis of an investment hypothesis indicates that the analysis lacks depth. After all, literally anyone can come out and make some bold long-term prediction all the while knowing that the critics won't be around later to hold them accountable. But it could also be argued that Jim Rogers uses this technique to tune out the noise of day-to-day information and keep focused on the big picture. After all, the hardest thing when it comes to monetizing a long-term investment hyposthesis is having the vision and courage to stay true to your opinions. So I give him the benefit of the doubt since he has paid his dues in the market.

Another thing that bothers me is that his opinions on the market seem to be based on ultra-long-term trends. Don't get me wrong. I love market history and believe in studying past market behavior. But making a prediction that the US dollar will crumble sometime in the next 20 years doesn't have much practical value to an investor. This is not just because of the difficulty of investing in the futures and options markets where contracts regularly expire, but also because most investors' time horizons are far shorter than his, which makes his advice useless to most investors.

Another reason why I tune him out is because he is one of those people who is constantly predicting an eventual apocolypse. These doomsday analysts are useless as investment resources for the well-known reason that they are almost always wrong. But, in this case, his views are also irrelevant. Through different comments he has made, he has indicated that he disagrees with the structural design of American capitalism. For example, he has said that he objects to the idea of fiat money and thinks the Federal Reserve should be abolished. Well, American capitalism isn't going to undergo those kinds of radical changes so it's a moot point. Except for those occassional times where I like to sit around and ruminate about theoretical economics (and I do), these kinds of issues have no value to me as a trader.

Overall, I like Jim Rogers as a person. He seems like a nice, passionate, and intelligent guy. He isn't just another useless financial journalist and he is not afraid to speak his mind (which is why he is the most quotable investor in the world). And even though he has probably made a ton of money in the markets, he seems to have some idiosyncracies which keep him from being someone who I classify as a useful resource.

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Jim Rogers