Investment legend Jim Rogers says he's "expecting an opportunity to buy gold," but isn't buying yet. (AFP photo)
by CEO.CA on Bay St.
Legendary investor and author Jim Rogers urged students to scrap career plans for Wall Street or London's financial district during a Nov. 4, 2010 speech at Oxford University’s Balliol College (one of his alma maters). He recommended studying agriculture and mining instead. “The power is shifting again from the financial centers to the producers of real goods. The place to be is in commodities, raw materials, natural resources.”
Rogers famously moved to Singapore in 2007 because he wanted his children (he has two young daughters) to learn Mandarin, as he thinks China is where the action will be this century. In this Skype interview with CEO.ca, done during an exercise session for the 73-year-old, Rogers touches on the days when Wall Street was a "backwater," the future of finance and his early days establishing the Quantum Fund with George Soros.
CEO.CA: Why did you make the choice to get into finance? What sparked your interest in finance?
Jim Rogers: Well I knew nothing about finance and Wall Street, just that it was something in New York and that something bad happened in 1929. I did not know there was a difference between stocks and bonds; I did not know anything. I met someone I liked who offered me a summer job for a Wall Street firm and in the end I could not believe I got paid to do what I love, which was to know about the world and what is going to happen in the world. I could not believe it, and I did it well and they paid me a lot of money. At that time I was planning on going to law school, business school or medical school. I did not end up doing any of that. I went straight to Wall Street and had a good time. It was a very bad time. When I look back, I had no perspective, no knowledge. I was like a lot of 22-year olds, I had no clue. I thought the world started the day I got out of university. It doesn’t but that is what we all thought. When I look back it was a backwater. I mean, a big day was 3 million shares when I went to Wall Street. And the Over-The-Counter market barely existed. It was all done over the telephone with printed pieces of paper. You can see what a staggering change there has been. I was at Oxford in the 60s and my professors use to say: “Why are you so interested in the stock market. Nobody cares, it is not important, it is not important to the English Economy, to the World economy. It is a backwater.” I did not know it was a backwater and I did not care. I liked it, so I stayed. Now every kid in Oxford starts a hedge fund in her dorm room. But in those days it was really an oddity.
CEO.CA: How did you get your news back in the day, how did they manage all that news?
Jim Rogers: News has sped up. 150 years ago they got Clipper ships, and they could send news across the ocean a few days faster. News has always gotten faster. In those days, I read the Financial Times but it came a day or two after it was published. But I still read, several other newspapers from other countries as well. Annual reports would only come in the mail. There was a ticker tape; Dow Jones and Reuters had a ticker tape. It is not so much the speed of the news, it is the judgment. Yes, the faster we get the news the faster we can act. But if 100 people go into a room and they only hear the right thing, only 4% or 5% are going to get it right, going to make the right judgments, and come out and do the right thing. In the end, we all end up making the same mistakes we did before, whether we get it a day late or 5 minutes late. In the old days, you may remember this, Rothschild sent observers to the battlefront with carrier pigeons. That kind of faster news made a difference, and I think he even spread rumors to get even more bargains. Yes, news is important, fast news is important but the thing most required is judgment.
CEO.CA: I picture slower-paced financial markets in your time.
Jim Rogers: We did not think it was slower placed, I assure you. The market opened at 10 in those days and it was pretty fast-paced. It did not stop to wait for anybody. Today we may get it over our computer, in those days we got it over the ticker tape. We thought it was pretty fast-paced.
CEO.CA: Did you ever spend any time on the trading floor?
Jim Rogers: Well, I visited a time or two, not sure why I did. My first summer they sent me to the floor to see what it was like, just for a few minutes. I spent my second summer on Wall Street on a trading desk for over-the-counter, we were making markets in stocks. Other than that, no, I did not spend too much time on a trading desk because it died. I learned that my interests were much more in doing the research and finding out what was happening. I spent more time on airplanes than I did on the trading desk.
CEO.CA: What do you think financial services will look like in the future?
Jim Rogers: There are going to be a lot fewer human beings in finance, there is no question about that. Trading is becoming more automated, we cannot stop progress. But we still have to tell these machines what to do. There will be fewer traders in the business. We have had long cycles in the world where the financial types were on top of the world and then it collapses; then we have long cycles with producers of real goods on top. When I went to Wall Street, finance was a backwater. After what had happened in the Depression and the War, I mean the last place anybody wanted to go was Wall Street or the City of London. Especially London, they had exchange controls, the nation was going bankrupt and other problems. Then along came the great bull market of the 80s, 90s. But now the world is changing again. I am sure you read that thousands of people are getting laid off in the financial community whether it is banking, insurance, stockbroker and/or investing. It is not an easy to place to get a job anymore and not an easy place to keep a job, but the numbers continue to decline. Great people can always get a job and keep a job. That is in part because there is so much competition because everyone now wants to get into finance and get an MBA. In 1958, America graduated 5,000 MBAs, the rest of the world graduated none. Now America graduates 200,000 a year and the rest of the world graduates thousands more. There is massive competition. It is a time when there is big leverage in the financial community. In the old days, banks and brokers had very little leverage for historical reasons now there is massive leverage everywhere. By the way, Lehman Brothers had been around since the 1850s and Bear Stearns was around from 1922, it was not like these were Johnny-come lately operations. You have governments being very anti-banker, anti-investors, and financial types, that are constantly passing laws and taxes and regulations to make it tougher. So it is not the place to be in 2016, unless you love it.
CEO.CA: Do you have any advice to financial service professionals currently in the industry?
Jim Rogers: If you love it, do it! I did not know I was making a mistake. I did not have enough sense, insight or breadth, or vision that “gosh kid you are really making a mistake.” I am glad I did not know because I loved it so much. But if it is not your passion down to your big toe and there is something else you are more passionate about, I would urge you to reconsider because the wind is going to be in your face for the next several years.
CEO.CA: Does public venture capital like the TSX Venture Exchange have relevance today?
Jim Rogers: The world is always going to need capital and sources of capital, whether it is the same as it was 20 years ago or 20 years hence. There is going to be a need for people to raise money whether they are startups or 40-year old companies. Therefore there is a need, it may be crowdfunding or some evolution of crowdfunding. Somebody has got to do it. There are going to be 18-year-olds in garages as long as we live, but there has to be someone to show the 18-year-old how to do it. If you are going to raise money, you should have a track record, it is the best way to do it. If you are more visionary than that...If you are going to replace sliced bread you’ve got to convince people of why you are going to replace sliced bread, then you can go forward. These are basic rules that have been around 1,000 years.
CEO.CA: Do you have any advice for investors in the mineral exploration sector?
Jim Rogers: Yeah, find minerals! Be a good mineral finder, if you are good at finding the stuff, money will find you. Now you may need money to go find it, but there are people that find it without money. Best thing to do is to show people you know what to do. Christopher Columbus eventually convinced a couple of people, here is the evidence, let’s go do it. He did not find what he thought he was going to find. Even if he found what he was looking for, it would have been a big deal too.
CEO.CA: When you and George Soros started the Quantum Fund, who were your first backers, your clients or where did you get the money to start? Why did you partner with George Soros?
Jim Rogers: Well, I was looking for a job and he was looking for a bright young man. He already had the fund, it was already in existence for 2 to 3 years before I came. More recently we had to split off because they changed some rules in Washington, thank goodness. We only had 12 million dollars in the room when we started. It was tiny because no one would follow us. Someone with $12 million followed us and off we went.
CEO.CA: Do you have any advice for investors in speculative mineral companies?
Jim Rogers: Be very careful. If you are investing in anything, be very careful because the next couple of years, maybe not this month but we are going to see some real problems in the financial markets. It has been over six years since we have had any problems. We are well overdue, so be very careful no matter what you are invested in.
CEO.CA: Do you think commodities will continue to decline?
Jim Rogers: Well, I do not know, commodities have already slumped down. I am not buying gold yet. I am expecting an opportunity to buy gold. But other commodities like rice and sugar, some things have slumped down enough, I would not buy iron ore but I might buy rice or sugar.
CEO.CA: What is the best way to invest in commodities, a company or through future contracts?
Jim Rogers: If you buy the right company you are going to make a lot more money. If you find a natural gas company that discovered natural gas in Berlin, you are going to make a lot more money than buying natural gas futures. It is generally better to buy the commodity unless you are a very good stock picker.
CEO.CA: What are you reading now?
Jim Rogers: McGuffey Readers, I bought some copies of the original books. The sixth-grade edition is just astonishing, what kids were reading back then. It is some of the great literature of our time. We read it every night, my daughters and I. The first, second and third grades are not that riveting but the one for the sixth graders is just amazing.
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CEO.CA thanks Mr. Jim Rogers for taking the time to answer our questions and hope to have him provide another interview in the future.
