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Thursday, November 30, 2006

Jim Rogers plays the field but India's on his mind

Jim Rogers has come a long way. This poor boy from Alabama is today a legendary investor. With degrees from Yale and Oxford, and a reputation built on Wall Street, the world of investing keeps their ears peeled for his advice. For a guy from a rural village in the US, he sure knew his mind. He knew he did not want to become a lawyer or a doctor or a politician!

He told CNBC-TV18, "I read the Financial Times. I read as much as I could about what was going on in the financial world and in the economic world. I also read about politics, I read about everything. If you are going to be a successful investor, you have to know about the whole world. You can’t just know about the New York Stock Exchange, NYSE, you have to know about the whole world."

He did get a superb education but he says he didn't much learn about the market at Oxford. He recalls, "I didn’t know much about the market when I was at Oxford. I learned that later. All bubbles look the same, whether it is in India, Germany, Australia, Japan or in America - people act the same all over the world, whether during a boom or even in panic."

"As far as I am concerned, an MBA is a waste of time, money and energy. Many people think it is a way to get a job, it may be a way to get a job but it's not going to help you make money. Plenty of MBAs are not successful investors and many people, who have never seen a business school were great investors. So an MBA is very overblown as far as I'm concerned."

He had a unique kind of entry to the world of investing. He wanted to know if getting an MBA would be worthwhile and he was told by an experienced older investor that, if he learnt to short sell soya beans a couple of times, he would learn more, than at any B-school. The older man told him, "I assure you that when the soya beans go against you, you will learn a lot about yourself, the markets and the world."

Today, he's done well for himself. He began to look at countries to invest in and the asset classes that would really pay off in the long run. He explains, "I guess that came from experience - from realizing if a country is going to do better, we should invest in all the stocks in that country. If one thinks, commodity is going to do better, one should invest in all the commodities. If an airline industry is going to do better, probably all airlines are going to do better. It is something I have learned from experience."

"As far as I am concerned, an MBA is a waste of time, money and energy. Many people think it is a way to get a job, it may be a way to get a job but it's not going to help you make money. Plenty of MBAs are not successful investors and many people, who have never seen a business school were great investors. So an MBA is very overblown as far as I'm concerned."

Since he's made a killing on foreign playing fields, these are a few things he recommends that budding global investors should look out for. He elaborates, "I certainly want the currency to be convertible. One needs to make sure that there is a rule of law, make sure that there is liquidity in the stock market. You want a country, which has an improving balance of trade, it doesn’t have to be positive but it has to be up and on the rise. You have to have an economy that is getting better and an understanding that investors are good for a country and are welcome investors."

"There are countries which are obscure and cheap because people don’t know about it and don’t go there. I have invested in many countries that aren’t obscure. Japan is not obscure and I have investments there on the theory, that Japan is going to get a lot better. So, it doesn’t have to be obscure, it has to be cheap and one I think as a market, will get better."

Another guideline is really simple. Find something cheap and secondly, see if change is in the wind. He explains, "One can be a successful investor if you can figure out when something is going to change. If it is for the better, one wants to buy and if it is for the worse, then sell it and sell it short. Right now, I have been buying airlines when the airline industry was not doing well for the last five years. They have lost billions and billions of US dollars."

"In my view, there is change taking place, the airplanes are full now, the fares are going higher. Either the airlines are going to disappear or there is change taking place for the better. I don’t think we are going to take a boat to London anymore! I think we will be flying, so one way or other, the changes coming in is a positive change. Also, other things being equal, I prefer a company that does not have a lot of debt but if I think a change is coming and if it is going to be positive, then I don’t mind a lot of debt. I have bought companies in bankruptcy, and I think they are going to come out of it."

Jim is an experienced player and feels that an MBA degree doesn't prepare you for an investment-oriented career. He's also all too aware of the fact that he's the world’s worst market timer. He admits as much and says, "I am the single worst market time trader in the world. I have to be patient and I have learned that it might take a while for things to work out. That is okay because I have always learned that perhaps it is going to work out if I stay with it. I do worry about that, if a change doesn’t take place, or something derails the change, I would have to change my opinion."

"It is not easy to become a successful investor or get rich. It takes a lot of work. If one is not prepared for that, then one should not be investing. It is that simple. You are better off, putting the money in the bank and earning interest."

He also suggests that potential investors look at certain ratios to understand their purchases well. He advises looking at debt-to-equity and return on equity. This apart, the man has his own quirky ways of doing research. In Jim's case, he does his research in a very hands-on manner - he's famous for making his own spreadsheets - manually. He feels, this is the best way, a rookie could probably learn more in this manner, than in any other way.

He adds, "I don’t use Wall Street research. One has to be suspicious of everybody’s numbers. I am sure at Enron, there were people who didn’t know that there were problems. But if one does the numbers and compares them over a period of time, one will start to see problems showing up. One may not know what the problems are, but one can figure out that something might be wrong."

Earlier, he was sanguine about the Indian stock market but was gung ho about commodities. The bull market in Indian commodities is already on and it may last from 2014 till 2022. These bull markets last a long time because it takes a long time to bring out a new supply and when shortages develop, they go on for a long time.

This is beside the point that he feels that, "Commodities get absolutely no respect, though they are starting to - people are starting to learn how to spell commodities! I bet most of your readers have never bought a commodity (stock) and I bet most of them don’t know anybody who has bought a commodity. People know about stocks and bonds and very few of them know about commodities and care about them."

But today, things have changed. He says, "I am more optimistic about India than I have been anytime in my life. I still have a lot of skepticism. The market is a little bit frothy right now, I am not convinced that India is going to be the next China but India seems to be doing the right things, I know your politicians say the right words. I hope they mean it, but my problem is that I have heard Indian politicians for 15 years, say the right things!"

"In fact, I have sold out on the Indian stock market including the hotels. Though, I think Indian tourism can become one of the great investment sectors in India and in the world. There are other sectors in the Indian economy like agriculture, defence, education and tourism. In my view, India is the single best country in the world to visit from a tourist point of view. You have a combination of man-made and natural sites, food, culture, breadth of languages, of religions and everything else. And you always win the beauty contests!"

Written for www.moneycontrol.com

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