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Dear Daily Crux reader,
Of all the investment "gurus" featured in The Daily Crux, none is more popular or more respected than Jim Rogers.
Rogers is best known for co-founding the Quantum Fund with billionaire George Soros – which famously returned over 4,200% in just 10 years.
He’s also well-known for "calling" the huge bull markets in commodities.
Raised in rural Demopolis, Alabama, Rogers had his first job at age five. He went on to attend Yale and Oxford University before making a name for himself on Wall Street during the terrible bear market of the 1970s. He retired at age 37 to travel the world, and has since authored five fantastic books on investing and success.
Longtime readers are familiar with Jim's thoughts on commodities and the insane policies of our government, so this interview is a little different...
Like our colleague Porter Stansberry, Rogers believes the U.S. is headed for a serious crisis. We sat down with him to learn his advice for succeeding in the turmoil ahead.
You don't want to miss this one.
Justin Brill
Managing Editor, The Daily Crux
www.thedailycrux.com
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The Daily Crux Sunday Interview
Jim Rogers' advice for the "End of America"
The Daily Crux: It's no secret that you're super-popular among Crux readers. Articles and videos featuring your insights are consistently among the most "clicked-on" we publish.
Most of your recent interviews and commentary have focused on precious metals, commodities, and the foolishness coming out of Washington from the likes of President Obama, Treasury Secretary Tim Geithner, and Fed Chairman Ben Bernanke... So today, I'd like to talk about something a little different... some of the ideas from your latest book, A Gift To My Children: A Father's Lessons for Life and Investing.
One of the many lessons you pass along to your daughters in the book is the idea that the 21st century will belong to China. Most readers know you're a longtime bull on China... But are you bullish at all about the future of the United States? Are America's best days behind it?
Rogers: Well, in 1918, the U.K. was the richest, most powerful country in the world. If you looked at a map of the world, it was all red – the British Empire was everywhere.
But there was a lot of corrosion underneath. And within three generations, the U.K. was bankrupt. The U.K. could not sell government bonds. It had to be bailed out by the IMF.
Now, it certainly had some rallies along the way. Sometimes things got better... or looked better. But the trend was always down.
Starting in 1979, the U.K. had a revival when the North Sea oil started flowing. Over the next 20 years or so, the U.K. had a huge boom in oil production, which made things much better in the U.K... And of course, there was the stock market bull market, which made the City of London more exciting and prosperous.
But now, the North Sea oil is declining and the city of London is going into decline, just like Wall Street and financial centers all over the world.
As unlikely as it appears, these things happen... And they're happening in the U.S. right now. So I keep looking for what could happen to cause a revival in the U.S.
We have agriculture, but even our agriculture is facing problems. Conceivably, we have a lot of shale gas. If that technology is ever perfected, that would help the U.S.
But these things are not enough to turn the U.S. around permanently, just as the North Sea was not enough to turn the U.K. around permanently.
So, no... Right now, I'm not bullish on the future... And I would urge everyone to learn about investing outside of the U.S.
Crux: Is there any way this decline can be stopped at this point?
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Rogers: Well, yes... If Americans suddenly decided to withdraw troops from 120 or 130 countries around the world, cut spending with a chainsaw, and lower taxes with a totally new taxation system while cutting litigation and improving education – sure, it's possible.
The problem is what it takes would cause so much pain, no politician could get elected on that kind of platform. And if he did, he would either be assassinated or kicked out of office pretty quickly, because it's just too much.
We've had 50 years of overindulgence in the U.S... and you don't just wake up one day after 50 years of going crazy suddenly to say, "Oh well, OK. Everything's all right now. Let's move on to something else."
No. You've got to pay the price. And unfortunately, the price is going to be very expensive.
Crux: In the book, you also talk about some of your most important investment lessons. In light of the crisis you see coming, can you give us your advice on what readers can do to protect themselves... both those in or near retirement and those who are younger?
Rogers: As you know, I think everyone should learn about real assets. We're entering a period of shortages which are going to get worse.
And even if they don't get worse, the governments are going to print money if the economies don't get better.
So the best place for most people's money is in real assets. It's like the 1970s again. Stock markets and economies around the world were very bad in those 15 years or so. And yet commodities had one of the greatest bull markets of all time. You didn't make much money in stocks unless you were in very selective stocks.
Likewise with currencies... There are huge imbalances in the world now. The largest creditor nations in the world are China, Korea, Taiwan, Japan, Hong Kong, and Singapore. And the largest debtors... you know who they are and where they are.
These imbalances get worked out in the currency markets, among other places. It used to be the gold market, but we're not on the gold standard anymore. So people need to learn about having some of their money outside their own country – whether their country is Australia, Germany, or the U.S. – because we're going to be in a period of more turmoil... maybe even chaos. You're already seeing governments fail, even countries fail.
There's going to be much more social unrest, including in the U.S.
Everyone has a fire insurance policy or medical insurance policy. They hope they never use these policies, but they have them. If you begin to look at your life and investments and finances in the same way, you see having some of your assets outside your own country – no matter which country that is – is a smart insurance policy, and perhaps a way to make a lot of money.
I would also urge everyone to learn how to sell short. If you don't want to do that, at least learn about currencies. You don't want to keep all your money in cash in difficult times.
A lot of people put all their money into Icelandic krona and thought they were fine. Of course, we know Iceland went bankrupt and the krona collapsed. So be sure you learn something about currencies, because keeping all your money in cash could be a disaster.
For younger readers, I would suggest you work to learn foreign languages, preferably Chinese or at least an Asian language.
I see finance as continuing to go into decline... It's going to be a very, very depressed area of the world economy for years to come. All those people thinking about getting an MBA – unless they're truly passionate about finance – should look at some of the other area, of the world economy where they're going to have much better outlooks.
But even then – as I make clear in my book – they shouldn't go into something unless they really love it.
Crux: If you were starting over again today, would you still go into finance and investing? Do you think you would be as successful?
Rogers: Actually, Wall Street was a disaster the years I was there. And I did OK. I know Roy Neuberger who started Neuberger Berman went to Wall Street in 1929 – it couldn't have been a worse time – and yet he became wildly successful in finance.
So of course it can be done. But the numbers of people who do it are going to be very few and far between going forward. You'll need to be very passionate about it, because the wind is going to be in your face.
In 1958, America had 5,000 MBAs every year and the rest of the world had none. Now, America has a couple hundred thousand every year and the rest of the world has tens of thousands. So there's huge competition in finance.
By the way, an MBA won't teach you about commodities or raw materials. It will teach you mainly about stocks, bonds, and options.
But now there's huge competition at a time when there's staggering debt in the financial world, and politicians all over the world are coming down hard against banks, brokers, and financial institutions. Taxes, regulations, requirements.
So, finance is going to be a horrible place to be, just as it was in the '50s, '60s, and '70s. I mean, almost no one went to Wall Street in the '50s, '60s, and '70s. The city of London was a wasteland in those days. And then we had the big bull market and that all changed. But now, we're going back to a period where the producers of the real goods are the ones in charge, making the money and the excitement.
This has happened repeatedly throughout history. We've had long periods when the financial types were the kingpins, and we've had long periods when the producers of real goods were the kingpins. It's reversing again now, and we're just going back to what's always happened.
Crux: So fields like agriculture and engineering would be preferable?
Rogers: Very much so, if you like it. There are more graduates who study physical education or public relations than agriculture or mining in America... So there's going to be huge shortages in those fields.
The average age of farmers in America is 58. In 10 years, if they're still alive, they'll be 68. In Japan, the average age of farmers is already 66. So there are magnificent opportunities in areas like agriculture, engineering, and mining for people who love it. Producing real goods... That's where the next fortunes are going to be made.
Crux: Great advice... Finally, your book is full of some wonderful life-lessons you've learned over your career and travels. Could you leave us with a couple of your favorites?
Rogers: Sure... Be skeptical... Be curious... Don't believe anything you read until you've done your own research, your own thinking. This idea is responsible for some of my biggest successes.
Be persistent. The people who are successful are not the smartest or the most gifted or the most talented... The people who are successful are the ones who are persistent, persevere, and follow their own passions.
And as I told my daughters, beware of the boys.
Crux: Thanks so much for talking with us today.
Jim Rogers: My pleasure. Thanks for having me.
Editor's Note: You can learn more about Jim Rogers' books – including A Gift to My Children, Adventure Capitalist, and Hot Commodities – by clicking here. We consider them "required reading" here at the Crux.
Listen to an Obama impersonator and what the future of America might hold by clicking here!
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