By definition, being contrarian – both in life, and as an investor – is difficult. Going up when the rest of the world is going down, or going right when everyone else is going left, defies the natural human instinct to fit in.
Legendary investor Jim Rogers has made a career of going against the herd. Jim co-founded the Quantum Fund, one of the world’s most successful hedge funds, which generated returns of more than 4,200 percent over ten years.
Later Rogers drove around the world – twice. He wrote several excellent books that blend travelogue, investment insight, and political commentary. Today, Jim is viewed as a founding father of the boots-on-the-ground approach to investing in emerging and frontier markets. (He also happens to be a fellow Singapore resident and regular Asian Wealth Daily reader.)
I recently sat down with Jim for an extended one-on-one, exclusive interview. A few excerpts are below…
Jim Rogers on when to sell
Me: Jim, we’ve talked about buying… how do you know when to sell an asset?
Jim Rogers: Well… when people are getting hysterical, you can sense it just by market action… if you read the press you can see when everybody’s talking about whatever it is that’s the best thing, something going to change everybody’s life… and how boy, it’s a whole new era… You hear the same words every time, every time, they are the same. Investors and the press use the same expressions about how great things are now. [For example,] Amazon can never go down, and will never go down and is going to go own the world someday.
When you hear all that kind of talk… I mean, fortunately or unfortunately, I have read about a lot of markets in my day and they always say the same thing. Absolutely, “a new era.” Oh, how many new eras have we had in history? It’s just amazing.
Me: So you’re talking about really using history to interpret the current market.
Jim: Yes… If you understand history, you’re probably going to be a much better investor. You’re going to be a much better at everything if you understand history, because it all happened, this all happened before. I assure you, we all put our trousers on one leg at a time, and we always have, and we always will.
But you need to understand the basics of how the world works and the best… A good way to do that is to know about what has happened before. And, if you know what’s happened before then you’ll probably be a step ahead of figuring out what’s going to happen.
Why we’re all going to look silly in 15 years
Me: So, what in today’s markets do you see and think, “All right, 10,15 years from now we’re going to look back at this and say, ‘Gosh, we were fools'” [because we believed all the talk about a “new era”?]
Jim: Well, in New York, on the stock exchange there are only like 10 or 15 stocks that are holding up the averages. They’re all the big stocks like Google, Amazon, Apple… and all of those companies are going to go on forever, and get bigger and bigger and bigger.
And perhaps some of them will, but, I know, you know, if you look back at the data [this isn’t usually the case]. This is an extreme example, but if you look back at the Dow Jones industrials Average from 100 years ago, I think there’s only one stock left, that’s still in. Nothing goes on forever.
In fact, in one of my books I talk about the need to understand that everything is changing. You pick any year in history, 1900, everything that people knew in 1900, 15 years later it was totally wrong. Everything, it changed.
Again, you pick any year, Kim. You can do it as well as I can; 1955. Fifteen years later there was a whole different world from what everybody thought in 1955. And that is one of the basic lessons that history will teach you, if nothing else. And you, certainly need to know how to think like that if you’re going to be a successful investor.
More from Jim
In the full exclusive interview I had with Jim Rogers, he also talked about some of the biggest mistakes he’s made, both in life, and in markets… one of the biggest dangers of success… and some of his favourite markets today.
I’ll shortly tell you how to gain access to the complete video of this interview… stay tuned.