Earlier this week, we shared some of Jim Rogers’ insights from his recent interview with Real Vision Television.
Jim is a legendary investor, best-selling author and Guinness World Record holder. So when he speaks, smart investors listen.
Today, we’re sharing a few more of Jim’s insights… on fear in the market, how to buy gold and the one sector Jim is bullish on today…
Chris Hohn the founder and manager of TCI Fund Management was the star speaker at this year's London Value Investor Conference, which took place on May 19th. The investor has earned himself a reputation for being one of the world's most successful hedge fund managers over the past few decades. TCI, which stands for The Read More
How being “fearless” is good… sometimes
Millennials (or, for that matter, young people – regardless of the generation) often get a bad press. But, in a bull market, Jim Rogers believes that under-35s can make serious gains because of their fearlessness.
“When things are going right, we all need a 26-year-old. There’s nothing better than a 26-year-old in a great bull market, especially in a bubble, because they’re ’fearless‘. To youthful investors, a bull market will never end…”
Now, that’s great in a bull market. But in stormier weather when things are going south, Jim thinks that older (and perhaps wiser) heads should take the helm because fearlessness can be very dangerous in a bear market.
As Jim says, most of these under-35s don’t know why they made money in the first place. So they don’t know why they lose money.
“The most dangerous time is when you’ve had a great success because you really think you’re smart, and you’re immediately looking for what’s next. And that’s when you should close the windows and go to the beach or do anything to get away.”
In short, during uncertain times, sometimes the best thing to do is nothing. And part of doing nothing is holding what’s maybe one of the most-hated assets of all: Cash. It doesn’t earn anything, inflation eats away at it, central banks can’t stop printing it, and you’re denying yourself the magic of compounding if you’re holding cash.
But cash is the perfect hedge. You don’t have to worry about the market crashing if you have a lot of cash.
Now, we don’t recommend ever pulling out of the market completely, as we’ve written before. But if the market starts looking uncertain, think about raising a little cash.
Why agriculture should be on your radar
Markets are more predictable than most people think. Stocks, sectors and markets rise and fall over time on repeat (as we’ve written before). For investors, it’s tempting to think that because a sector has been rising for some time… it will keep going up. Or that because another has been bearish for a while… that it won’t ever improve. This is called “status quo bias” – and it’s one of the most dangerous emotions in investing.
One sector that has been bearish for a long time is agriculture. It is down around 30 percent over the last two decades. But what goes up must come down (and vice-versa). Jim understands this, and that’s why he’s bullish on agriculture.
“Often throughout history if you find things that are disasters and you buy them, you may lose money first or you may go bankrupt first, but usually you make a lot of money in the end. It’s not the first time we’ve had big cycles in agriculture, in real assets, and probably not be the last time either.”
We’ve said something similar before: Often the best time to invest is when things are at their worst. That’s because shares are cheap when market confidence is low. And, since markets move in cycles, those cheap shares are bound to rise in value sooner or later.
If you want to follow Jim’s lead and buy into agriculture, he recommends the ELEMENTS Rogers International Commodity Agriculture ETN (New York Stock Exchange; ticker: RJA).
Everyone should own gold
Jim has been a long-time gold holder. And he believes everyone should hold gold – at least as an insurance policy.
“Everybody should have coins, physical coins, as an insurance policy, as an emergency, if nothing else. You hope you never need them. But you’ve got to start by owning gold coins, coins that are recognized all over the world.”
History has proven time and again that gold is one of the best ways to hedge your portfolio – that is, to protect it when stock markets everywhere fall. And, unlike paper money, gold is a permanent store of value. Gold has withstood history and maintained its inherent value. It’s durable, easy to transport, looks the same everywhere, and it’s easy to weigh and grade. In short, gold is insurance against financial calamity.
But what about investing in gold today? Jim says he’s not selling, but he’s not buying right now either.
“I’ve owned gold for many, many years. I’ve never sold any gold. I haven’t bought any serious gold since 2010. Before this is over, gold is going to turn into perhaps a bubble. It’s certainly going to get very, very, very overpriced. I’m not buying it now. But short of war, I expect another opportunity to buy gold and silver. And if it happens, I hope I’m smart enough to buy a lot.”
When the time comes, Jim believes gold coins are the best way to buy gold. But if you want to make big profits, look at gold futures and miners.
“You should have physical possession of some gold coins. After that, gold futures are the best way if you want to make money and you’re a good trader. Gold futures, that’s where you can get the most leverage, unless you can find the right gold mine. But there are hundreds of gold mines. So if you find the right gold mine, do it. But otherwise, have some gold coins in your closet or in your safety deposit box or both. And then learn about gold futures because that’s the way to make a lot.”
Like Jim, we’re fans of owning physical gold. But if you can stomach the volatility, my preferred way to invest in gold stocks is through a gold-mining ETF like the Sprott Gold Miners Fund (New York Stock Exchange; ticker: SGDM).
As I told you earlier, it pays to listen to Jim. So I hope his latest ideas will serve you well.