Investment Biker, Jim Rogers

Key take aways

  • Central investment thesis:
    • Always bet against the central banks and with the real world
    • truly down trodden people do not rise, but hell hath no fury like suppressed peoples whose expectations have been aroused
    • people don’t change their ways until their are forced to
    • while it is easy to figure out an investment is cheap, the real work is figuring out if a change is about to occur in the near future. It is important to study markets and their history
    • when seeing a big change coming (the opening of the trans Siberian railway), consider the economic, political and social shift
  • modus operandi
    • Why buy a new sofa when it could be put to work in the markets
    • Only invest in what I can sell quickly
    • do nothing until you can see the money to be picked up around the corner
  • key areas of study
    • geography
    • politics
    • economics
    • history
  • Company assessment criteria
    • Price to book value
    • sound balance sheet
    • pay dividend
    • Price to earnings ratios
    • Viable industries
    • start with largest soundest enterprises
      • banks
      • mines
      • news papers
  • On assessing countries
    • Watch out for statism – governments getting in the way of an organic market
      • democracy does not equal prosperity
      • US government piling more and more regulations
      • SnL crisis of the 1980s
      • Artificially suppressed prices
        • 1970s gold in America
        • 2019 prices of pork in China
      • Foreign aids (IMF, UN and Peace Corps) just props up a system that does not work and delays the actual rebuilding process. Have faith in the locals to rebuild themselves in a configuration that works for them as opposed to a system suited to foreigners liking (hubris)
    • On ethnic strife and separatism
      • Some geographical boundaries don’t make sense.
      • no borders remain stable for long
      • economic hardship will bring to surface these fault lines as they get used as a vehicles to get more
      • Wait till wars are fought and border issues sorted out. It might then become a great investment opportunity to enter at the bottom
      • examples
        • Rise of Islam and Christianity in Siberia prior to Soviet collapse
        • Hong Kong riots
        • Barcelona declaration of independence
        • XinJiang, Tibet
    • black markets as signals: difference between black markets rates and official exchange rates provide an indicator of how much the central bank has propped up the exchange rate. Minimal to no differences are signs of a strong economy
    • major red flags:
      • currency controls, import taxes, export restrictions. Makes it hard to pull funds out
      • is country trying to devalue its way out of its internal problems instead of doing a proper fix?
      • frantic purchase of gold in local jewelry store
    • Positive signal:
      • Is the country trying to get foreign hard currency by making things other people want to buy – quality goods
      • Is the country learning to compete and out innovate its competition
      • an educated population
  • On centrally planned economies
    • the market feedback mechanism is missing
    • resources get ruined due to misuse
    • it would have thrive if it was a sound economic theory
  • On China
    • while Russia abused their resources, China having nowhere to go were more deliberate and took better care of their resources
    • success had a lot to do with economic and political organization
    • example
      • took bees to blooming flowers to work them 5-7 times harder than their foreign counterparts
    • Hong Kong, Guangzhou and Shanghai being captured by the capitalist spirit generally ignores capital’s policies
  • Note worthy collations
    • China (labor) / Siberia (natural resources)
    • Australia (natural resources) / Japan (capital)
    • US (capital) / Canada (natural resources) / Mexico (labor)
  • On commodities
    • most local markets will eventually get assimilated into the global market
    • diamonds have artificially propped up prices that will be hard to maintain in the long run. DeBeers will eventually run out of cash buying up supplies from the black market and it will lead to sudden price collapse. Opt for gem and rubies instead
    • when gold gets too cheap companies will figure out ways to use it thereby depleting its supply driving up price. Same could be said of oil
    • underlying structural issues within a country can stay hidden for long during times of a commodity boom
  • The key to success
    • out of every 1000 people who wants to be rich only 6 can master the discipline to do so
    • stay focus on a single goal for five, ten, twenty years

Related readings

Observations on how public opinion is shaped in the US

Public opinion is observed to be very malleable and fickle. It’s highly susceptible to reshaping by main stream media.

In an unlikely twist of events, what was once presented as a war by the White House against China over trade and national security has overnight morphed to become a fight for American values like democracy, free speech and human rights.

While the ongoing unrest in Hong Kong have provided ample fuel, the tweet by NBA Houston Rockets general manager was the spark that caused the fire.

Related Readings

The American Factory

Context

FuYao is a Chinese manufacturing company that products glass for automobiles companies:

  • Honda
  • Toyota
  • Hyundai

The company setup a factory in Dayton Ohio in 2013 to take advantage of the abundant supply of cheap skilled labor in the region resultant of the 2008 recession.

Overarching trends

  • globalization continues to apply downward pressure of wage growth around the world for commoditized labor
  • automation continues to eliminate entire categories of jobs around the world

In depth analysis of FuYao Glass America

The opening of a plant in the new country can be seen as a acquisition of sorts.  Acquisition activities is considered a merge of the following components:

  • Culture
  • Process
  • Assets

In this case, it could be seen as a merging of FuYao’s culture and process with Dayton Ohio’s asset which is cheap skilled labor.

Below are the key conflicts with the merger

  • highly structured and propagandized environment (Chinese) versus loosely structured and casual environment (USA)
  • processes built around social norms in a weak union environment (China) versus social norms from a strong union environment (USA)
  • productivity and throughput focused paradigm (Chinese) versus safety and family focused paradigm (USA)
  • workers paid USD29/hr when working for GM before it shuttered are now paid USD17/hr under FuYao
  • governor and grassroots were encouraging unionization to encourage more say American say in the running of the plan

Key transitions

  • removal of locally hired senior management (USA) with Chinese senior management (USA) for effective implanting of culture within company
  • battling against worker unionization

Reasoning on more extreme weather patterns observed

August and September is the season for extreme weather patterns along the south eastern coast of major continents in the northern hemisphere.
Barely two weeks after Typhoon Lekima (the costliest ones in Chinese history) hits South eastern coast of the China, Hurricane Dorian (the largest one in US history) gets elevated to category 5 and is set to hit Florida, the South eastern coast of USA.

Attempt at reasoning increased magnitude of storm patterns

Both Earth rotates eastwards and the trade winds blow westwards at a constant rate. This explains why storm patterns always occur along the east coast of continents.
Intensified greenhouse effect resultant from increased carbon emission has caused greater heat to be trapped resulting in generally a warmer ocean. This leads to greater temperature difference between the upper and lower sections of the buildup and thus more severe weather patterns.
This phenomena is the most acute along the equator during the season when:
  • the northern hemisphere shifts from summer to autumn,
  • the Southern Hemisphere from winter to spring and
  • the equator is the hottest.

That happens to be during August and September.

Approaches to capping out the magnitude of the storm

  • Reduce the surface area of the water body the storm is allowed to build up momentum over. Reducing water supply in the ocean by freezing them up.
  • Reduce the delta between the hottest and coldest temperature during the year. Reduce the amount of heat trapped within the earth’s atmosphere.

 

Related references