Jim Rogers

Jim Rogers: These Are The Most Interesting Markets Today

Over the past few days, I’ve been sharing insights from legendary investor Jim Rogers.

Jim is a world record holder and best-selling author. His is a voice in the investing world well worth listening to.

Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?

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Jim Rogers

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I recently sat down with him for an exclusive one-on-one interview. I’ve already shared his views on the biggest threats to global marketswhere to invest your pension fund… and his life lessons.

Today, I’m sharing Jim’s views on what he thinks are the most compelling opportunities in global markets today.

High-potential markets today

Jim has told me before that he’s interested in disaster… and he still is.

Kim: Jim, where do you see opportunity and good value today?

Jim: I have been shouting that North Korea and South Korea would soon merge for a few years now, and it looks like it’s finally going to happen. [Jim told us that he was bullish on North Korea in 2016.]

Not tomorrow. But unless Mr. Trump messes it up, and he might, that problem is being solved as we speak for many reasons. [North Korea’s leader and Trump are due to meet in a few weeks.] But that would certainly prevent American taxpayers from spending a lot of money… Korean taxpayers… it’d prevent everybody from spending a lot of money. So let’s hope it happens. I would be terrific. It would be a great opportunity for investors. In the North they need everything, they have nothing. Virtually nothing. So it would be a great opportunity for all of us.

You’re probably going to say to me, “What would you buy?” And there’s nothing to buy in North Korea, there’s nothing public I own. North Korean coins. I own Korean Air Lines (Korea Exchange; ticker: 003490) because I assume there’ll be a lot more air traffic. I own a South Korean ETF. [The iShares MSCI South Korea ETF (NYSE; ticker: EWY) is one ETF you can own.] But other than that, I don’t really know a way to invest.

Also, Russia is still hated by most investors, which is terrific, it means it’s still cheap. I am looking for Russian investments. I’ve bought more Russian government bonds recently in rubles because they have a very high yield and I’m optimistic about the ruble – certainly that the ruble is making a bottom, if it has not made its bottom already.

Vietnam is doing very well right now. I prefer the bad things that are hated. But there are big changes in the country, and it’s right on the Chinese border. It’s a country of 90 million people, educated, disciplined, hardworking. They call themselves communist, but take that with a grain of salt.

I’ve mentioned Nigeria and Kazakhstan before.

China. I’m looking for investments in China. China is 40 percent below its all-time high. Japan is 50 percent below its all-time high. I’d much prefer China and Japan to, say, America and Germany. You know, these are markets that are near all-time highs. And I know that watching you guys, you know to buy low and sell high.

Economic fundamentals don’t necessarily dictate the direction of a market

Jim mentioned Japan. So I asked him… when we look at debt profiles and countries most likely to blow up from debt, wouldn’t Japan be at the top of that list?

Jim: Absolutely. Japan has staggering internal debts. They have a lot of external reserves, foreign-currency reserves, but they have huge debt and they keep running up debt after debt after debt. I can give you scenarios where there isn’t a Japan in 50 years. I mean, they have a declining population. Their debt is going through the roof. It’s a fantastic country, but it’s in serious, serious decline.

But that doesn’t mean that the stock market cannot go up for a few months, or a year, or two. So I’d rather buy Japan than many other countries.

Kim: It sounds like you’re talking about the disconnect between the fundamentals of a market or an economy, and the direction or trajectory of its stock market.

Jim: There’s a difference in a short term and a long term. I know Japan is going to disappear, but there’s still time to make some money if the world doesn’t fall apart in the next three or 10 months.

But beware of value traps

Jim has said before that he likes to buy things and own them forever. In his Adventure Capitalist book, he says:

What success I have had in investing has usually come from buying stock that is very cheap or that I think is very cheap. Even if you are wrong, when buying something cheap you are probably not going to lose a lot of money. But buying something simply because it is cheap is not good enough – it could stay cheap forever. You have to see a positive change coming, something that within the next two or three years everybody else will recognize as a positive change.”

The perfect stock to buy is one that’s very cheap – and which appreciates steadily over time as the valuation becomes less cheap, and/or as the company grows. That might sound straightforward, but it’s not.

(A cheap stock is one that trades at a valuation level – for example, a price-to-earnings ratio or a price-to-book value – that is low, compared to the market as a whole, the sector, or a stock’s historical levels. Whether or not a stock is cheap has nothing to do with the absolute price of a stock. Shares that trade for hundreds of dollars can be very cheap – and a $3 share could be very expensive.)

There are a lot of ingredients to a stock’s valuation – and reasons why a cheap stock might be a value trap, and not be as cheap as its valuation suggests. Bad management, poor use of investment capital, assets that are delivering lower returns and a company operating in a sector that’s in long-term decline are just a few of these reasons.

A value trap can stop being a value trap – and become an attractive, under-valued investment – if there’s a trigger for change. A change in management, a big change in the industry, higher commodity prices, a regulatory change – all of these things can turn a value trap into a great investment. Until there is, they’ll continue to be value traps.

So no matter what markets you’re looking at – whether it’s Japan or Russia – make sure you’re avoiding value traps.

Good investing,

Kim Iskyan

Publisher, Stansberry Churchouse Research

P.S. I look all over the world for attractive, under-valued investments in my newsletter International Capitalist. The returns in those places can be extraordinary. And for a limited time, we’ve opened International Capitalist to new subscribers… you can learn more about it here.

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