Jim Rogers: “Anytime That You Think You’ve Become A Financial Genius-It Is Time To Sit Back And Do Nothing For A While”

One of our favorite investing books here at The Acquirer’s Multiple is – A Gift to My Children: A Father’s Lessons for Life and Investing, by Jim Rogers. Rogers co-founded the successful Quantum Fund with George Soros back in 1973. There’s a great passage in the book in which Rogers provides a great lesson for investors that are enjoying success.

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Jim Rogers

Here’s an excerpt from that book:

Never act upon wishful thinking. Act without checking the facts, and chances are that you will be swept away along with the mob. Whenever you see people acting in the same way, it is time to investigate supply and demand objectively.

Let me give you an example: In 1980 everybody wanted to own gold. The price had skyrocketed to over $850 per troy ounce. But one could see that gold was being overproduced; after all, a supplier is bound to increase production for anything that rises in price. A lot of people bought gold at this inflated price, insisting that it was somehow different from other commodities. Boy, were they wrong.

More gold started to be mined, and, at the same time, the demand for the precious metal scaled back. In fact, many folks who owned gold jewelry sold it to refiners for melting, which further increased the supply. By the year 2000, the price of gold had sunk to about $250 an ounce. History shows that most bubbles take years for recovery, so there is rarely any reason to rush in after a period of mania. The exact same change in supply and demand happened with silver, which tumbled from $50 in 1980 during its mania to under $4 a couple of decades later.

When you see so many people being unrealistic, stop and make an objective assessment of the supply-and-demand equation. Bearing in mind this basic principle will bring you that much closer to success.

Anytime that you think you’ve become a financial genius— when, in fact, you simply have had the good luck to turn a profit—it is time to sit back and do nothing for a while. If you stumble upon success in a bull market and decide that you are gifted, stop right there. Investing at that point is dangerous, because you are starting to think like everybody else. Wait until the mob psychology that is influencing you subsides.

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Article by Johnny Hopkins, The Acquirer's Multiple


The Acquirer's Multiple

The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization.The Acquirer’s Multiple® is calculated as follows:Enterprise Value / Operating Earnings*It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT.Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations.Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up.Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC.He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.Articles written for Seeking Alpha are provided by the team of analysts at, home of The Acquirer's Multiple Deep Value Stock Screener.All metrics use trailing twelve month or most recent quarter data.* The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”

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