One World, Like It or Not
I'm not going to tell you what you expect to hear. I'm
going to tell you about what hasn't changed in the past few weeks, and that is the reality
of the American investment environment. We are citizens of the world, and when we
invest—even if it's strictly in American companies—the true context of our
investing is global. I've been traveling around the world for nearly three years now in
order to better understand, use, and explain that essential fact.
My intention when I set out on this journey was to get a sense of the world firsthand, to
see the broad forces at work. I've been to 104 countries on this trip, and I've learned a
few things. None is more important than the fact that Americans have been living—and
investing—in a cocoon. We've avoided taking a close look at the connections between
ourselves and the rest of the world. That is a luxury we can no longer afford.
I've also experienced firsthand the reality that the world isn't always so friendly. I've
encountered dangerous situations all over the globe. In Moscow, a bomb went off 30 meters
from where I stood. In Yugoslavia, I was awakened by the sound of gunfire. In Senegal and
Tanzania, I saw the aftermath of riots between religious sects.
Here's my point: I don't separate those facts from my investment perspective. They are
elements that need to be incorporated into a true worldview of investing.
I've preached in favor of foreign investing for years. Anyone will agree that a portfolio
comprising nothing but local tech companies is too heavily concentrated, but I would make
the argument that a portfolio of only American companies is equally unbalanced. After all,
everyone who lives and works in the United States is inherently overexposed to the
domestic economy. Our personal wealth is subject to local wages, real estate values,
taxes, and more. Foreign investment provides a level of diversification and, by extension,
safety.
It's important to embrace the sweep of time as well as geography. Nations go through
cycles just as corporations do. In the 19th century, the British Empire was all-powerful.
The 20th century belonged to America. To assume that the 21st century must also belong to
the United States is to deny the way the world has always worked. China, with its high
levels of savings and investment, will be the next superpower.
Is that terrifying, or is it an insight that promises opportunity? You know my preference.
When I look at the world, I see trouble and strife and danger, certainly, but I also see
more and more nations opening their doors to foreign investment and allowing people to
take advantage of free-market economies. That is good news on every level.
It's trite, but it's so true: The world is getting smaller. The Internet, cell phones, and
air travel have made us more connected than ever before, intertwining our economies,
bringing disparate cultures closer together. Investors who understand this
interconnectedness know that if a revolution kicks off in Chile, the price of copper will
rise. Such a rise will in turn cut into the profits of electric companies in the United
States. Similarly, if war widens in the Middle East, it's a likely bet that the price of
oil is going to spike.
Don't get me wrong: What happened in New York City and Washington, D.C., is horrific and
frightening. I don't think a foreign army could have marched onto our shores and done as
much damage. It will change a great deal about our country. We may find ourselves at the
beginning of a war that will last years. I've often been concerned that the American
government, with its bullying foreign policy tactics, was making more enemies than friends
overseas. I've been out here long enough to know that not everyone thinks as highly of us
as we think of ourselves.
My fear is that rather than opening their eyes to the rest of the world, U.S. investors
will further shut themselves off. Politically and emotionally charged events such as the
terrorist attacks often encourage people to put up walls against what is different, what
is unknown. That would be a grave mistake. Would you like a patriotic way to approach
global investing? Look for those countries that live up to the ideals and principles that
made our country great.
Faithful readers know that I am an equal-opportunity investor: I buy stocks, bonds,
currencies, futures—whatever the market permits and whatever looks promising. I've
made it my practice not to talk specifically about my choices; I am a private investor, in
both senses of the word. But I do want to show that I mean what I say about being engaged
in the world. So I've put together a table that identifies the 28 countries in which I
currently have money on the line.
Wherever I am, I take a top-down approach. I start by determining whether a country has
turned a corner economically. If it has, I confirm that the currency is convertible; I
have to be able to sell if I change my mind. If all systems are go, I usually buy two or
three of the largest companies there. That's because when Fidelity comes to Africa to
start a Botswana fund, it won't be buying stock in mom-and-pop operations. It will be
buying the big companies that drive the economy. (The table identifies the largest
publicly traded company in each of the 28 countries, but I don't necessarily own that
company right now. Those company names should function as starting points for your
investigations.)
To maintain discipline, and because I don't have an endless stream of money, I don't add
to my position without selling something else. If I see an opportunity to buy a
company—a hotel chain in India that might benefit from a boom in tourism, a software
company in China—I make my move. But in order to free up the capital to buy that new
company, I usually sell another asset, typically whatever is weakest. If one part of the
portfolio grows, another part must shrink.
Where am I looking now? Raw materials all over the globe. Faced with political and
economic turmoil, governments often start printing money. That causes inflation to rise. I
think we'll start to see that in the United States, given the way Alan Greenspan has been
cutting interest rates. That will undoubtedly send the price of raw materials up. It
always has. I've talked about the coming bull market in the natural-resources industries,
and this should only accelerate that process.
This period in American history will linger in the collective psyche for years. But if
there is something positive to take out of a difficult time, it is that Americans are
getting a wake-up call. We're saying goodbye to the illusion that we live on an island,
that oceans alone can separate us from the harsh realities of our times.
The 28 Countries In Which Jim Rogers Holds Investments
Country Stock Market Market Cap (In Billions) Companies Listed Largest Stock In The Market*
Australia
Australian Stock Exchange
$372.7
1,330
News Corporation
Austria Wiener Börse
33.5
111
Bank Austria
Botswana Botswana Stock exchange 1.0
16 Sechaba Brewery
Canada Toronto Stock Exchange 720.0
1,327 Royal Bank of Canada
China Shanghai Securities Exchange** 4.0
54 Southeast Electric B
Costa Rica Bolsa Bacional de Valores 3.0
83 Florida Ice and Farm
Denmark Copenhagen Stock Exchange 122.4
210 Novo Nordisk B
El Salvador Bolsa de Valores de El Salvador 0.7
37 Banco Agrcola
Finland Helsinki Exchanges 139.1 156
Nokia Oyj
France Euronext Paris (Paris Bourse) 1,040.8
948 Total Fina Elf
Germany Deutsche Börse 1,473.7
1,022 Allianz
Ghana Ghana Stock Exchange 0.6 22
Ashanti Goldfields
India Mumbai (Bombay) Stock Exchange 112.8
5,962 Wipro
Ireland Irish Stock Exchange 67.3 72
Diageo
Italy Borsa Italiana 579.9 235
ENI
Ivory Coast Bourse Regionale des Valeurs Mobilieres
1.2 38 Sonatel SN
Japan Tokyo Stock Exchange 2,906.8
2,072 NTT Docomo
Korea Korea Stock Exchange 154.1 693
Samsung Elec.
Malaysia Kuala Lumpur Stock Exchange 116.9
807 Tenaga Nasional
The Netherlands Euronext Amsterdam (AEX) 594.1
910 Royal Dutch
New Zealand New Zealand Stock Exchange 17.8
136 Telecom
Norway Oslo Børs 79.1 191
Statoil
Peru Bolsa de Valores de Lima 10.6
212 Telefónica B
Spain Bolsa de Madrid 471.0 1,036
Telefónica
Sweden Stockholmsbörsen 227.3 310
Ericsson
United Kingdom London Stock Exchange 2,311.4
1,856 BP Amoco
United States New York Stock Exchange 11,500.0
2,374 General Electric
Zimbabwe Zimbabwe Stock Exchange 2.7
71 Barclays Bank
Most recent available data
*Jim Rogers does not necessarily own shares in any of these companies.
**Foreigners can buy B shares only; data reflects B share market.
Updates are available at www.jimrogers.com.