Investment Biker, and some personal thoughts

It's time for another book review. I've just finished reading Jim Roger's Investment Biker, about a week ago.

In around 1990, Jim set out with his then-girlfriend Tabitha to travel around the world on motorbikes. The first leg of the journey started in Dunquin (Ireland), through to Vienna, Istanbul, Ankara, Tashkent, Beijing, and finally to Tokyo. The second leg took them through the Siberian wilderness, all the to Moscow, through Warsaw, Berlin, London, and back to Dunquin again. The third leg took them to Amsterdam, Tunis, Algiers, Tamanraset, Kano, Bangui, Kinshasa, Harare, Johannesburg, all the way to Capetown in South Africa. From Africa, they flew to Perth in Australia, and started the fourth leg of their journey which took them from Perth to Darwin to Hobart to Sydney, and finally to Auckland in New Zealand. From there, they flew to Cape Horn in the southern tip of South America, and started the fifth and final leg of the journey to Buenos Aires, Punta del Este, Santiago, Lima, Cuzco, La Paz, Bogota, through the nations in Central America, to Mexico, New York, Alaska, and finally back to San Francisco. If I remember correctly, it took them about 2 years to complete the journey, covering a total of 60,000 miles on their bikes.

The book detailed the various forms of governments that Jim saw around the world, the various economic policies that these governments had in place, and the various investment opportunities that had presented themselves to him. I'll try to recall some notable things that he mentioned. Note that all these were in the context of the year 1990.

Russia: A statist government. State-controlled economy. Businessmen were given quotas to fulfill. Eg. You have to produce a certain amount of oil in a given year. The result: these people just strive to fulfill their quotas. They do not plan for the long term. Oil fields were not maintained properly. After all the easy oil near the surface has been extracted, and after these people have fulfilled their quotas, the oil fields were stripped of whatever they can get their hands on to sell. There're still more oil deeper underground but the oil fields were no longer working. Compare this to a capitalist: A capitalist will strive to squeeze every single penny that he can from the oilfield. The oil field would have been maintained properly, and he would have planned long-term and extracted oil till the last drop.

China: The Chinese has great work ethics. The government is loosening economic policies. Compared to the Russians, the Chinese are far more efficient. Farmers plant crops right to the last centimeter of their farms. Everything was economical. However, Western China was far underdeveloped compared to Eastern China. Jim also had dealings in the black market. One good way to judge a country is through the black market. Eg. If you can exchange your dollar for more renminbi in the black market than  in a bank, it means that the government has artificially kept the renminbi low. This is not good for the economy in the long run.

Siberia: Jim and Tabitha went from town to town across this vast land of emptiness. The towns were like ghost-towns. The local people had nothing to do. Their favourite past-times were drinking and sex. Shops were open but no goods were found inside. Why? Because of the statist government. Prices of goods have been kept artificially low for years and years. They did not change at all! The result was that entrepreneurs found no incentive at all to start businesses. What's the use, when you can't make a profit? Again, Jim turned to the trusted black market. The townspeople figured that people travelling across Siberia would need gas, and Jim were able to buy from them. Jim had arrived in a town where he witnessed a great scene. The locals had swarmed a shop which has a new stock of a gold jewelry. Gold is such an honest money, Jim wrote. Nobody wanted the rubles. Paper money based on nothing. All paper money loses its value over time because of the government. Gold doesn't, because governments can't print gold.

Poland: Poland used to have a statist government too, but the country had since embraced capitalism, and it is prospering. There is free trade, and capital flowed into the country.

Africa: Diseases, corruption, famine, wars, statist governments. Super rich elites, super poor ordinary people (America is going in this direction at neck-breaking speed). Jim travelled through the Sahara desert, where dozens of adventurers perish every year, war zones, ghost towns, etc. He saw first hand the fight between capitalism and statism side by side. There was a nice tourist attraction shared by 2 countries, Zambia (statist) and Zimbabwe (capitalistic). The capitalistic side of the tourist attraction has many resorts, hotels, and lots of tourists. On the Zambia side, there was only one hotel (why waste money and build more? They all serve the same function) and very few tourists. I know what you're thinking. Zimbabwe?? But hey, it's not capitalism that has caused hyperinflation in Zimbabwe today. It's the government's foolish printing of money out of thin air. Anyway, capitalism clearly brings wealth. Government-controlled economies are just failures. Unfortunately, just as Africa is learning from this and starting to emerge out of statism, America is falling right into statism in our world today. It was not all gloom and doom in Africa. Botswana and South Africa were the jewels in this continent. The government did not control the economy, and allowed capitalism to work to its full glory. Jim started a stock trading account in Botswana and bought all (if i remember correctly) the shares.

South America: Similar to Africa, in that it has tried to be statists, but failed. Now they're also slowly converting to a free market-based capitalism. A great potential in this continent. Chile was the crown jewel here. A vibrant economy! Peru, on the other hand, was embroiled in a bloody civil war. The opposing faction to the incumbent party had resorted to violence, in an attempt to cause disorder. They're called the Shining Path. These extremists had shot down all tourists that visited Peru. As a result, tourists were a rare sight in this country, Jim and Tabitha being one of them. Despite the turmoil, Jim felt that a fundamental change was imminent, and proceeded to set up a stock trading account here.

The Darien Gap: No road had connected South and North America. Jim reasoned that anyone who can build such a road will be fabulously rich. This will be something like the Silk Road which revolutionalised travel between 2 parts of the world.

North America: Mexico has also learned its lesson, and is embracing free-market capitalism. The USA, unfortunately is going in the opposite direction, as you would have noticed from my consistent rants in my previous posts.

From the reading, here're the few things about Jim's investment philosophies which I picked out:

1. Look for something which is very depressed (yeah, a no-brainer, you say). On Youtube, Jim often says that he doesn't like to jump on something that has started moving upwards in price. Jim invested in wool in New Zealand, because years of government-controlled prices had kept supplies low, insufficient to satisfy demand. He invested in Botswana as well, and one South American country which I can't recall. Right now, silver is still very depressed, 70% below its all-time high. Some agricultural products are even more depressed.

2. Do not lose money! What I've been taught in school is that it's okay to lose money, just make sure that you earn more than you lose. I found this kinda weird, and it definitely is a no-no strategy for Jim. If you don't lose money, and can invest at 10% returns per year, you'll be rich. Compounding is the magic of investment. The mistake that most investors makes is that once they had gained some returns from an investment, they immediately look for another investment to dump their money into. For Jim, it is wiser to let the money sit in the bank and do nothing first, and only invest those money when you're very sure that you will not lose them.

3. It all boils down to supply and demand. Government intervention in the economy distorts this delicate balance. As a result, there'll be years of under-supply and years of oversupply of commodities. This equates to fabulous profits, if you can figure out demand and supply.

4. In an emerging market with a new stock exchange, and where a fundamental change is imminent (eg. change from a statist to a capitalistic govt), it is often safe enough to buy stocks of the big companies. They are much more stable, and their stock prices are still depressed anyway. This was why Jim bought all the stocks in Botswana (7 of them if I remember correctly!!)

Jim also wrote that no borders between 2 nations stay constant for over a 100 years. They are always changing. Economic conditions will be the dominant determinant of the constant re-drawings of borders across the world. Civil wars and people's revolts will keep occurring, as they have since the dawn of history. Over the past few days, I've watched tons of documentaries on previous empires. The empires of France, Rome, Byzantine, Ottoman Turks, Persia, Mongol, Chinese, Greece, Aztecs, Maya, Franks, Huns, and the Goths. It seems like there're revolts in each of them! When people are oppressed long enough, and pushed to their limits, they will revolt. It is already happening in America like I have mentioned in my preceding blog post, just that nobody is noticing it. No one wants to. Note: America had civil wars and revolts before. Its currency has failed twice before. These will happen again. Maybe not the civil war part but there'll definitely be more violence. Gun sales has increased a lot over the past year.

Recently, I had a sudden realisation too. It seems like the number of billionaires in our world today are increasing, and this gives people the illusion that we are having unprecedented wealth and prosperity, that money is everywhere! I think caution needs to be thrown into the wind here. What have increased may not be the wealth of the population as a whole, just that purchasing power has been transferred from the population to this elite group of people. If you had lived 1000 years ago and you had, say, $10,000 (not a big sum of money to a lot of Singaporeans today?) you may be a millionaire or a billionaire by today's term. There are many millionaire- and billionaire- equivalents in the ancient world. There are many million- and billion-dollar building/megastructure equivalents in the ancient world. So don't be fooled into thinking that this billionaire trend is a new phenomenon, that money is everywhere and everyone can be rich. The fact is, given our current economic and financial system in place, this is IMPOSSIBLE. The middle class will continue to lose wealth as the elites suck them dry. Today we see billionaires in the world because our paper money supply has exploded exponentially over the past few decades. The purchasing power of these billionaires may be similar to the purchasing power of the elites who had lived in the ancient world hundreds or thousands of years ago. Well, this looks like a reasonable guess to me.

Anyway, back to the book: I've learned a great deal of things from this book. An understanding of history, politics, economics (Austrian!!), and philosophy will go a long way in making one wealthy. I've also learned how one should tackle border-crossing problems, corrupt officials, bribery, and all the little details that will make such a trip around the world possible. It is definitely a very difficult challenge, which I may attempt in the future!

The next book I'm reading would be Adventure Capitalist, another book by Jim Rogers on his 2nd attempt to travel around the world (around the year 2000) in a custom-made Mercedes, with his then-girlfriend and current wife Paige Parker.