Jim Rogers: The Grandmaster

Prophecy is an inexact science. You can know what happened last month with a lot more certainty than you know what will happen next month. Which is why so many people spend so much time mired in the past.

The past is not prologue, but it can provide lessons. If you are trying to deal with a problem, you can look to the past to find analogous situations, identify different actions taken, and weigh the outcomes.

This kind of exercise is at the core of an effective coaching practice.

In some ways it's like playing chess.

when you are considering a move in chess you must consider your opponent's possible counter-moves. Then you must consider the moves you can make to counter those counter-moves. And so on.

Grandmasters are the ones who think furthest into the future. They quickly think beyond the immediate because they can see the largest number of moves and counter-moves.

The grandmaster uses experience to train his mind. Experience has taught him what does and does not work. He can assess moves and outcomes far more rapidly than lesser players.

When the grandmaster is playing the game he looks toward the future. He knows that looking backward is not going to do him any more good than it did Orpheus.

A grandmaster need not be a person. In business the "person" who can see the farthest into the future with the greatest accuracy is the financial markets.

The markets represent the collective wisdom of the investing class. Everyone has the right to case a ballot in an election, but the investing class can also vote with its money.

The markets are not a democratic institution. Many people do not vote in the stock market and the people who do vote do not have an equal number of votes.

More successful people have more votes than less successful people; they have more capital and more credit at their disposal.

Obviously, the collective opinion of a group of people is not infallible. The market has, as people like to say, predicted eight of the last five recessions.

The future is not predetermined. Government and personal actions can steer it in one direction or another. They may forestall calamity, hasten its arrival, or delay recovery. How we deal with the current crisis will make the future brighter or darker. Given the damage done already, we can say with some confidence that we are not heading to a bright new morning.

In chess, as in bridge, you have to be a great player to understand another great player's moves. With some sports you can be a mere fan and know the difference between great and mediocre plays. When you are dealing with a grandmaster like the stock market, only the best players really know what it is saying.

Jim Rogers is an investing grandmaster. He does not just move his money around; he moves himself and his family around too.

A year or so ago Rogers sold his townhouse on the Upper West Side and moved his family to Singapore. His move was vote of no confidence in the United States and the American dollar.

Here is some of what he said at the time, in December 2007: "I am still short Citigroup. I'm still short Fannie Mae. And I just increased my short positions on investment banks last week because that is where the excesses have been in the United States economy.... You see 29 year-old kids making $10 million or $20 million a year and thinking: 'This is the way the world is. This is normal.' Well, it's not normal."

What would you give for having put on that trade a year ago?

Rogers often comes to mind when people in my practice address this question: Is New York over? The question has not yet reached the cover of the magazine that bears the city's name, but it is certainly worth consideration.

If the dollar losing its status as reserve currency, this will make the financial services industry a shadow of itself. If that happens, what hope is there for the real estate market, the retailing business, restaurants, newspapers, and government services?

The second question people are asking is this: Is Asia the future. So said a report last week from the National Intelligence Council. Link here.

Jim Rogers has long since thought so. Right now the signs point in that direction. For now we will wait for the turbulence to pass before we will know what the future will look like.

Grandmasters at the investing game are, however, already taking their positions. When you learn to look through storms you will be better prepared to make decisions before everyone else. And as Rogers suggests, it is not just about where you put your money; it is also about where you put yourself and your family.