Thursday, August 28, 2008

Jim Rogers Fans The China Investment Story Again

China’s Economic Advance is All But Unstoppable -- Jim Rogers, April 15, 2008

Anyway I’m still around China. I have never sold any of my Chinese companies. You know, selling China in 2008 is like selling America in 1908. Sure, let’s say the market goes down another 40% - so what! -- Jim Rogers August 19, 2008

I think Jim Rogers provides good examples of where I differ from the generally accepted bearish economic or investment position. Rogers is popular with many bears because those views seem self-evident - the Fed is printing money, the end of the U.S. economic leadership is at hand, the dollar is going to zero, the twenty-plus year commodity supercycle is just ramping up and this is undeniably the Asian century. These are clearly not positions with a basis in fact. Instead arguments surrounding these positions are almost entirely based on emotions and speculation.

I do agree with one point Rogers made. I do believe Chinese equities are going down another 40% - as I wrote in a prior post, I expect a total drop of around 90%. The point is that I do not subscribe to opinions. All of my views are the result of quantitative analysis. That analysis may be right or may be wrong but it has a basis in a reality other than how I feel at the moment. Because if I were using that data point, at times I'd just about convince myself the world is coming to an end.

Near the peak of the Chinese bubble Rogers sold his house in the U.S. and was going to move to China. And, he made it very publicly known by going on the media circuit to announce it. In other words, he was extremely confident. Did he ever move to China or is this more of his ramblings that appear to make less and less sense?

I believe Rogers would generally consider himself a trader but how many trading rules has he broken by holding stocks through a collapse? Just about every one I can think of including every golden rule. Roger's position has seemingly been that it was a sure thing to make money in China. Now that it appears this may not be accurate, he has changed his position to being that he's in it for the long haul. His position changed because he refused to acknowledge his extreme bias might be wrong and has instead decided to hold through a murderous decline in asset prices. How would you like to hold Chinese equities through one of the greatest stock market crashes in history? We aren't talking about anticipating a crash anymore - although we did anticipate the crash. The crash has already happened. Rogers now exposes himself to unquantifiable risks by not enforcing rules in his investment strategy. Instead he has likely let his emotions talk himself into accepting losses. It is textbook. I know because I have done it. And, so has every other person on this earth.

It could be decades or longer before Chinese investments return to these levels, if ever. What economic and political risks might unfold in this period of time? They are unknown. They are not quantifiable. How old is Rogers? He must be close to seventy. I think his grandchildren might be inheriting his Chinese stock certificates. That is, if the communist government doesn't re-nationalize companies or his investments don't go bankrupt while waiting on that economic turnaround.

Rogers could have retired a legend after writing his commodities book around 2000. The reality seems to be that Rogers never understood why his thesis was going to come true other than paper assets were a bubble. But, he knew a commodities boom was coming. Indeed it did. In spades. Now he continues to stray into topics of which he apparently knows very little, if anything, including fundamentals. His calls are becoming suspect because now he talks of bias, politics, opinion and other elements he doesn't understand. So his value is eroding. Prize fighters can never seem to go out on top. Instead they always seem to be carried out on a gurney. Hey Flat Board Jack, looks like we have another pick up for you. This one is a TKO. The Chinese stock market is likely not coming back for a long, long, long time.



posted by TimingLogic at 6:58 AM