Review of Street Smarts by Jim Rogers

 

(This video is a bit off topic, but it gives you an idea of what Rogers is like. The full documentary is about an hour and well worth watching to see how things used to be in China.)

 

The review starts here:

(525 words)

Seeing this book has six pages of index, I thought it would be packed full of useable information. In fact it’s a memoir of Rogers’ life and achievements.

Rogers has enjoyed a very successful and interesting life. From (apparently) humble beginnings he won scholarships to Yale and Oxford, learnt from some of the great investors of Wall Street, partnered with George Soros, made a fortune and retired at 37. But that wasn’t the end of it. He became a professor at Columbia University, traveled the world and became a highly regarded media commentator.

Sadly, the book does not reveal exactly how he achieved any of these things, except through hard work and good connections. But there are a few tips for traders.

Rogers advises the way to make a lot of money is:

  • specialise in what you’re interested in;
  • don’t listen to anyone else, especially brokers;
  • don’t diversify;
  • be willing to lose everything, especially if you’re young; and (importantly)
  • wait for the big opportunities where you cannot lose, and then bet big.

He explains in simple terms how short selling works. He used short selling to make his own fortune, but this technique is not available to most investors. Shorting can yield big gains but huge losses are also possible. Only the smartest traders are successful at short trading. Rogers himself lost his fortune through uncovered short selling. Fortunately he was young enough to rebuild it. Of course he found the experience unpleasant, but it was also instructional for him.

If you learn this one point from it, the book is worth its price – short sellers are the smartest of all traders. Therefore, in my opinion, you should never take a long position in the face of large scale short selling. Again, don’t buy a stock where the price has fallen because of short selling. Avoid it entirely or at least wait until the shorts start covering their positions. The short sellers are sometimes wrong, but not often.

He worked for the broker Roy Neuberger who told him Wall Street is like the shoe business. You buy the shoes, mark them up and sell them. You don’t sit on them for months or years.

Much of the book is given to Rogers’ opinions on politics, economics, the education system, Asia and much else. Unfortunately he does not back up his views with more than anecdotal evidence. His views are already well known through his media commentary. He describes a devastating legal battle which aged him and he talks about the joys of fatherhood.

He predicts the demise of the US tertiary education system for various reasons: student loans; the tenure system; overseas competition; poor quality staff and facilities; short working hours. Endowments are particularly shaky due to sub-prime investments.

The book is well written and easy to read. Perhaps his previous book, Hot Commodities, would give a more ‘nuts and bolts’ account of how to make real money. If I find a copy I will read and give you a review. Street Smarts is not a guide to making money, but I’d recommend it for a light read.

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