Why ‘Lunatics’ Make the Best Investors

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Good old Jim Rogers!

He never fails to deliver an intriguing and contrarian idea.

If you don’t recognise the name, Jim’s a Wall Street veteran who has made a lot of money investing across different markets.

He’s been doing it for 50 years.

For example, Jim was cashing in on ‘emerging markets’ long before Wall Street caught on and turned it into a marketable asset class.

I saw a recent video interview of him this morning.

The country Jim’s most excited about right now?

Venezuela.

Yep — sounds crazy, doesn’t it?

Today’s Profit Watch expands…

Venezuela is gripped in a hyperinflation. The production of its main export — oil — is collapsing.

Firms are leaving the country. There’s starvation in the streets.

These are the images we’re left with from the mainstream media reporting.

They don’t exactly scream ‘buying opportunity’.

It would never occur to anyone to consider Venezuela an exciting opportunity.

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Except if you’re Jim Rogers.

Jim likes to step in when things are so bad that they can’t get any worse.

He likes to buy bankrupt companies and bankrupt countries.

This drives prices so low that he basically can’t lose any capital if the idea doesn’t work out.

This is how he’s created a career — and millions in profit — from ‘buying low and selling high’.

He’s said before that people often look at him like a lunatic when he discusses his favourite countries to invest in.

North Korea is one of them. See why?

However, it all comes with a crucial caveat…

Jim Rogers: Buy change to get rich

Jim invests in these conditions as long as there’s positive change happening to turn the disaster around.

So Jim obviously sees something happening in Venezuela the rest of us don’t.

Now, Jim is a very wealthy man who can buy up assets like these and wait for a turnaround. And he’s prepared to wait for years.

Those of us with much less capital don’t have the same luxury.

So don’t think I’m urging you to rush off to Venezuela. I won’t be, either.

However, what I like about Jim is the independence of his thinking.

Anyone would think investing in Venezuela is insane.

And yet this shows exactly how susceptible we all are to groupthink.

It’s the ideas on the edge that always have the potential to be the most profitable.

They may not be respectable…you may be mocked as a fool…the odds may even be terrible…but it’s these ideas that take you away from the herd to the biggest potential payoffs.

No one makes a motzah doing what everyone else is doing.

There must be some mismatch to send prices soaring or collapsing.

Our daily hunt is to try and sniff out those ideas where this could happen.

Consider Jim’s Venezuelan idea…

The good times could come again

The capital of Venezuela is Caracas. It was once one of the richest cities in the Western Hemisphere.

A man like Jim could gamble on, say, real estate in the centre of town.

The current collapse means there must be hundreds of sellers desperate for hard currency…and willing to sell at almost any price.

In fact, this is what many Westerners took advantage of in the wake of the German hyperinflation back in 1923.

Those who did so made a fortune once the German economy recovered…if they could hold on.

Germany may be the heart of the eurozone now. But in 1923, it was a defeated and hated power with a worthless currency and massive foreign debts.

It could barely afford raw materials for its shattered industries. The middle class was destroyed.

History repeats, so they say…

Watch for an invasion here

And it’s not at all farfetched to imagine Venezuela’s economy stabilising with the right policies and returning growing production to the oil fields.

A hyperinflation can blow away the government’s useless currency…but it cannot remove the oil in the ground.

It’s all still there…and the oil firms leaving Venezuela would come back under the right circumstances.

It’s even feasible that the US government boots out the current Venezuelan government and installs a new one…propping it up with investment and foreign aid.

And there Jim could be, with his cheaply acquired real estate, ready to rent or sell to the Westerners and returning emigrants.

And if oil goes into another big bull market, Venezuela could flood with US dollars and oil wealth again.

Now, that’s a possible scenario…and a long way off from today.

But you can see how the potential for a huge gain is born in the disaster that precedes it.

That’s where a guy like Jim is playing the odds…taking a low-risk bet with a big payoff.

These are the most valuable investment ideas.

Perhaps the hardest part is finding a way to monetise them.

No investment bank is going to launch an ETF for Venezuela under the current circumstances.

Wall Street can’t ‘sell’ this kind of investment case.

It takes an independent and self-directed investor to step in where others won’t tread.

However, there is one firm that’s found an incredibly lucrative way to enter any emerging market and cash in.

The secret is to have a proven business model. And if this firm doesn’t have an original one…why, it’ll just take another from someone else.

More soon.

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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