Jim Rogers tells us when to sell and which bubbles to watch

History repeats itself… especially in the world of investing. Jim Rogers (who happens to be a Singapore resident) made a fortune predicting major market events. He’s a history buff and knows that, as he says, “if you understand history, you're probably going to be a much better investor.”

Jim co-founded the Quantum Fund with George Soros. This became one of the best-performing hedge funds in history. From 1970 to 1980, the fund gained 4,200%. Beyond being an investment legend, Jim is a best-selling author and world traveler – setting a world record for crossing six continents on a motorcycle. He is also known for starting the boots-on-the-ground approach to investing in emerging and frontier markets.

When he talks about the long-term trends that shape global markets, savvy investors listen. I recently sat down with Jim for an extended one-on-one, exclusive interview. Check out a few excerpts from our conversation below…

Jim Rogers on when to sell
Me: Jim, we’ve talked about buying… how do you know when to sell an asset?

Jim Rogers: When people are getting hysterical, you can sense it just by market action… if you read the press you can see when everybody's talking about whatever it is that’s the best thing, something going to change everybody's life… and how, boy, it's a whole new era... You hear the same words every time, every time, they are the same. Investors and the press use the same expressions about how great things are now. [For example,] Amazon can never go down, and will never go down and is going to go own the world someday.

When you hear all that kind of talk… I mean, fortunately or unfortunately, I have read about a lot of markets in my day and they always say the same thing. Absolutely, "a new era." Oh, how many new eras have we had in history? It’s just amazing.

Me: So you're talking about really using history to interpret the current market.

Jim: Yes… If you understand history, you're probably going to be a much better investor. You're going to be a much better at everything if you understand history, because it all happened, this all happened before. I assure you, we all put our trousers on one leg at a time, and we always have, and we always will.

But you need to understand the basics of how the world works and the best... A good way to do that is to know about what has happened before. And if you know what's happened before, then you'll probably be a step ahead of figuring out what's going to happen.

Beware these market bubbles
Me: So when we look at global markets, which markets... [are those] that a lot of investors are very keen on [and may be in bubble territory]?

Jim: Well, I can't think of many that people are keen on right now. America... the S&P, people are keen on… European football clubs… that's a bubble.

American tertiary education is a bubble. Everybody thinks it's the end-all and be-all. America has done a great PR job of selling its universities. Everybody knows [that] grammar school, primary school, and high school are a disaster in America. But somehow or another that translates into the fact that America has great universities. Don't ask me the logic. But that's obviously a bubble.

Hong-Kong real estate, Shanghai real estate… [those] are clearly in some kind of bubble… also, Sydney real estate.

Bonds are obviously something that is going to cause a lot of pain to a lot of people. Bonds have been going up for 35 years. Literally, for 35 years. Now, bond markets have a habit of having long, long, long cycles, 30, 35 years. It's normal in the bond market. At least historically in the US it's been normal, but that's another clear bubble.

[Jim told me this in early October… between then and the end of November, the iShares 20+ Year Treasury Bond ETF (NASDAQ; ticker: TLT) dropped 10%. That is an absolute shellacking in the bond world.]

Jim had a lot more to say about using history to understand and predict trends in the market. He also talked about some of the biggest mistakes he’s made… and the dangers of success.

To hear more from one of the world’s best (and most interesting) investors, click here.

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