An important investing lesson from Jim Rogers…

  • A risky exporter?
  • Not enough Aussies do this
  • See the Great Repression – from your own home
  • Exploiting the ‘Grand Cycle’
  • An observation

This week, your editor writes from the East Coast of the US. We’re in New York today, before heading down to Annapolis, Maryland, for a financial publishers’ conference.

We’ll be back in New zYork on Thursday and Friday, before heading home.

But while we may be here, all the financial markets excitement is happening much closer to home.

And if you own shares in Crown Resorts Ltd [ASX:CWN], you’ll know exactly what we’re talking about. More in a moment. First…


Over the weekend, the Dow Jones Industrial Average gained 39.44 points, or 0.22%.

The S&P 500 added 0.43 points, or 0.02%.

In Europe, the Euro Stoxx 50 index closed up 50.15 points, for a 1.69% gain. Meanwhile, the FTSE 100 gained 0.51%, and Germany’s DAX index added 1.6%.

In Asian markets, Japan’s Nikkei 225 index is up 52.24 points, or 0.31%. China’s CSI 300 index is up 0.01%.

In Australia, the S&P/ASX 200 is down 24.73 points, or 0.46%.

On commodities markets, West Texas Intermediate crude oil is trading for US$50.11 per barrel. Brent crude is US$51.80 per barrel.

Gold is US$1,253.45 (AU$1,652.59) per troy ounce. Silver is US$17.41 (AU$22.95) per troy ounce.

The Aussie dollar is worth 75.86 US cents.

A risky exporter?

As Bloomberg reports:

Shares in Crown Resorts Ltd. plunged the most since 2008 after Chinese authorities detained 18 of the casino company’s employees including the head of international high-roller operations. The detentions triggered concern of a renewed crackdown on gaming companies that woo high-stakes Chinese gamblers to casinos overseas. Melbourne-based Crown gets more than a third of its revenue at its Australian resorts from international visitors.

At the time of writing, the stock is down 9.65%.

Through the end of June this year, Crown brought in total revenues of $3.6 billion, for a net profit of $948.8 million.

Of that revenue, $1.7 billion came from main floor gambling, with $1.2 billion of that at Crown Melbourne, the company’s flagship venue.

Crown Melbourne also accounts for just over 70% of the company’s EBITDA (earnings before interest, tax, depreciation, and amortisation).

It’s no wonder the stock is taking a beating.

But it’s also a good reminder that, while Crown’s main casino and gaming operations may be in Australia, it’s really an export business. An export business that relies on cashed-up Chinese gamblers coming to Australia.

Or more precisely, an export business that relies on the Chinese government allowing Chinese gamblers to come to Australia.

Investors shouldn’t forget that. For all the talk about China becoming a more market-based economy, its government still wants to make sure that everyone knows who’s in charge.

Remember, this is regulation China-style. The Chinese have their own way of dealing with things. In the US, the Securities & Exchange Commission (SEC) files a lawsuit and then settles for a few hundred million, or a billion…or 12 (just as Deutsche Bank).

But, then, the US government is in a different position to the Chinese government. The US government needs cash. So it thinks nothing of good old-fashioned extortion ­– ‘Pay up and we’ll leave you alone.’

That is, of course, why not a single US financial services or banking exec has gone to jail after the meltdown in 2008.

The Chinese government has plenty of cash. China still holds US$1.2 trillion in US government debt. Not to mention its stash of foreign currency reserves.

Bottom line: An investment in Crown Resorts isn’t really an investment in an Aussie casino and gaming firm. Given the importance of Chinese gamblers to Crown, you may as well be making a direct investment in China, for all the risk involved.

Is that the kind of investment most Aussie investors are either prepared to make, or in the case of Crown investors, realise they’ve made?

In short, no. Unfortunately, most probably didn’t realise that until this morning.

Not enough Aussies do this

While investing overseas may not be the thing for a lot of Aussie investors, others see it as a key part of their investment strategy.

In truth, more Aussie investors should probably take advantage of the ease of overseas investing.

This is why we’re so excited about one of the keynote speakers at next week’s Great Repression investment conference in Port Douglas.

(By the way, I can hardly believe that, after nearly a year of planning, the conference is just about upon us already!)

The speaker in question is Jim Rogers. In preparation of his arrival in Port Douglas, his keynote speech, and the one-on-one interview I’ll have with him, your editor has bought, and is now reading, each of Jim Rogers’ books.

In the past week, we’ve read Investment Biker and Adventure Capitalist. If you haven’t read either, they’re a terrific read – and we’re not just saying that because we’ll be looking Jim Rogers in the eye just over a week from now.

(The next book on our list is Hot Commodities. We’ll start that one tomorrow on our flight down to Baltimore.)

There’s no doubt I’ve learnt a bunch from Rogers’ books. That’s why I always encourage folks to read as much as they can. I encourage our editors and analysts to read as widely as possible, and I encourage our subscribers (you) to read as much as possible, too.

One of the things that amazed me the most about Rogers is how he doesn’t have the same kind of reservations about investing internationally as the average investor.

Most Aussie investors won’t even think about investing in US or European stocks. Yet, according to Rogers in his books, he’ll invest anywhere, providing the market meets to specific criteria. We’ll give you the criteria another time.

It has meant that Rogers has invested in places as diverse as Austria, Australia, New Zealand, Botswana, Argentina, Bolivia and elsewhere.

And if you think it’s different for Rogers, because he invests big amounts, think again. In Adventure Capitalist, Rogers reveals that his Bolivian investment in the 1990s amounted to just US$3,000.

Not much, right? That’s because Rogers likes to make small plays at first, just to check the lay of the land, and make sure the process works. Only when he’s satisfied that everything is in order will he up his stake.

As it turned out, everything wasn’t in order in Bolivia, leading to an amusing tale of Rogers turning ‘bounty hunter’ to recover his cash from a crooked broker!

Anyway, we don’t say that to put you off investing overseas. Our point is that investors don’t think about investing overseas enough.

And we’re not saying your first overseas investment should be in Bolivia or Botswana. There are plenty of ‘first world’ overseas markets where investors can dip their toes in the water.

And if you think it’s too risky, think back to our lead story today – Crown Resorts. The stock is down nearly 10% today. Remember, there are risks on the Aussie market too.

See the Great Repression – from your own home

Speaking of the Great Repression investment conference, if you can’t make it there in person next week, don’t worry.

There’s another way you can catch every minute of the conference from the comfort of your own home…watching the presentations in your own time…stopping, rewinding, and watching again – as often as you like.

What’s more, it comes at a fraction of the cost of a ticket to be at the event in person.

For details, go here.

Exploiting the ‘Grand Cycle’

In the meantime, if you haven’t done so already, check out our most popular trading service here.

It’s popular for a number of reasons. Not least of which is that the trading system utilises the theories and methodology behind the ‘Grand Cycle’ — the cycle that controversial economist Phil Anderson says is at the centre of all market action.

The service is Time Trader. We launched the service earlier this year and, after closing the doors on new memberships, we’ve agreed to reopen them for a limited time.

The Time Trader service was a response to some of the frustrations from members of the Cycles, Trends and Forecasts service.

They loved the theory and the knowledge about the Grand Cycle. But they wanted a way to put what they had learnt into action.

The result was the Time Trader service, where Phil’s team of analysts scour the market looking for the best trading opportunities on the Aussie (and overseas) market.

It’s a cracking service, one which any serious trader should check out. For details, go here.

An observation

Donald Trump’s main campaign slogan is ‘Make America Great Again’.

This isn’t the first time we’ve noticed it, but how can we put it: America is a dump. The place is crumbling.

On the drive from JFK airport to our hotel in Lower Manhattan, the sides of the roads are strewn with litter.

There is road construction (as in maintenance) at regular intervals. Driving through the boroughs of Queens and Brooklyn, houses in what you would think are prime locations are boarded up.

In Manhattan, where Donald Trump owns a penthouse, barely 10km from your editor’s hotel, buildings and road infrastructure are crumbling and in disrepair.

This is a major problem for the US. It built infrastructure when it was a wealthy, prosperous and growing economy.

It then expanded its infrastructure by borrowing billions of dollars, believing the US economic miracle would grow forever.

Now it has to repair the crumbling infrastructure with money it doesn’t have. And it needs to do so fast enough in order to keep ahead of the decay.

Trouble is, it can’t. As far as we can see, the decay is growing. New York is home to some of the world’s wealthiest people…and yet, it’s a dump.