Market Wizards - Interviews with Top Traders
A Little Bit Of Everything
James B. Rogers, Jr.: Buying Value and Selling Hysteria:
James started trading with $600 in 1968 and eventually formed the Quantum Fund with George Soros in 1973 and retired in 1980.
He believes in shorting hysteria-the exaggerated price. Sometimes, the market charts show incredible spikes, up or down. It reflects hysteria. He thinks if a trader goes against panic, he will be right if he can stick to it. They scale out as the market goes up which makes the market choppy.
While talking about the financial collapse in Oct 1987, he said he was expecting it. The stock markets in the world were at an all time high and money was flooding everywhere. He says that whenever such situations arise in a market, believe that it is the top. Hence he positioned himself for the collapse.
He says he has learnt from the very few mistakes he made. He learnt not to do anything if you have no idea of what you are doing.
While talking about losses he says that the first loss is the best loss if there was going to be a major fundamental change. But if your fundamentals are correct then you just have to sit doing nothing and let the market hysteria wash out.
An adage should be that you always invest against the central banks. When the central banks try to prop up a currency, you should go the other way.
James says that he is totally flexible and open to everything without any boundaries. But, he uses charts every week to know what is going on in the world.
To sum up, Roger’s investment approach consists of the following:
- If one buys value, then he will not have much to lose even with wrong timing.
- One must wait in bottoming markets until there is a catalyst to change the market direction.
- Selling hysteria.
- One should be flexible and not be biased against certain markets or types of trades because it can limit your field of opportunity.
- Never follow conventional wisdom.
- One should know when to hold and when to liquidate a losing position.