Junto, “full minutes”, June 5, 2003, 7 PM

Speaker: JIM ROGERS,

Author (most recently) of “Adventure Capitalist, The Ultimate Investor’s Road Trip”

Soldiers’ Sailors’ and Airmen’s Club, Lexington Ave., between 36^th and 37^th Sts.

VICTOR NIEDERHOFFER: At the bedside of Larry Ritter (the best baseball writer ever -- “Glory of Their Times”) I encountered Paul Volcker (a colleague of Ritter @ NYU). I remarked that I enjoyed listening to Ritter’s books on tape, because you can hear the players’ own voices. Volcker remarked that he had no (working) tape recorder and it transpired he had no computer, nor saw a need to have one. [Thus, he is, like Buffet, a neo-Luddite.] Last week, Henry Kaufman, while receiving an award, felt the need to point out that he had recently had dinner w/ Volcker (who was present) 3 days in a row. He then remarked (with evident facetious intent) that no one would want to hear Volker’s thoughts on the stock market, and went on to give his own, a list of worries. Afterward I asked Volcker his views on the stock market. He said the function of the stock market was to be worried about.

The Century Club: This is the leading place for Jewish Mavens in CT. It has five of the most famous financiers of today among its members, just as it did early in the 20^th century. Many of today’s crowd support “liberal” and statist causes And many of that bunch financed the Communist revolution.

Why is it that so many eminent men in finance dislike and distrust the marketplace?

IRIS BELL: The name “Junto” comes from a similar group founded by Ben Franklin….

Howard Baldwin/Crusader Entertainment has the rights to do a movie of “Atlas Shrugged”. The screenwriter to be is an enthusiast of Rand. There will be an International Ayn Rand meetup 6/21 in Manhattan. Check the web.

Our topic tonight is political, sociologic and economic observations from a Guiness record setting 3 year, 152,000 mile drive through 116 countries, made around the turn of the Millenium.

The Literary Book of Economics has been published by ISI.

Barron’s on 4/21showed a chart of output per capita: flat until a few hundred years ago; gradually rising to the industrial revolution was solidly under way, then exploding upward.

LARRY PARKS: See FAME’s website (www.fame.org) for a piece by a very prominent constitutional lawyer arguing that failure to adhere to constitutional provisions for the monetary system has undermined the Constitution broadly.

ALLAN __________ [Accountant and tax expert]: The Martha Stewart imbroglio sounds a lot like … Hillary’s Cattle trades. As with Martha, every explanation Hillary made was exposed as false (example: that she made money because the market was rising when in fact she made money mostly on short trades during a rising market.)

VN: what is the parallel? That MS is in trouble not for the trades but for lying about them?

VN: Sid Bass once called up a friend and said he had a big secret to tell him. The friend, expecting a hot tip on the market was surprised to hear: “I’m in love”.

Allan ____: We seem to now be in the second phase of the following cycle: When times are good spending rises along with tax revenue [which itself rises faster than the economy]. Then when times are bad, tax rates are raised in order to sustain the high water spending level [and indeed bad times push government spending up]. During the stock market boom no effort was made to reduce rates. A tip: NY State rates, relative to neighboring states are not too bad; it’s the city income tax on top of the state that is the killer.

STEVE KAGAN [Chief Economist to Gov. Pataki]: (VN: his regression of jobs on taxes made it’s mark on me.) There has been a de facto coup d’etat in NY: The municipal unions have taken over NY state. (Only a few papers talk about this: perhaps the Post editorials and the Buffalo Eve News (?).) NY City is most at risk. But, note: all 6 senators and all but 1 Staten Island rep. voted against the Bush tax cut, despite the fact that it helps the city enormously. How? Since the cost of living is higher in the NY area, without that being adjusted for in the “progressive” tax rates, a tax rate cut has a disproportionately beneficial effect on NY.

Now ask yourself? Does the Washington State delegation vote against the interests of Boeing or MSFT? Does the TX delegation vote against the oil industry The Manhattan Inst. has calculated that 90% of the state tax increases will be paid in NYC.

The real trickle down economics is the phenomenon whereby a small amount of your gross pay is allowed to trickle down into your take-home pay.

VN: Jim Rogers is a professor, one of the greatest travelers ever; was the lead researcher and fomentor of the most successful investment partnership ever. And is a brand-new, first-time father. He and I will be presenting you with signed copies of his book. (VN is paying for the books, but there is no speaker fee.)

JIM ROGERS: I spoke here before, after my trip around the world on motorcycles, at a time when Ben Franklin was still here.

Paige and I left 1/1/99 from Iceland

Now we usually tried to stay in hotels and indeed at the best hotel in town, but in one case that was a pair of shacks so small we couldn’t both fit in one. Along the way we ate a lot of things, but Page refused to eat Dog, Silkworm and Turtledove. Now we did not drink the water, so we drank a lot of beer. Did we get sick? We were extremely careful of what we ate. I never got sick and Paige only had food poisoning 3 times, and each time from 5 star restaurants. What did we use for money? Well, even in Timbuktu you can use a credit card at a few places. How about parts and service for the car? We took a one of a kind Mercedes [the body of a sport coupe on the chassis of a GelandWagen]. Now here is how I figured we would be able to get service anywhere, because what does every dictator and mafioso drive? We were received very well. Everyone loves Americans, even if they don’t love American government policy, as often I don’t. They love American culture and know more about it than I do. We weren’t kidnapped, maybe because we gave no advanced notice of our arrival.

The book has much about the travel, but also many reports of the state of the world in many places.

We were at Lake Titicaca in Peru on Sept. 11. Didn’t go to Cuba, because of the red tape to get the car there.

Bolivia, Angola, Tanzania (great place to visit), Myanmar was a great surprise. We were told we were the first foreigners to drive across it since WW II.

FLOOR: What is the opinion in Shanghai re the communists? JR: Well, first you must realize that the Chinese are the best capitalists in the world. They work from dawn to dusk and save 35%. There is religious freedom, entrepreneurship. And Shanghai is in the forefront. SARS will not be big.. So, it’s an opportunity to buy Chinese shares.

FLOOR: At your last talk here emerging markets were just emerging. What about now? JR: This trip I closed as many investment accounts as I opened, unlike last trip. Then, capitalism was oversold, but now that people have run into some of the problems of capitalism.

India? India is a disaster and will remain so for the rest of your life. They are more arrogant than the French. They talk a good line of freeing up markets, but there is no intent behind it. The infrastructure is terrible. Cross country trucks average 10-12 MPH. A Bombay cell phone doesn’t work in Calcutta.

An Indian (13 years in US finance industry): Democracy gets in the way of the pace of privatization. On the other hand, what is emerging is a deeply held consensus on the details of the construction of a market economy. China can do it top down. JR: There is no consensus: the Moslems and Hindus slaughter each other. It is against the law to own more than 12 acres of farmland. Madras wants to secede.

I traveled with a videographer and a webmaster in a truck. (They went home every six months or so)

Bolivia? Why will it rise? It has been one of the worst managed countries for 200 years (150 coups in one 2 year period). First they have discovered tons of natural gas. Secondly, they are developing agriculture.

If there were six of me the N. Chile, So Peru, Bolivia and Western Brazil arear would be where one of the six would head. There will be enormous opportunities there.

Languages? French (a little) and English will get you through. And you can do sign language, or you find an interpreter. Also you can pick up the most important parts of the local language quickly. I can ask for a beer in 42 languages.

FLOOR: What is the impact of AIDS on Africa? And what is the future of So. Africa? JR: AIDS is certainly a disaster, but the government statistics are not to believed. No science is being done to verify AIDS cases. It seemed there were not huge numbers of deaths that we saw. So. Africa: has the best infrastructure in Africa -- perhaps Morocco is on a par – but it is deteriorating rapidly. Corruption is rampant. So Africa has 13 official ethnic groups, with many hatreds.

New Zealand? Idyllic, but torn between opening up and isolationism. Racial tensions. But I have investments there. It is a natural resources economy and I’m bullish on them. The bottom at end of ’98 in those markets was the start of long boom. The long bear market caused capacity to shrink. This will be like the late 60’s and 70’s. Merrill Lynch got out of the commodity business in ’98. When they come back in, when CNBC starts broadcasting from the soybean pit in Chicago, then the end will be near.

FLOOR: If you are bullish on commodities and see inflation coming, why are you bearish on housing? JR: Well, look at the 70’s: When interest rates are high the R/E industry is in trouble. Note: that even if R/E goes up in $ terms, the $ will probably erode in such an environment.

Russia? It is and will be a disaster.

There is a tremendous shortage of women in Asia. Example: for 100 14 year-old girls in Korea, there are 120 boys. This gives women great power. (By the way, in Europe 1000 years ago there was such a shortage and men had to pay dowries).

The dollar is a very flawed currency: You should get into foreign currencies, because it is official Fed policy to not permit prices to decline. Which means they will print money. (But don’t sell just now because the dollar is oversold short term.)

Corruption in the US? Opinions vary: There has always been a market in, e.g., congressmen, but we’re not as bad as many.

GARY ____[Public defender and Biblical scholar]: What do you think of the old Europe/new Europe distinction? JR: I don’t think it is very significant.

We have troops in 140 countries at a cost of 200 billion. North Korea’s 4 neighbors have plenty of capability to contain it. Why do we still have 50,000 troops there?

I have no shorts now (none since July of ‘02). Greenspan and Bush are printing and spending at a rapid rate. So, I am selling some now, but not shorting. People have gotten well away from the “equities are dead” thinking of last year. And they’re getting a bit ahead.

FLOOR: What is the best monetary system? JR: We’ll, there are better and worse systems from a theoretical point of view, but what matters most is than any system will sooner or later be debased by politicians. Rather than pine for a commodity basket based currency, just buy commodities. Note: you don’t have to put up thin Margin. You can buy the commodity (best) or buy shares or buy natural resource based country baskets. Oil price will stay high for a long time, surprisingly. Saudi Arabia is teetering. It has a very high birth rate and has a very young population impatient with being ruled by 80 year-old fundamentalists. Same with Iran, which was the only place we were not allowed to drive across. Every time we tried, we got through 2 or 3 layers of bureaucrats with no trouble, but then would be stopped by the mullah in the corner [i.e., the political commissar].

Japanese capital and Chinese Labor are developing Siberian resources, an effort that will probably be very successful.

NGO’s? One of the great scams: they all drive around in their air-conditioned 4 wheel drives, having little contact with the people. This was basically described by Conrad in “Lord Jim”: first world people who can’t quite make it in their home countries go to the third world to lord it over the locals.

The orphanage scam: In Ethiopia they have orphanages that are [Potamkin Villages,] populated only when the donor crowd is around. Once they leave, the kids go back to their families.

A Swiss guy in Sudan gave 20 million to a local guy to be used to buy the freedom of slaves. The local simply “freed” his friends, relatives, fellow villagers, etc. He told them to say they had been beaten, had had to work dawn to dusk, etc.

I am long the Euro now, but in 10 or 15 years from now it will have fallen apart. The deal (the Maastricht treaty of ‘92) was a sound money deal, though flawed, but the pressure to weaken it cannot be resisted. Probably, rather than the emergence of a consensus weakening, we will see those countries most inclined to weaken the currency pull out.

Turkey? I’m nuts about Turkey. It should be part of the EU. It has 70 million, mostly young, people. The birth rate is very low in Europe. The new government, notwithstanding its reputed Islamic tilt, is a sounder manager of the country than any they have had.

I wouldn’t have had the vehicle made in Calif. (where if it looks good that’s all that matters).