The crew over at Wall Street Cheat Sheet posted a quick interview they conducted with Jim Rogers. There was one line in there that really resonated with me and was something new (to me anyway) in terms of his usual message. More like an addition to his usual message.
Interviewer Damien Hoffman asked Jim what countries he watches to make sure the Greece situation doesn’t get out of control. Jim gave an answer that was broader than the intent of the question in saying…
I’m trying to watch the whole world. We cannot be very successful investors if we don’t know what’s going on everywhere. All of a sudden you’ll something like Iceland will show up and you’ll get killed because you didn’t know that Iceland even existed.
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He went on to note that often events start in places no one pays attention to. If you have been reading this site for a while you know that I try to ‘watch the whole world’ and write about that some. In the past I’ve mentioned some countries that are off the beaten path and obviously I devote a fair bit of time on trying to learn about certain narrow market segments where I think value can be added either through performance or dampening volatility.
The potential portfolio benefit should be obvious. As one example the troubles in Latvia caught my eye early on (read about it either in the FT or in Jyske Bank’s research) and it became clear that Swedish banks were very heavily exposed to Latvia through loans made into the country. Part of Latvia’s trouble came from unrealistically trying to maintain a peg to the euro. But now it is possible that they pulled off an internal devaluation (A Fistful of Euros has had a post or two about this) but that remains to be seen.
Every holding in a portfolio is risks but often those risks are not obvious without casting a wider net in what you study. The Latvia story might have steered you away from the risks in Swedish banks.
