Commodities guru Jim Rogers isn’t throwing in the towel on his prediction of a long-term bull market in commodities.
In fact, he’s throwing in more money.
“I recently bought some agricultural commodities,” said Rogers, reached by cellphone as he walked down a New York street. “I’m doing it. Whether or not I’m right, who knows?”
Rogers is an influential contrarian investor who has believed since 1998 in a long-term commodities bull market that could last 15 years. His 2004 book Hot Commodities provided a rational discussion of why commodities bull markets occur and why they tend to last for about a decade and a half.
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Most of his own money is invested in commodities and he operates a commodities index fund.
While commodities prices surged in the past few years, Rogers’ view was commonly held by other analysts, who saw a long-term shortage of commodities in a world in which India and China were rapidly industrializing.
But most commodities prices are now falling and many analysts say the boom is over.
Rogers laughed at the apparent flip-flop.
“All the people who are saying it is over, none of them saw it coming,” said Rogers.
“Most of them two years ago couldn’t even spell ‘commodities.’ And now all of a sudden they are self-proclaimed experts on commodities.”
But if the commodities bull isn’t dead, why have prices slumped?
It’s not a difficult answer to find, because it’s written clearly in Rogers’ book:
“I cannot promise a stairway to heaven. No bull market in any asset class has ever gone straight up; periodic corrections will always occur. In this bull market, too, there will be corrections; things will go down.”
Rogers said his view hasn’t changed from when he wrote those lines.
“Not at all. If anything, (a long-term bull market in commodities) is more likely,” he said.
World growth continues, even if it has slowed, yet commodities production is barely increasing. Most commodity producers seem focused on takeovers rather than digging new mines.
“All the mining companies have been running around buying each other up. Likewise the energy companies. That’s good for their own management, but it does nothing for the balance sheet,” he said. In fact, the borrowing needed to finance the takeovers makes balance sheets worse, he added.
“That’s not going to bring new copper to market. That might bring less copper, because they have less money to explore, less money to hire miners, less money to open new mines,” he said, adding that should support long-term metal prices.
Rogers’ belief in the strength of agricultural commodities is helped by something he doesn’t support: biofuel subsidies.
“Whether we like it or not, the politicians are going to spend a lot of money promoting ethanol. It’s not economic. It’s only going to survive because of subsidies,” he said, adding politicians don’t care because it wins votes.
Rogers admits a surprise like a flu pandemic could throw off his outlook.
Even then, he thinks commodities would fair better than other investments.
