Jim Rogers News and Commodities Articles
Rogers Forum Discussion
Topics in the Jim Rogers Forum Discussion include, but not limited to:
Please note that we no longer post the article
about "Jim Rogers on Russia", i.e., the email exchange between Jim Rogers and a
Russian student. It is an excellent email exchange between Jim
Rogers and the Russian student, and we believe that you can find more information
about that email exchange elsewhere on other websites.
Below is an article written by Jim Rogers months ago, posted in lieu of the
email exchange between Jim Rogers and the Russian student.
Breakfast of Champions?
By Jim Rogers
Author of Adventure Capitalist and Hot Commodities
Looking for a hot tip? Here's my advice: Do not buy the hype from Wall St and
the press that stocks always go up. There are long periods when stocks do
nothing and other investments are better.
That's not what a lot of people expect me to say these days. (It's probably not
what they want to hear, either.) The Dow Jones Industrial Average and Standard &
Poor's 500 indexes, after all, are down substantially, trading at levels not
seen since 1998. To many investors, it seems like a perfect time to do some
bargain shopping for battered quality stocks. Everyone knows "sell high and buy
low" (though I'm always surprised at how few people follow that adage), so now
appears to be an ideal time for a bottom feeder like me.
Sorry, bottoms in the investment world don't end with four-year lows; they end
with 10- or 15-year lows. More important, many investors seem to have forgotten
a hard reality: There are frequent periods when stock markets don't do much.
From 1900 to around 1920, for example, U.S. stocks floundered while the economy
grew. Then stocks skyrocketed in the 1920s. In 1966, the Dow was trading around
1,000. By 1982, it was at 800, down 20 percent over 16 years and that is not
adjusted for the high inflation of those years. So much for long-term investing.
Over the next 15 years the market soared.
We recently had a decade of unprecedented growth. Is it such a stretch to think
that we might now see a mediocre period of equal length as has happened
Despite my distaste for U.S. stocks, though, don't think I'm sour on all
investments. I do believe there are some good bets out there. It will come as no
surprise to faithful readers that I believe this is a great time to invest in
stocks from other countries, where stock markets haven't been as exploited as
the U.S. market has been in the last decade. On my recent trip around the world,
I bought shares of companies in places like China and Chile, countries I feel
have great potential. In fact, right now I own shares of companies in 28
countries. Of course, it is best to go to many of these nations to open
brokerage accounts in order to buy stock, but I'm all in favor of Americans
expanding their horizons. Plus, there are mutual funds that cater to the
international investor as well as many foreign stocks that trade as American
depositary receipts on U.S. exchanges.
The coming decline in the US dollar will make foreign stocks and currencies even
I think this is also a great time to invest in private equity, helping companies
grow from the ground up. It's much more effective to build a company quietly and
soundly during a down market than it is to, say, try and ride a boom-and-bust
cycle during a high-flying market, something like what we saw during the go-go
1990s. The stock market, many discovered, isn't exactly the best place to raise
money when you're building because -- surprise! -- it turns out you need real
earnings and real growth opportunities to build a healthy company. The "promise"
of earnings just doesn't cut it.
It is easier to build a real company in times like these than when even your
hopeless competitors can raise easy money from a delusional stock market.
Fortunately real companies will have less competition now.
Perhaps the best investment opportunity I see these days is in commodities.
Commodities are real assets -- raw materials and natural resources from all over
the world. They're not "sexy" investments at the moment. It's hard to get
investors fired up about pork bellies or orange juice; few people get calls from
their broker about a great new lead mine. That may soon change.
Commodities have a lot going for them, particularly in our current economic
environment. They are a great investment during an inflationary period (such as
now – despite what the government and Wall Street try to tell us) because
increases in the price of raw materials reflect the rising costs of goods. In
addition, commodities tend to zig when the equity markets zag. During that flat
period for the U.S. stock market between 1966 and 1982, the commodity markets
Historically, there has been a bull market in commodities every 20 or 30 years,
and I think we're already in the throes of a new one. And while raw materials
can lose value, the price of a commodity will never go to zero. When you invest
in commodities futures, you're not buying a piece of paper that says you own an
intangible piece of company that can go bankrupt. You're buying a contract to
purchase a real, tangible bushel of corn or several hundred pounds of coffee.
On the flip side, commodities can go quite high, as high as anyone is willing to
pay. Gold, you might remember, went from $35 an ounce to $850 during the 1970s
The main reason few people have talked about commodities lately is because that
market has been in a massive slump for about 25 years. Keep in mind that
commodities’ prices move not because of magic, but because of shifts in supply
and demand. During the late 1970s and early 1980s, high prices led companies to
overproduce, leading to substantial excess supply and stockpiling. As a result,
inventories swelled, demand dried up, and prices started to fall. A fiscal
crisis in Asia and Russia in the late 1990s only exacerbated the problem.
Sugar peaked at $65.65 in 1974 and then fell to $2.56 in 1985. Oil went from $2
in the early 1970s to as high as $40 a barrel in 1981 before falling to $10 in
1986. Many commodities producers went bankrupt or closed facilities. No one
expanded operations. I can probably count on one hand the offshore drilling rigs
built in the last 20 years or the new rubber plantations. The tough times,
though, helped many commodities producers become lean and mean through
consolidation, mergers and cost-cutting. All that excess supply has been sopped
up. Demand has continued growing, particularly in fast-expanding economies like
those in Asia.
That said, most people don't think it's possible to make money in commodities.
Many brokerages reduced or closed their coverage during the 1990s in favor of
the red-hot equities market. You can no longer buy commodities at Merrill Lynch
– one of the largest brokers in the world. My guess is many analysts and even
executives are too young to know how profitable a hot commodities market can be.
They will soon.
The commodities market is showing signs of life. Cocoa prices have doubled over
the past year, rising 20 percent since the beginning of 2002 alone. Gold has
recovered from a 20-year downturn; the price of an ounce is now around $315. As
of June 24, the Dow Jones AIG Commodity Futures Index, a marginal benchmark for
the commodities world, is up 11 percent since the beginning of the year.
I started the Rogers Raw Materials Fund (RRMF), an index fund that tracks price
moves of 35 raw materials on commodities exchanges, on Aug. 3, 1998, just before
I left on my trip. Since then, it's up about 215% while the S&P
is up 16%. (last updated: April 15, 2005)
Is it too late, then, to get involved in commodities? Definitely not.
Investors rarely recognize beginnings and ends of bull markets. We can look at
recent painful history, but the same pattern has repeated for centuries.
US Shares1998 1999
Advances 3928 4224
Declines 5879 5467
[Source: Wall St Journal]
Sixty percent [60%] of shares were down in the US in 1998 and the same pattern
repeated in 1999 – hardly a bull market. Yet the press and Wall Street were
braying to buy stocks because of the New Economy and the bull market. The public
finally poured huge amounts of money into the stock markets in the 1999-2000
period even though the bear market was already underway.
Throughout history the public has always piled into the latest bull market right
at the top so few have caught on to the bull market in commodities. I’ll sell
when Merrill Lynch has commodity brokers in every office again and the TV
networks are broadcasting from the soybean pits in Chicago.
An investor who put his money in the S&P Index in 1982 did extremely well, but
so did one who got on board in 1983-85. I suggest you consider putting your
money in a raw materials index now and staying with it for the next several
So what specific commodities do I like now if you do not want a fund? As a rule,
I like to look for the ones that are beaten up. Hogs, orange juice, sugar, and
coffee, for instance, have been especially hard hit. It sounds like a breakfast
menu as investment plan, but it could be the best money you ever spend,
particularly if U.S. stocks continue to flounder. After all, breakfast is the
most important meal of the day.
Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market
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