Sunday, October 16, 2011

Why Jim Rogers is right about commodities - MarketWatch

NEW YORK (MarketWatch) — Jim Rogers, a former partner of George Soros in the hedge fund game, has been vociferously bullish on commodities for going on 15 years. Except for getting older, married and becoming a parent, he has not changed.

I ran into him in late September at a commodities conference in Frankfurt. He told the assembled burghers that in 10 years the conference would have to be held in a stadium rather than a hotel meeting room, because commodities by then would be a red hot asset class and investors would be flocking to it.

Here are some of Rogers's comments. Even after applying the true-believer discount, they offer a feast for thought:

“The 19th Century was the age of Britain, the 20th Century was the age of America, and the 21st Century will be the age of China,” Rogers said. He has moved from New York to Singapore with his wife and two young daughters, who he says are now fluent in Mandarin.

“The U.S. dollar has started fading as the world's reserve currency,” Rogers said, assailing what he called the U.S. government's de facto policy of devaluation.

“However, the dollar could get a temporary boost if the government allows U.S. companies to repatriate their overseas cash without onerous taxation,” he said.

WSJ's Chana Schoenberger reports U.S. corporations are expecting negative results as a result of a strengthening U.S. dollar against weakening Euro economies.

“The 30-year bull market in bonds is about to come to an end,” Rogers said. “Bond portfolio managers should start looking for a different line of work.”

Added Rogers: “Stocks have been in a trading range for 12 years, and that will continue.” Long spells of go-nowhere meandering are fairly common in the market's history, he explained, citing the Dow Jones Industrial Average's  fluctuation from roughly 800 to 1000 from 1964 to 1982 — almost 18 years.

“I'm short American technology, Europe and emerging markets,” Rogers said. “I'm also bearish on American education, but I haven't figured out how to short Princeton.” (Rogers graduated from Yale University in 1965 and from Oxford University in 1966.)

But why would Rogers short emerging markets, when they would seem to figure prominently into his bullish commodities scenario, not to mention his prediction of Chinese global dominance?

“The time to buy emerging markets is when everyone else is dumping them,” he said, “not when there are 20,000 M.B.A.s running around touting them.”

“The secular bull market in natural resources began in 1999,” Rogers said. This advance shows no immediate signs of ending, he added, “but when it does, it will end in a bubble, like all long-term bull markets do.”  

Rogers predicted: “There will be more social unrest and more countries will fail. Politicians will try to impose price controls, of course, but they won't work. Speculators will be the scourge of society, attacked from all sides. It will get very ugly.”


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