Monday, June 11, 2012

Jim Rogers: Buy Commodities Now, Or You'll Hate Yourself Later -Seeking Alpha

“It’s coming again” warned commodity legend Jim Rogers earlier this week. When asked about the future of the U.S. economy Rogers had a pessimistic outlook, as he feels that the global financial landscape is simply too volatile to avoid another recession. And what’s more, Rogers thinks this next one will be worse than 2008. He cites the recessions in 2002 and 2008, stating that the 2008 recession was so much worse because of higher debts. Now, in 2012, debts are even higher, leading Rogers to believe that the coming recession will be even worse [see also Warning: Ignore Bill Gross’ Hard Money Prediction At Your Own Risk].

Just how high is our current debt? Economists project it will top $16 trillion by the end of the fiscal year, which would bring us to a debt-to-GDP ratio of over 100%. Rogers was quick to note, however, that the major problems likely won’t surface until 2013 and 2014, as this year is an election year, and Rogers feels that Obama will be forced to print money to get us through the election. His final plea to investors came in the form of a dismal warning: “if you are not worried about 2013, please — get worried” [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].

Buy Commodities!

Several weeks ago, Mr. Rogers went on the record stating that he feels that stocks and bonds are not the way to go, as a capital flight could send interest rates soaring and wreak havoc on our financial system. Instead, the hard assets guru put his money where his mouth is by stating that he owns gold, silver, and agriculture, as he feels that these assets have the most potential to either provide a positive return or preserve value in the coming years. He also noted that he feels that the U.S. dollar has strong potential for short term gains (as money flows out of the indebted European nations), but will eventually lose its status as the world currency and exhibit a similar fallout of the British pound sterling.

This advice comes at a time when gold has been faced with a number of hardships, as the precious metal had been rapidly losing value for the majority of the past month. Sitting at what seems to be a low, it seems that Rogers is suggesting to buy gold at its current price as he feels that the gold bubble won’t pop until the end of the decade. In light of this dire warning from one of history’s most respected investors, we outline several options for making an actionable play on the advice of Jim Rogers:
Gold/Silver Bullion: Plain and simple, the safest way to own gold and silver is by physically holding the commodities. Note that this is also the most illiquid option, as selling large amounts of physical bullion can be a daunting task.GLD/SLV: Your next two options for making a play on these precious metals will likely come from these physically-backed ETFs. GLD represents gold bullion with over $65 billion in assets while SLV holds silver bullion and is home to $8 billion in assets. These two options will be extremely liquid and allow for easy movement of positions.Market Vectors-Agribusiness ETF (MOO): This ETF will be a perfect play for those looking to take advantage of Rogers’ advice on agriculture. This fund provides exposure to publicly traded companies worldwide that derive at least 50% of their revenue from the business of agriculture, putting an equity spin on a commodity investment.

Jim Rogers

Warren Buffett

Nouriel Roubini