Monday, November 26, 2012

Commodity Guru Jim Rogers is Still Bullish on Gold -- Should You Be, Too? - StreetAuthority

President Barack Obama's first term was very good for precious metals. Silver was up an eye-popping 236% while gold added an impressive 128% gain, both handily beating the S&P 500's 75% return.

Those big gains have more than a few investors concerned about another asset bubble in a long list of bubbles that includes technology, finance and housing in the past 12 years. But according to legendary investor Jim Rogers, the precious metals crowd has nothing to worry about now that Obama has been reelected.

The billionaire co-founder of the Quantum fund with George Soros is telling the market to expect more of what we've seen in the past four years. The loose monetary policy, further quantitative easing and weak dollar will support the upward trend in gold and silver, according to Rogers. "Investors should prepare for rising prices and more expansionary monetary policy now that President Barack Obama has won reelection. "If Obama wins, it's going to be more inflation, more money printing, more debt, more spending," Rogers recently told CNBC. The investor also said he plans to sell federal debt and purchase more gold and silver.

So if Jim Rogers is correct, then investors should expect big things from precious metals in the next four years. But with all kinds of precious metals investments to choose from, the landscape can be confusing. With this in mind, here are my three favorite strategies to benefit from the rising tide in gold and silver, ranked from lowest to highest risk.

Lowest risk: Physical gold and silver
Investing in physical gold and silver has become very popular in the past five years with the release of new exchange-traded products (ETFs) such as SPDR Gold Shares (NYSE: GLD) and iShares Silver Trust (NYSE: SLV). These types of ETFs provide investors with direct exposure to underlying precious metals prices. These instruments have become very popular among investors because they have low expense ratios and reduce company-specific risk related to production volatility, earnings and cash flow.  

ETFs like SPDR Gold Shares and iShares Silver Trust have handily outperformed most gold and silver mining stocks in the past few years as investors have bypassed the miners in favor of a more conservative approach to the market. Longer-term, gold and silver prices probably have less upside than miners do, but they also provide more price stability.

Medium risk: Basket of gold miners
The next level of risk up from physical gold and silver is to buy a basket of mining stocks such as Market Vectors Gold Miners (NYSE: GDX), another ETF that holds a basket 30 gold- and silver-mining stocks with operations across the world.

This is another strategy for investors who want to protect their portfolios from company-specific risk, which is incredibly high in the gold-mining industry due to production uncertainty and political troubles in less developed regions of the world. This is a little more aggressive than investing in actual gold and silver but lacks the high risk-reward ratio of an individual miner. With a net expense ratio of .52%, Market Vectors Gold Miners falls below the category average of .63%.

Highest risk: Individual miners
This is definitely the highest risk category in the list of strategies to invest in gold and silver. There is a big difference between investing in a smaller operation valued between $1 billion or $2 billion and a global mining powerhouse such as Freeport-McMoRan Copper and Gold Co. (NYSE: FCX) and Barrick Gold Corp. (NYSE: ABX), each valued at about $35 billion. Barrick Gold CEO Jamie Sokalsky has said that every $100 increase in the price of gold will produce an extra $400 million in cash flow for the world's largest gold company. This is a great example of the incredible leverage mining companies provide to rising precious metals. Bear in mind that bigger mining companies offer more earnings transparency, while small miners have more upside. Either way, of the three strategies, this is your highest risk-reward investment.

Risks to Consider: The biggest risk to gold is a liquidity crunch like the one we saw in the financial crisis of 2008. The trigger for an event like that could be Europe, which continues to struggle with too much debt and shortages of tax revenue. Although the region continues to combat its financial problems, margins calls for big investment banks and intuitional traders would weigh on gold and silver.

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Sunday, November 25, 2012

Jim Rogers is Betting Against this Entire Sector, Should You Too? - StreetAuthority

Billionaire investor Jim Rogers may be most famous for calling the bottom of the commodities market and buying in 1999, just before it surged 22% during the following three years while the S&P 500 lost almost 40% in the same period.

But the co-founder of the Quantum Funds with George Soros could be just as famous for some of his warnings. In a 2007 interview with Reuters, Rogers predicted a 40-50% drop in real estate prices in some areas of the United States and a massive recession across the country.

We all know how that prediction turned out.

So it's no surprise investors take note when the legendary investor makes any market prediction. And Rogers is now warning that one sector of the market is "priced in lunacy," so he is betting heavily against the group. The sector has seen earnings fall by 4.3% in the third quarter compared with the same period last year, almost double the decline of 2.2% for the overall market.

So which sector could be headed for a big drop?

Rogers is talking about technology.

Bears have a lot to growl about...To be sure, there are several reasons the technology sector is due for a correction. The sector outperformed all others during the past four years with an annualized gain of 19%, while the S&P 500 Index gained 12% in the same period. This outperformance may already be working itself out with a drop of 10% so far this quarter compared with a decline of 6% in the rest of the market.

 In terms of valuation, the stocks in the Technology Select Sector SPDR (NYSE: XLK), for example, currently trade for about 13 times trailing earnings, which is right at the average for the overall market, but higher than that of the financials and energy sectors. And dividend yields are not as good either. While many of the big players such as Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL) have started to pay dividends, the sector as a whole only pays a 1.7% dividend yield compared to an average of 2.1% in the overall market.

Of more concern, four years after the financial collapse, U.S. companies have yet to really ramp up hiring. While Europe and China are looking incrementally better, the United States is facing a huge fiscal gap in the coming quarters, with even the most optimistic forecasts only calling for about 1.5% gross domestic product growth. With labor already cut to the bone, companies are putting off improvements in tech spending ahead of the fiscal and economic uncertainty.

One big clue to the level of frothiness in the tech sector could be coming from the rebound in real estate prices in Silicon Valley. Real estate has soared in the tech capital and prices are off their peak by just 1.3% in some cities, while much of the rest of the state continues to struggle with foreclosures.

Bulls still have room to run in individual stocksThere may yet be hope for the sector. Tech companies in the United States earn more revenue outside U.S. borders than any other sector, making the tech industry more resistant to fiscal cliff worries and weakness here at home. Revenue should be marginally supported if Europe can stage a rebound or if emerging markets continue their economic march higher.

President Barack Obama will need to barter with Congress if he wants to let the Bush-era tax cuts expire for those making more than $250,000 a year. One possible deal could revolve around another tax repatriation holiday like we saw in 2004. Under a repatriation holiday, U.S. companies are lured to bring foreign profits back to the country by taxing them at a roughly 5% tax rate, rather than the current 35% corporate rate. Because the tech sector has the most overseas revenue, it also has the most cash held overseas, so it could win big with such a tax holiday.

In addition, Microsoft launched Windows 8 in October and will stop supporting Windows XP in early-2014. This could reinvigorate the corporate spending cycle for information technology (IT) and services. Further, if demand in fact rebounds, then tech spending usually leads the business cycle because it is easier to buy IT and services than to add staff.

Quality and value vs. hopes and dreamsEven Rogers admits there will always be success stories, but the problem is when an entire sector is pushed up without any real difference between the good and the bad. This was evident in some of this year's catastrophic IPOs -- Facebook (Nasdaq: FB) and Groupon (Nasdaq: GRPN).

Investors seem to have forgotten the lessons of the 2000 tech bubble, and are now paying meteoric prices for very little in earnings. While Groupon and Facebook have seen their shares sink since their IPOs, shares of LinkedIn (NYSE: LNKD) are up almost 10% since its offering in May 2011. LinkedIn is basically Facebook for professionals and does not command nearly the audience, so why is it that shares are trading for more than 665 times trailing earnings? Only a handful of other stocks in the market trade so expensively, and they are all small or mid-cap companies. Earnings are down during the last two quarters and the company has yet to present a clear strategy to monetize on mobile usage.

While there are plenty more examples of unrealistic prices in the tech sector, there are also some good deals. I wrote in September about the once-in-a-decade opportunity in Intel (Nasdaq: INTC). The shares trade for just 8.8 times earnings and pay a 4.5% dividend yield. Investors are worried that the emergence of smartphones and tablets will make PCs obsolete, but, as I mentioned before, there are several catalysts coming next year that could send the stock dramatically higher. The company is extremely well-run, with an operating margin higher than 95% of peers in the industry and has bought back $1.4 million in shares this past quarter.

Risks to Consider: Half of investing is keeping your profits before the bottom drops out of the market. Companies with strong balance sheets and good value should do well during the next year, but may see a short-term drop as investors take the entire sector lower. Investors should be ready for a short decline on sentiment before stronger stocks head higher.

Action to Take --> After years of outperformance, the tech sector could be due for a correction, as Rogers expects. You may not want to neglect the entire sector, but be selective and know when to take your money off the table. Given the valuations in much of the sector, investors may want to avoid some of the more expensive stocks and the general sector funds. For those who do not want to completely avoid the sector, look for large-cap companies with strong balance sheets that pay healthy dividends such as Intel.

Thursday, November 8, 2012

5 New Jim Rogers Commodities ETNs Coming Soon

The Royal Bank of Scotland (RBS), the issuer behind the Trendpilot series of ETNs, is nearing launch of five new ETNs, all based on renowned commodities guru Jim Rogers’ Enhanced Rogers International Commodity Index (RICI) series. The four other ETNs will track RICI subindexes focused on agriculture, energy, precious metals and industrial metals.

Will see more turmoil in currency & oil markets

Jim Rogers says commodities are still the best bet and he won’t buy equities because he doesn’t see equities going up with all the money printing

Wednesday, November 7, 2012

Investing In Commodities: A Mini-Guide - FN Arena News

Legendary investor Jim Rogers is now an old man who likes to chat about the joys of two growing up daughters and about his adventures when he was traveling around the world, twice; once on a motorbike and once with a modified beaming yellow sports car.

But when Rogers shows up at investing or mining conferences, the audience is more anxious to hear about his views and predictions for the world, for opportunities and investments and, most likely, for investment opportunities in commodities.

After decades of (literally) fame and fortune, Rogers' all-encompassing view today comes down to one simple, straightforward prediction: global governments have become addicted to the apparent virtues of their money printing presses; they will use it more and more, and more, and more.

It's the ultimate political heaven: in the short term it looks like all evils and wrongs are being dealt with, while the real effects won't be known for a much longer time but by then, such is the dynamic of democratic government, there will likely be another government in power instead.

Rogers' active investment career spans many decades, during which he became a wealthy man. Yet, today, he does not own one single government bond, not one single share on a stock exchange and no investments in real estate. He put all his money in commodities. He never sells, only wants to buy more.

Because of his macro-view, Rogers is convinced the last investment asset left standing will be hard assets; commodities. Under a worst case scenario, he believes, commodities will lose less of their value than shares and bonds and paper currencies and properties. Under a best case scenario, commodities are yet to experience a genuine rampant investment bubble.

Guaranteed outperformance, that's how Rogers sees it. Both his daughters speak fluent Mandarin and already have their own investment portfolio which contains of -you guessed it- 100% investments in commodities.

Rogers admits he also has some shorter-term positions in a handful of currencies, but only for a limited time. Ultimately, he believes, all paper currencies will suffer from the loss in confidence that will come, at some point during this process.

For investors looking to build up their own commodities investment portfolio, Rogers has one piece of advice: pick the five that are the furthest away from their all-time peak in price. Then start your research. Pick the three that are most likely to move back up again.

His current favourite is sugar. Do you know sugar is currently priced some 75% below its all-time peak from the 1970s, he lectured the audience at a recent mining conference in Singapore. And guess what's in the pockets of his jacket: a silver coin, a few gold coins and a handful of sugar sachets from the coffee table in the back of the room.

Take a few for yourself, he tells the audience. It's free!

Rogers' tongue-in-cheek investment advice lays bare the counter-intuitive truth behind successful investing in commodities: big profits are made from bottoms but most investors only get interested closer to the top.

Libertarian billionaire sees serious economic slowdown over next two years -

Jim Rogers is a well respected and widely followed investor who, since earlier this year, has been predicting a 'financial armageddon' for 2013 through 2015 regardless of who won last night's election for the White House. Now with President Obama firmly in place over the next four years, Rogers is suggesting America will experience fewer jobs as the federal government continues to print and borrow money to live beyond its means.

In an interview overnight with The Economic Times Rogers said, "They will probably come up with some kind of quick fix, but then whatever fix they do in the end, it is likely be the wrong thing. These guys have been doing the wrong thing for the 50 years in America. America 50 years ago or even 40 years ago was the richest and most powerful country in the world. Now America is the largest debtor nation in the history of the world. And the same guys who made this mess, do you think they are going to fix it? No, they are not going to fix all the problems. They are going to make the problem worse." When asked what he is doing with his money, Rogers replied, "I am going to buy more commodities, I am going to be short on United States government bonds, but I am long on the US dollar at the moment. I do not know if I am going to stay long on the US dollar, but I am long on the US dollar."

The United States is headed for what has been referred to as the 'fiscal cliff', whereas on December 31, 2012 a series of economic policies expire which could put America in serious disposition and if not resolved by the current Congress and signed by President Obama, then we could be worse off than Rogers is suggesting. If nothing is done it will trigger the expiration of the Bush-era tax cuts, across-the-board spending cuts to most discretionary programs will occur, we will revert back to the 2000 year levels for the dreaded Alternative Minimum Tax, workers will go back to paying an additional 2% payroll tax on Social Security, ObamaCare taxes come into effect while federal unemployment benefits expire.The net effect is likely to be a reversal of the current trend for unemployment in America to more Americans losing their jobs with the unemployment rate above 9% which could be devastating for the country.

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Jim Rogers

Warren Buffett

Nouriel Roubini