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.

Jim Rogers

Warren Buffett

Nouriel Roubini