Barron's June 5, 2006 issue had an article on Jim Rogers which started on p. 18. It was titled "Last Laugh" and was written by Jonathan R. Laing. According to Mr. Laing, Jim Rogers earned his chops. He co-founded the, "....wildly successful Quantum Fund with George Soros in 1973. The hedge fund used gobs of leverage to notch a return exceeding 4,000% over the remainder of the decade, despite a poor stock-market environment."
In 1998 Jim Rogers developed a commodities index consisting of 35 commodities that had futures markets. He weighted them as per their global consumption. It is called the "Rogers International Commodity Index" (RICI). From its inception through April the index had the second best return of 50 indexes tracked by Barclays. The RICI returned 265.59% during that period.
Having established that Jim Rogers has some knowledge about commodities and investing, we can look at his views.
I quote Mr. Rogers from the Barron's interview, "How can anybody say that a bubble has developed in commodities yet with sugar 80% below, silver 75% below and corn and cotton less than half their all-time highs? .... We're now only in the early part of a long-term commodity price boom that has years to run and will likely see literally dozens of raw-material prices make new highs. Even crude oil and copper have a long way to go, even though they recently set price records."
Why does Mr. Rogers believe commodities still have lots of room to go up?
- Chinese demand has just started for many commodities and is almost certain to increase dramatically.
- There has been significant under-investment in new productive capacity.
- Commodities have low correlation with stocks and bonds and will do better when those markets labor like they are now.
- Commodities do well in inflationary periods and inflation is currently increasing.
- Existing oil fields and mines are depleting and there haven't been any major new finds to replace them. It will take time for them to come on line when they are found.
Is the RICI investable? Yes, several funds track the index. Merrill Lynch offers the RICI Trakr (BUV0). Learn more at http://www.trakrs.com/pdf/76123_003.pdf. This is a futures contract but has been modified for individual investors so that you can hold it in a regular account and aren't subject to margin calls. Gains are treated as capital gains and long-term gains are available after just six months.
What about GOLD??? Barron's in the very next article on p. 21 titled "Gold Rally Should Keep Running, With Some Missteps Along The Way" says the recent drop in gold prices is a short term correction and that a bull market will re-emerge. The author of the article is Michael Kahn.
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