âJim Rogers, the legendary American investor, financial commentator and, along with George Soros, founder of the Quantum Fund, is the ultimate commodities bull. More than 10 years ago, he started the Rogers International Commodities Index, and in 2005 he wrote âHot Commodities: How Anyone Can Invest Profitably in the Worldâs Best Marketâ. Below, he explains to Newsweekâs Rana Foroohar why oil is still black gold.
Foroohar: Inflation-adjusted, oil is the same price that it was in 1976, and in 1870. So why are you still a bull?
Rogers: It doesnât matter. Itâs also true that just about any stock you can think about is at or below where it was in the 1970s right now. So what? There are still 15- to 20-year periods when commodities, stocks and any other asset class goes up a great deal. In 1987 stocks collapsed by 40-80%. But people who were smart enough to stay in them made 1,000% returns in the next decade. The point is to take advantage of those periods and make some money.
Whatâs the fundamental case for commodities right now?
Supply is declining. Thereâs been 35 years of low investment in production capacity. The last lead smelter in the US was built in 1969! Thereâs been no major oilfield discovery in 40 years. Oil is in decline. According to the International Energy Agency, oil reserves are declining significantly. At this rate, in 20 years, there will be no oil left. The only people to make money in the next 20 years will make it in commodities. Itâs the only asset class where the fundamentals are improving. I mean, look at Citigroup, look at GM. Those fundamentals are not improving.
Do you see commodities as an inflation hedge?
Absolutely. This is only time in history where youâve got every central bank in the world printing money at the same time. Consumer prices are going to go way up. The public is already getting out of paper money, which is why youâre seeing gold go up.
Does the future growth of China factor into your bullishness?
China is tiny in comparison to the US economy. Anyone who thinks that the commodities story is driven by China needs to do more homework. In the 1970s, everyone was in recession, and you still had declining supply [in oil] and higher prices. Asia wasnât even in the game then. China was run by Mao. But now, of course, there are those 3 billion people in Asia who are in the game. Itâs just another factor.â
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Source: Rana Foroohar, Newsweek, April 11, 2009.
Hat tip: Investment Postcards
