Rogers is fairly famous among the investing crowd for being a superbull on commodities. His investment convictions spring from an unflappable confidence in his ability to spot emerging secular trends. He looks at the same headlines we all do — that the U.S. government is running gargantuan deficits, that China’s huge account surpluses are being smartly invested, that the world economy is experiencing tectonic shifts. But Rogers sees each bit of news as a piece of a bigger puzzle. When he finally can divine what the puzzle says, he bets heavily, writes books about it and gathers a crowd around him. No one knows how heavily he bets, because Rogers is a private investor, but it’s safe to assume that it’s more than you or I have in our brokerage accounts.

Consider what he did the last time he saw one of these trends coming: in the early ’90s, he traveled the world on his motorcycle, then wrote a book, Investment Biker, that helped popularize emerging markets at the beginning of their long bull run. (See pictures of the top 10 scared stock traders.)

Rogers sees three big secular trends now, and he’s acting on all of them. First, America’s role as the dominant economic power is declining, so why own American stocks? (He doesn’t.) Second, China is emerging, and even though it may have crises from time to time, it is a good place to invest. (He does.) Third — and this is the biggie — emerging nations including China are greatly increasing the future demand for commodities such as oil. (He’s in with both feet.)

“Thirty years ago, 3 billion people were not even participating in the world economy, and now they are trying to live like we do,” he notes. That emerging megaforce, says Rogers, will put a supertight squeeze on commodity prices across the board, from beef to bullion. For the unconvinced, he pulls out a chart showing the average daily per capita consumption of oil in the U.S. at 0.677 bbl., vs. India’s infinitely smaller consumption (0.021 bbl.) and China’s (0.049 bbl.). “Even if the Chinese and Indians just start consuming as much electricity as Koreans now do, the price of oil will take off,” he says. (See the best business deals of 2008.)

Rogers isn’t just an investor; he’s an impassioned salesman, part Jimmy Swaggart, part Howard Ruff. There are several commodity exchange-traded funds (ETFs) now trading under the Rogers name, and his very appearance last Thursday, Oct. 8, was to help hawk two new precious-metals ETFs — one for gold and one for silver — being offered by ETF Securities USA, which hired Rogers to speak.

Maybe it’s the bow tie, his Alabama drawl or his professorial demeanor, but when Jim Rogers speaks, even those who disagree quietly rethink their positions. People who challenge him are playfully mocked. Responding to one young business type in the crowd who questioned his thesis, Rogers advised him to “head down to Texas A&M and offer to trade in your M.B.A. for one of their agricultural degrees.” Become a farmer, he advised the guy: “You’ll make out better than you will with your M.B.A.” The man tried to respond but was drowned out by laughter.

Own government bonds? Don’t tell Jim. “How could anybody in their right mind lend money to the U.S. government at 4% for 30 years?” He draws out the enunciation of “30 years” as if he can’t even believe he’s saying it, can’t believe that anyone could be that stupid.

Rogers believes some eternal truths: that even God-fearing politicians lie about their intentions, and that governments will steal from you. “Think it won’t happen here?” he asks. “Just look what they did to GM bondholders.”

He also fervently believes in investment cycles as a natural outcome of human behavior. The commodities boom is one such cycle, he says, and it won’t last forever. “These commodity bull markets tend to last 18 to 20 years. The current one started 11 years ago,” he says. No one knows when a cycle will end, Rogers says, but it’s clear from his ebullient tone that he believes the best part of the ride is still ahead. That especially holds true for certain commodities that have not yet had their big run. “I like gold [partly as an inflation hedge], but I’m even more interested in silver, which is still 70% below its all-time high.”

Silver. Hmmm. Hardly has that thought sunk in before I’m back to watching Jim prance across the stage, dipping into geopolitics — “whenever in history an established power is being surpassed by a rising power, they clash,” he said, referring to a potential U.S.-China faceoff — and giving the audience a peek at what may be his only anxiety, water. Or rather, China’s inadequate supply of it. “If they run out of water, all bets are off — it’s the one thing you can’t do without,” he says. Boy, this guy is smart.

But if he’s so good at investing, why is he out shilling for someone else’s funds?

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“The fundamentals get better and better for agriculture. We have a shortage of farmers developing, much less of everything else,” Rogers said in a live interview. “Demand goes up, inventories go down, it’s the perfect storm.”

“Gold is going to go much higher over the next decade or so,” he said. “I’m not selling any gold, I wouldn’t buy it, I don’t like to buy anything at an all time high, but don’t sell your gold, it’s going to be much higher in ten years.”

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• Jim Rogers started investing in commodities after reading the Wall Street Journal
• Investment community are getting back to commodities
• Doesn’t know how high commodities will go
• Always sees what’s going to happen and thus usually exits bull markets early
• Bearish on $USD

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• China continues to be the largest creditor nation in the world
• China is spending its reserves on things it will make them more competitive
• Jim Rogers is not currently buying any stocks in China
• Last bought Chinese shares in October/Nov 2008
• Likes to buy things when things collapse
• China has to buy commodities
• China has a horrendous water and pollution problem
• Geitner has been wrong for the past 15 years
• The way you build an economy is you save and invest

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Date: April 14,2009

Veteran investor and world traveler Jim Rogers’ new book, A Gift to My Children: A Father’s Lessons for Life and Investing, will be published by Random House on Apr. 28. BusinessWeek investing reporter David Bogoslaw spoke by telephone with Rogers, who now lives in Singapore with his wife and two young daughters (ages five and one). Here’s what he had to say about investing, the financial crisis, and lessons learned.

n your book, you advise people to thoroughly educate themselves about a subject before they ask for advice from reputed experts so that they can truly evaluate the worth of the advice. How practical is that for investors who aren’t professionals like yourself?

The people you’re describing should not be investing at all, unless they invest in things they know a lot about. If you’re an auto mechanic, you’ll know much more about your field than anyone on Wall Street ever will. You’ll know when new products or processes are coming out. Those people can get extremely rich by just staying with what they know. It could be products that go into cars, like tire companies, or glass companies, rather than [only] auto companies. They shouldn’t try to compete with Warren Buffett.

So you reject the advice about diversified portfolios?

Diversification is something that stock brokers came up with to protect themselves, so they wouldn’t get sued [for making bad investment choices for clients]. Henry Ford never diversified, Bill Gates didn’t diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket.

You can go broke diversifying. Ask anyone who’s diversified in the last three years. They’ve lost money. Nonprofessionals are always jumping around, thinking they have to do something. If they have a big success, they think they need another one right away. That’s when hubris sets in at its worst. That’s when people really should go to the beach. It happens to me too.

You believe there is a need for more restrained spending and a higher savings/investing rate in the U.S.—closer to what you observed in China two decades ago. But economists warn that if everyone opts for higher savings at the same time, it will kill consumer spending completely and hamper economic recovery.

You’ll never see America save one-third of its annual income [the way the Chinese once did]. Even Japan is down to a 15% savings rate. America should increase its savings rate. Thirty years ago, America was saving 9% or 10% of its income.

The reason we’re having this crisis is everyone borrowed too much. The idea that you can solve a period of horrible borrowing and spending with more borrowing and spending is not going to work. We’ve had the worst credit excesses in world history, mainly in the U.S. You can’t end a problem like that with no pain. Somebody’s got to suffer.

You’ve been very vocal in criticizing the government policy responses to the financial crisis. Doesn’t the Lehman example show how much harm would have been done if the government had allowed other big financial institutions to fail?

It would be better to let some of them fail now, rather than wait for six or eight of them to happen all at once. The system can recover from bankruptcies. After Lehman went down, the stock market didn’t really collapse right away. It happened a month later, but people started blaming it on Lehman in hindsight. We’ve got to have some pain. Even if AIG (AIG) and Fannie (FNM) and Freddie (FRE) and Lehman all went bankrupt, it cleans out the system.

South Korea went through this in the late 1990s. They didn’t have anyone to bail them out, and they had to go through the pain. Sweden did it in the early 1990s, Mexico did it, Russia did it. The list goes on and on. Competent people take over the assets from incompetent people and rebuild from a solid base.

You’ve spoken a lot about the 21st century belonging to China and the investment opportunities there. As the Chinese middle class grows, do you expect a big change in Chinese savings habits as they become more able to afford consumer goods?

Look at Japan’s and Korea’s extremely high savings rates. Those have come down as those countries have become more prosperous. China is developing [social] safety nets now. When you have safety nets, there’s less reason to have very high savings. That will happen in China as well.

China is maybe one fifth the size of Europe’s economy. China can’t save the world, no matter what they do. They are investing in their own economy and have huge reserves and huge savings, The World Bank has predicted that in 2020, China will be the world’s largest economy. But the World Bank has never been right about anything. It could well happen in the next 10 or 20 years, but on a per capita basis probably not within my lifetime, unless the U.S. really collapses and China really booms.

Do you think the up cycle for commodities has farther to run?

If history is any guide, we have further to go. The only sector of the world economy where the fundamentals are getting better is commodities. Farmers can’t get loans for fertilizers [which is constraining crop supply]. It takes 10 years to open a new mine. Stocks peaked in October 2007 and commodities kept going up until July 2008.

If the world economy is going to revive, commodities are going to lead it back up. If the world economy is not going to revive, commodities are still the place to be—especially with governments printing so much money. Look at the 1970s. The world economy was in the tank, but commodities did very well. We have supply constraints. Oil production is declining.

How are you investing in commodities?

I use my indexes [he created the Rogers International Commodity Index in 1998] because my lawyers won’t allow me to buy individual commodities because I’m always talking about them in public. Most of my indexed products use futures, Ultimately, you’ll be buying futures, even if you buy an ETF or ETN.

Your favorites are agricultural commodities?

The prices historically are still very depressed, compared with most other commodities. I bought all commodities recently, but I probably bought more agriculture than anything else.

Can you share an example of an investing insight your experience on the ground in foreign countries has given you that most economists and top-down strategists miss?

Crossing into Botswana by motorcycle, there was no hassle from guards at the border. It was perfectly efficient and straightforward. I filled out forms and nobody asked me for bribes. In the country there was no black market for the local currency. There were real roads and real hotels and stores with real products in them. When I got to the capital, there were real traffic lights and office buildings. I did more homework and found that Botswana had a huge trade surplus and a balanced budget, compared with many other countries. There was a democracy where they have elections and a stock market. It’s been one of the greatest stock markets in the world for the past 20 years.

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Jim 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 “Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market.” Below, he explains to NEWSWEEK’s 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 doesn’t matter. It’s 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 to 80 percent. But people who were smart enough to stay in them made 1,000 percent returns in the next decade. The point is to take advantage of those periods and make some money.

What’s the fundamental case for commodities right now?
Supply is declining. There’s been 35 years of low investment in production capacity. The last lead smelter in the U.S. was built in 1969! There’s 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. It’s 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 you’ve 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 you’re seeing gold go up.

Does the future growth of China factor into your bullishness?
China is tiny in comparison to the U.S. 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 wasn’t 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. It’s just another factor.

Are we going to see another food-price spike sometime soon?
Definitely. I think you should move back to Indiana and marry a farmer. There are times in history when the money lenders have been in charge, and we just came through one of those periods. But it wasn’t always that way. Wall Street was a backwater in the ’40s, ’50s, ’60s and ’70s, and it will be again. Farmers are going to be the ones driving Lamborghinis, and the traders are going to have to learn to drive tractors.

What about technological advances? Another green revolution could easily drive prices down …
Sure, there’s always something that will end a bull market. But if you think we’re anywhere near that point now, think again. Even if everyone in the world decided to put a windmill on their head, it’s going to take decades for that to really change things. In the meantime, you’ve got to put your money somewhere. And as we’re already seeing, even the value of cash can be wiped out.

I guess that’s one reason the Chinese are so worried …
Well, if I were running the Chinese central bank, I’d buy oil, wheat and zinc. Which is what folks there are already doing.

How about you? Are you upping your own commodities positions right now?
As a matter of fact, I am. I never sold anything to begin with. And I’m not planning to, either.

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