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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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“This is making the fundamentals better for commodities…farmers cannot even get loans for fertilizer any more, inventories for agricultural products are the lowest they’ve been for fifty years. Coming out of this, the secular supply is going to be even less.”

“In 1987 the stock market collapsed. Was that the end of the bull market? In retrospect, it was not. I would suggest that this period of forced liquidation is not the end of the bull market in commodities…. in fact, the fundamentals of commodities are improving.”

Does Jim believe in “Peak Oil” (Oil production has peaked)….

“I’m not a geologist, but I do know that nobody’s discovered a major ‘elephant’ oil field in over forty years. There may be huge amounts of oil out there, but if so, we don’t know where it is, and we’d better find it fast and it’d better be in accessible areas”

Buy the stock or underlying asset….?

“In the 1980s, oil went up ten times but a lot of oil stocks did next to nothing”

“If you’re a good stock picker, of course you’re going to make more money in the stock…but most people are not good stock pickers. All the studies show that indexing outperforms 80 per cent of fund managers year after year”

Which commodities is Jim buying? All of em…

“because they’ve fallen so much”

Hold off on Gold…..

“For thousands of years, alchemists have tried to figure out how to turn lead into gold, and I point out that for the past 30 years, you’d have been better off turning gold into lead!”

“I’ve been making speeches to gold bugs for years and they always hate me, because I tell ‘em that gold’s just a function of supply and demand, and they think it’s all holy and mystical”

Source: http://www.investorschronicle.co.uk/Columnists/GuestColumnists/article/20081119/a81f5c5e-b61f-11dd-9511-00144f2af8e8/The-buying-opportunity-in-commodities.jsp

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