It was the best of times, it was the worst of times.
Investors have been pulled in opposite directions in recent sessions, as conflicting data leaves the short term outlook very uncertain. Earnings season has gotten off to a hot start, with Intel, Alcoa, and CSX all impressing the Street. Meanwhile, diminishing fears over the debt crisis in Europe are suggesting to some investors that the worst is behind many developed economies in the developed world. On the other hand, others note sky-high unemployment levels and record budget deficits as major causes causes for concern going forward, and reasons to be cautious in the portfolio allocation process. One famous investor that falls into the second camp is the legendary Jim Rogers, who is advising investors to sell bonds and buy commodities as a refuge from the global economic woes.
Jim Rogers first rose to fame in 1970 when he started the Quantum Fund with fellow investor George Soros. The fund crushed the S&P 500 throughout the 70s and propelled both to investment fame and riches. More recently, he has been noted for his books The Adventure Capitalist, in which he highlighted his travels through more than 100 countries, and A Bull In China, in which he discussed one one of his favorite emerging markets. While many investors have predicted the rise of China in the next few decades, few in the U.S. have gone as far as Rogers. He believes so strongly in the rise of Asia during this century that he moved his family from the U.S. to Singapore so that his children could learn Chinese and be close to the action in the rapidly developing markets in southeast Asia and China while still maintaining a high quality of life in the island nation of Singapore.
Rogers believes that the commodity boom will continue and that these crucial goods are a safe haven in turbulent times. “Bonds are not a good place to invest in,” Rogers recently said at a conference in Kuala Lumpur. “You should own commodities because that’s your only refuge.” Rogers cites global supply shortages as the chief reason for advocating a push in commodities, despite the steep losses that most of these funds have sustained thus far in 2010. For investors seeking to match Mr. Rogers’ predictions,, there is an abundance of ETF options available that offer exposure to some of his favorite asset classes. Below, we profile several interesting choices for investors who buy into Rogers’ theories.
Although Jim Rogers has been on the gold bandwagon for a while now, he is even more bullish on the yellow metal’s less expensive cousin. Silver is trading roughly 65% below its all-time high, while gold has repeatedly set new records in recent months. So some believe that silver is undervalued compared to gold, and could make for an interesting play for precious metals investors.
Currently, two options exist that offer investors direct exposure to silver, including the iShares Silver Trust (SLV) and the ETF Securities Silver Trust (SIVR). Another interesting option is the Global X Silver Miners ETF (SIL), a fund that invests in stocks of companies engaged in silver mining.
Another investment idea Rogers recently threw out is sugar, a commodity that has seen its price tumble dramatically so far in 2010. Despite this large drop (or perhaps because of it), Rogers is extremely bullish on the “soft” commodity. “Not many things are 75 percent cheaper that 36 years ago, but that’s true of sugar,” Rogers said.
For investors seeking exposure to sugar, the iPath Dow Jones-UBS Sugar ETN (SGG) is perhaps the best option. Unlike SLV and SIVR, SGG doesn’t offer exposure to spot prices, instead tracking the performance of a futures-based strategy. The note tracks the Dow Jones-UBS Sugar Subindex Total Return, which consists of futures contracts in sugar. The fund charges an expense ratio of 0.75% and is down more than 35% so far in 2010, by far the worst performers in the Commodity ETFdb Category. If you believe Jim Rogers, now could be a good time to buy SGG low.
3. Broad Agricultural Commodities
Rogers is generally bullish on the broad agricultural sector, especially food commodities such as rice. He notes that prices of these commodities are “very depressed” and that they represent a better play than metals at current valuations. “Agriculture commodities are desperately cheap compared to 20, 30, 40 years ago.” said Rogers. While no pure play option exists for rice, the ELEMENTS Rogers International Commodity Agriculture ETN (RJA) serves as a good option for broad-based exposure to agricultural commodities. The fund tracks the Rogers International Commodity Index-Agriculture Total Return, a benchmark comprised of various commodity futures that was developed in concert with Jim Rogers himself.
Disclosure: Eric is long silver bullion.
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