By Jason Jenkins
Jim Rogers is no stranger to us. In May, our executive editor Garrett Baldwin interviewed the investing legend and got his ideas on everything from a tertiary education bubble to a long-term commodity bull market.
When the world’s major markets find themselves in peril, everyone seeks out a trusted voice of reason – someone who has achieved success over the long haul. So it shouldn’t be peculiar that the co-founder of the Quantum Fund made some news over the weekend. Rogers is even more down on the U.S. government than most.
Rogers’ Three Crucial Observations
Rogers doesn’t believe the market is in shambles due to the downgrade of our rating by Standard & Poor’s or the possibility of a double-dip recession, but because we are the greatest debtor in the history of the world.
What should be taken from Rogers’ statements this weekend are three of his crucial observations:
- He will not be buying stocks. Stocks are going to be, at best, in a trading range for years to come. He compared the current environment to that of the 1970s when equities were problematic.
- Rogers is a value buyer. He stated in 2000 that a “supercycle” commodity bull market had begun. Commodity prices would advance longer than in any previous uptrend. The raw materials surge would be led by gold and silver. Eleven years ago, gold was trading near its low at $252 – the lowest real price in nearly a century. Silver was selling at $4. Eleven years later, it’s up 650 percent.
- Rogers has currently stopped buying gold and silver. He’s not selling because he still believes that gold will hit and surpass $2,000 an ounce sooner rather than later. Rogers went on to elaborate “that gold prices are not in a bubble because not everyone is buying yet.” The question is, if he’s holding gold and silver long but not buying more of it, what is he buying?
Buying Undervalued Assets
What Rogers saw in gold and silver over a decade ago, he now sees in agriculture. Agriculture prices are still on an historic basis extremely depressed, and this is where he sees his next opportunity. Rogers thinks that the current commodities supercycle will last for 20 to 25 years. So if this commodity bull started in 1999 or 2000, this bull will run until about 2020 to 2025.
You can invest directly in agricultural stocks, such as John Deere (DE) or Monsanto (MON). Another method is to invest in agricultural futures through ETFs such as Agriculture ETF (AIGA) on the London Stock Exchange or PowerShares DB Commodity Index (DBC) in the United States. But remember, these are susceptible to market fluctuation.
Another overlooked option is direct investment in farmland. Farmland investments will pay a regular yearly dividend from the sale of crops, and can provide long-term capital gains during a bull market in food. Some direct farmland investment vehicles include Agrifirma in Brazil, Agcapita in Canada, and Chess Partners and Hancock in the United States.
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