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Below is the email I sent to my site's research subscribers on 11/05/2007:

RJA is an exchange-traded note, similar to an ETF except that is liability based on an index, as opposed to a fund.

What this means is that the security does not actually buy the commodities contracts and roll them over, say the way GLD does. Instead, it's a promise to pay the holder of the note the appreciation of the Rogers Commoditiy Index (Agriculture component) in 2022 (or earlier if you have $4M worth and want to redeem). So you have issuer risk as well as market risk.

Here's the quick lowdown:

Pros:
* Low fees (0.75%)

* Backed by a Swedish-government owned entity so in my mind, credit risk is minimal

* Broader agricultural exposure than other available commodity ETFs. For instance the Powershares one (NYSEARCA:DBA) is made up of only 4 commodities while RJA has exposure to over 20 items.

* Betting with Jim Rogers is a smart way to go.

* Historically, commodities have been shown to be very good investment and also negatively correlated with broader stock market

Cons:

* Possibility of liquidity risk in exchange trading

* Credit risk in addition to market risk -- if Swedish Export (SEK) goes bankrupt, we have to get in line with other debtors with an unsecured claim.

* Many commodities near record-highs -- possibility of correction.

* Historically, the RJA has underperformed the broader Rogers Commodity Index (NYSE:RCI) which is a superset of the RJA plus energy and metals as well.

Obviously I think the pros outweigh the risks. Because I have a good-size exposure to energy and metals already in my portfolio, I've chosen to open a position in the RJA and not the broader RCI. With the escalating costs for all commodities producers, we may at some point exit the equity side and play the resource story with the actual commodities themselves (either via an index like RCI or directly trading futures). For now, I'm comfortable with our portfolio and happy to add RJA at $10 per share.


Some additional color for my blog readers: first, if you are not familiar with Jim Rogers, I suggest hopping over to Charlie Rose's site and watch the three interviews Rose did with Rogers from 1995 to 2005. It's amazing to listen to Jim Rogers doing the exact same China spiel he's doing now 12 years ago! The man's investment calls are based on sound fundamentals and he has got a proven track record. Rogers notes in his "Hot Commodities" book that historically, commodities are negatively correlated with stock market returns. He gives a reasonable theory behind why this would be so and it's interesting to note that in the month that I've opened this position, it's up 3.5% while the broader market had it's worst month in years. So it may be a good bear market hedge.

I can't say if there is a bear market coming or not but agriculture fits neatly with my forecast of inflationary trends going forward. Food is getting harder to produce, productivity enhancements through technology are diminishing, climate effects are reducing yields and government actions only exacerbate the situation. If you want to play it through the companies as opposed to the actual commodities (or derivatives of), that's an option but at this moment, that story is very well known and hard for a value-oriented investor to pull off.

Finally, it looks like the trading volumes have picked up on RJA since I bought in so liquidity risk may ease. The nice thing about the Elements Rogers products is how you can pick and choose your spot to buy into the various components. The broad RCI index, comprised of energy, metals and ag, is probably where you want to be but now you can buy, in this instance, just the ag portion as oil and gold are near all-time highs. If oil pulls back, you can buy the RJN (energy component). Basically reconstruct the RCI but averaging down on pullbacks.

I have to admit it is a relief to have a lighter research load on this investment -- no quarterly calls to track, no worries about operating risks, etc. It's given me more than a second thought if I should switch to a sector-based ETF investment strategy.

Disclosure: Author is long RJA.

Source: Going Long Agriculture, Jim Rogers Style