Offshore Capitalist

Commodity Boom Will Thrive on Shortages, Rogers Says

Commodity supplies will lag behind demand during the next 10 to 20 years, further fueling a rally in raw materials, according to investor Jim Rogers.

“I don’t see any adequate-supply situation in any commodity market over the next decade or two,” Rogers, the chairman of Singapore-based Rogers Holdings, said today in an interview in New York. “The commodities boom is not over and the bull market has several years to go.”

The dollar fell to a 13-month low against a basket of six major currencies on signs that the global economy is recovering, boosting demand for higher-yielding assets. Gold futures reached a record $1,062.70 an ounce today. The metal has gained 19 percent this year, heading for the ninth-straight annual gain, while the dollar is down 6.6 percent.

Rogers, an author whose books include “Investment Biker” and “Adventure Capitalist,” predicted the start of a global commodities rally in 1999. The Reuters/Jefferies CRB Index of 19 raw materials is up 36 percent from Jan. 4, 1999. Rogers said it’s hard for him to predict the timing of market moves.

Gold will surpass its inflation-adjusted all-time high of more than $2,300 an ounce, Rogers said. He said that the timing will depend on many factors, including global politics. Some investors buy gold as a hedge against political instability and to preserve assets.

Favored Materials

Agricultural commodities are among his favorites, because demand for food, including grain and sugar, is rising in countries such as India and China. Rogers said cotton may gain as farmers produce less fiber in favor of growing biofuel crops such as corn.

“I own some cotton,” Rogers said. “I own some sugar,” he said. “Sugar will go much, much higher over the course of the bull market.”

Sugar futures in New York have surged 91 percent this year and touched 25.43 cents a pound on Sept. 30, the highest price since February 1981, partly fueled by rising oil prices. Ethanol is made from sugar cane in Brazil.

“Oil could reach between $150 and $200 a barrel,” because known reserves of crude are declining, Rogers said. He said international relations, particularly between the U.S. and Iran, will help guide prices.

“Natural gas is very cheap,” he said in the interview between sessions at an ETF Securities Ltd. investor conference.

Commodities ‘Best Place’

“Commodities are the best place to be, if you ask me, based on supply and demand,” Rogers said. He said he hasn’t invested in equities outside of China in two years.

“Everything has gone through the roof,” Rogers said of equities prices, adding that he may consider buying stocks “if something collapses.”

Falling supplies make commodities a better investment than equities, including shares of commodity-linked companies, Rogers said. He said oil would be better to own than petroleum companies, for example, because some suppliers could face “depleting reserves” as the world eventually drains known fields. Rogers said “unless something happens,” the world will exhaust crude reserves in 15 to 20 years.

“The supply of everything continues to decline,” Rogers said. “If the world economy recovers, commodities will do the best, because supply is being restricted. If the world economy does not recover, commodities will still be the best place to be, because governments are printing huge amounts of money.”

As a long-term investor, “I am horribly pessimistic about the dollar,” Rogers said. “I am not selling it yet. I think there may be a rally. I don’t think it will be sustainable if there is one.”

via Commodity Boom Will Thrive on Shortages, Rogers Says (Update3) –

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