Some have wrongly believed that the end of the commodity super cycle is over, but Jim Rogers isn't one of them, as he says the recent downturn is only a temporary setback, and because supplies remain constrained, the upward move in prices will continue for some time.
Rogers stated in an interview with Mineweb, that "this is nothing more than a blip. The bull market will continue until a lot of supply comes on stream and the problems since 2008 ensure not a lot of supply is coming on stream."
Why it's different this time around as far as the length of the commodity bull market, is historically companies are starting to bring more supply online after about 8 or 9 years of higher prices. This time around, because of the crises in 2008, that temporarily halted much of the expected boost in production, resulting in a slow down in supply of commodities.
Rogers said concerning expansion of commodities companies, that "All these guys are delaying or suspending or cancelling new supply which is bullish. Until the supply comes we're not going to have an end to the bull market and, certainly in agriculture, my goodness, inventories are near historic lows, we have serious shortages of everything in agriculture developing, including farmers."
As for China, which is the major impetus behind commodity demand, Rogers sees them possibly loosening up their money supply, suggesting more demand for commodities, although he says that "China has loosened up too early every time in the last decade, which is why the real estate bubble has continued and it's gotten worse. So it looks as though China is going to loosen up again and in my view they're going to loosen up again too early this time around, and you'll probably have a continuation of the same old thing - more inflation and perhaps excesses in real estate again."
Concerning where investors should place their money in regard to commodities, Rogers concluded they should look for those commodities which have fallen the most in price for the place to begin.
No comments:
Post a Comment