Jim Rogers Giving Clinic on Identifying and Solving Economic Crisis Part 3 of 5

Points covered in video:


Where the opportunities are now

In forced liquidation period

Find things where fundamentals are unimpaired

What is unimpaired are raw materials, commodities

Supplies of everything will continue to decline

Categories like farming, mining and lumber will be significant going ahead

Farming has severe shortages now

Even though demand is going down, supply is going down faster

Historically commodities tend to come back first in tough times because of shortages of everything

Alternative energy a long way from being reality or affordable

Future of China and America over next 30 years

Part One Part Two Part Three Part Four Part Five

Commodities: Mirror Equities Drop

Commodities mirror drop of equities

Almost everything in the current market are acting like they're in a conspiracy against commodities, as they go against their usual behavior and drop along with stocks. Investors usually use them as a hedge when the equities market falls, but this time around there's no safety there.

Once the period of deleveraging dissipates we'll get a better picture on whether that's the major downward pressure on raw materials. It's definitely one of the key reasons commodities are underperforming, as funds are forced to sell in order to access capital.

Of course this also increases the strength of the U.S. dollar, which in turn puts more downward pressure on commodities, as when funds move out of their positions in commodities, it brings them back to the U.S. dollar which most are denominated in.

The other obvious reason for the ongoing plunge in commodity prices is the economic conditions themselves, where demand for raw materials has declined significantly. This is one of the major reasons China is putting their own stimulous package into play, to spur domestic growth by providing capital for infrastructure projects.

When forced liquidation (deleveraging) begins to slow down, that'll probably be the first step toward shoring up the raw materials market again.

All of these factors will continue to drive the prices of commodities across the board.

Commodities: Jim Rogers Likes Silver

Jim Rogers said he likes commodity metal silver better than gold this year


Jim Rogers said in an interview Monday that he thinks silver will be a better investment than gold this year, as continued pressure to raise cash by large funds, central banks and possibly the International Monetary Fund (IMF) could continue to pressure the yellow metal down.

“Silver will do better than gold,” Rogers, chairman of Singapore-based Rogers Holdings, said on Monday in an interview. “It’s been beaten down horribly. If you put a gun to my head and said you have to buy one, I would buy silver rather than gold.”

While the IMF has agreed to a plan to sell gold in May, it still has to gain legislative approval from member countries to go ahead with sales. To reduce a budget deficit, the IMF will sell 403.3 metric tons of gold if approved.

Although he believes silver will outperform gold, he said if gold continues to have downward pressure, he will start buying into it again.

He reiterated his assertions that the current commodity sell-off doesn't represent the underlying fundamentals, and they'll come back much higher.

Inflation and the ability to meet surging demand will push metal, energy and agricultural prices higher, said Rogers.

The emerging Chinese middle class pretty much guarantees this will happen, and once commodities begin their rebound, the commodity bull market will continue on and last longer than projected because of this temporary slowdown.

It'll be interesting to see whether silver indeed does surpass gold in 2009 in the commodity sector.

Commodities: Scott Bleier Says Oil will Drop

As oil prices fall, will a contango arbitrage opportunity arise? I think so!

While some have thought the prediction of Scott Bleier that oil and commodities would fall after they reached outrageous prices that didn't line up with the fundamentals was precient, I don't think it was very hard to predict.

In the middle of July Bleier said oil was going to plunge to $100 a barrel, when it have made significant moves upward. Of course you had the usual clueless that got caught up in the euphoria who started predicting $200 a barrel in the near future, which made Bleier's prediction seem even more prescient.

Of course Bleier was even being too conservative in his projections, as they fell further than even he thought.

Now, as world demand is plummeting, and credit extremely difficult to get, he's predicting oil will fall to as low as $50 a barrel. It very well could.

The major reason that could happen is because cash-hungry institutional investors have been selling their positions in commodities like oil to become more liquid. That and slowing demand because of consumers cutting back on unnecessary driving and traveling is driving the price of oil and other commodities down.

Who knows, it could go below $50 a barrel, even with OPEC meeting next month to possibly reduce production by 1 million barrels a day in hopes of stopping the fall in oil prices.

Scott Bleier is president of Create Capital.

Oil as a commodity looks like it could provide an excellent contango arbitrage opportunity when oil rebounds.

Commodities are in "Forced Liquidation" - Jim Rogers

Jim Rogers, CEO of Rogers Holdings said in an interview with Commodity Online that the commodity bull market will last longer than he originally anticipated because of the financial crisis around the world.

Historically, said Rogers, there have been eight or nine periods of what he calls "forced liquidation," where people sell everything regardless of the underlying fundamentals. He added that this is one of those periods.

He explains it this way: ”The cyclical demand for commodities may slow, but the secular supply will be badly affected so the commodity bull market will last longer and go further in the end.”

What this means is the rate of growth will slow, but nothing has changed in the long-term demand for commodities in the emerging markets. Natural resources will continue to be needed for many years to come, and that means commodities will remain in demand.

Illiquidity is what's holding things back at this time, not the demand that hasn't changed. As Rogers said, people are being forced to liguidate in order to get access to immediate funds. When that's over, we'll go back to the commodity bull market as defined by the fundamentals of the market.


Other Insights from Jim Rogers:


Jim Rogers: Where he's putting his money

Jim Rogers: We're Facing an "Inflation Holocaust"

Jim Rogers: History Reveals Bailouts do more Harm than Good

Jim Rogers: Government Bailout a Huge Mistake

Jim Rogers: People Don't Understand Commodities

Jim Rogers Says Commodities Should Come Back Strongly