NEW YORK (HedgeWorld.com)–Forget about stocks and bonds, the new bull market is in commodities even if China stumbles in the short run, argued Jim Rogers, author and co-founder of Quantum Fund with George Soros, in a talk Wednesday.
“It’s simple economics,” he said, speaking at the New York Board of Trade, where he once owned a seat. His conclusion is based on the lack of investment in productive capacity during the long bear market for commodities in the 1980s and 1990s and the consequent weakness in supply.
He told the commodities traders in the audience that they are now going to be admired and respected and become very rich.
China’s voracious appetite for everything from cotton to copper to crude oil has been a major force driving up commodities prices. Mr. Rogers expects a hard landing this year in Chinese financial markets but sees that as a temporary setback.
On the basis of experience, he estimates that the commodities boom will continue for another 10 to 18 years, with fluctuations along the way. Commodity markets are nowhere near their all-time highs, with silver and sugar some 80% below their peaks, he said.
He is certainly not alone in advocating commodities as the asset class that will bring the highest returns over the next one to two decades. For instance, the chief investment officer of Deutsche Bank’s Frankfurt-headquartered private wealth management group, Klaus Martini, recently made the same point .
Like Mr. Rogers, Deutsche Bank started investable commodity indexes in recent years. In 2004, the Deutsche Bank Liquid Commodity Index-Mean Reversion rose from 657 to 812, while the Goldman Sachs commodity index went from 4697 to 5279.
Mr. Rogers has been predicting trouble in Chinese financial markets for over a year now, while remaining extremely bullish regarding that economy’s long-term prospects. Invest in commodities to take advantage of China’s growth, he suggested (see ).
Contact Bob Keane with questions or comments at: firstname.lastname@example.org.