Jim Rogers: What now for Commodities?

Jim Rogers said the commodities bull market is still on track to higher prices, but he isn’t buying anything right now.

In an exclusive interview with IndexUniverse.com, the commodities king said the downdraft in commodities the markets experienced in June isn’t unusual. “It’s the way the world works.”

“If you look at oil, for instance, it has gone down over 50% three or four different times since 1998,” added Rogers.  “That’s what markets do, and they will continue to do that.”

When asked whether the commodities bull market that he envisioned more than a decade ago and about which he wrote in his book, “Hot Commodities,” is still intact, Rogers said, “yes.”

Close followers of Rogers know he likes agriculture more than any commodity, longer term.  Populations are growing in size and prosperity in Asia, bringing with that growth an upgraded and voluminous diet—the demand side of the price equation.  On the supply side, Rogers notes the aging of farming personnel will pose challenges to the restocking of qualified talent.

“We know that there are huge shortages of agriculture developing,” he said.  “I don’t know if you knew this, but the average age of farmers in America is 58 years old. In 10 years, they’re going to be 68, if they’re still alive. Throughout the world, we have serious, maybe even catastrophic developments in agriculture, which is going to hurt us all over the next couple of decades.”

In the oil market, Rogers sites the lack of meaningful new discoveries to offset Asia’s insatiable demand for crude, reminiscent of the days post WWII in the United States as industrial growth jumped into overdrive to supply a war-torn world with everything from household appliances and automobiles to military and commercial planes.  China isn’t selling air force fighter planes yet, but it sells just about everything else that can fit into a big box store.  Nevertheless, China has overtaken the U.S. in oil imports.

“I do not see any major new sources of supply [of oil]. We know that the known reserves of oil continue to decline worldwide,” Rogers explained.

And as far as the hottest commodity since the summer of 2010, silver, Rogers likes it for the rest of the decade and wants more of the poor-man’s precious metal on pullbacks.  He had said early in May that the moonshot move to $50 in April didn’t look healthy and hoped for a pullback to kill the froth.

“Well, I’m long silver, and if it goes down more, I hope I’m smart enough to buy more,” he said.  “I didn’t particularly like seeing it spike, because anything that turns into a parabolic move has to be sold. And I don’t want to sell my silver. I want to own it 10 years from now. Fortunately, that spike did break, and I find that encouraging and bullish.”

Marc Faber again Calls for a Drop in Dow

Marc Faber told American news outlet Newsmax he expects stocks to tumble in May.

Following his call for a 10% decline in stocks—first, on Oct. 26, then, reiterated on Jan. 25, the Dow has refused to succumb to countless clues of an ailing U.S. economy failing to respond to herculean monetary stimulus from the Bernanke Fed.

The rally in the DJIA, following the post-crash March 9, 2009, low of 6,440.08, has since  taken the 30-stocks average to 12,928.45—or, a double—set on May 5.  Faber, the publisher and editor of Gloom Doom Boom Report, told Newsmax that the long-awaited 10% correction in the Dow is upon us.

Today, Faber said he’s troubled by several symptoms of fatigue appearing in the “internals” of the broader market, including a decline in the number of stocks reaching new 52-week highs, according to Wall Street Pit.

Another warning sign comes from metals prices, which have dramatically plunged in recent days, among them copper, also referred to as Dr. Copper for its highly correlated price pattern to equities.

While the Dow reached new intermediate highs earlier in the week, the price of copper failed to confirm the rally in stocks, lagging the Dow noticeably prior to Monday’s kick off to a commodities complex sharp reversal lower during the remainder of the week, further buttressing Faber’s case for an imminent continuation of the decline in stocks.

Confirming evidence of a reversal of global risk-on trades can be traced to both sharp declines in the U.S. Treasury 10-year note yield as well as a meaningful one-day 100+ pip rise in the USDX.

However, Faber’s recent call for a correction in stocks doesn’t make him a devout bear on the major indexes in the long run. With his overall underpinning thesis that a weak dollar encourages risk-capital flight into equities and commodities, Faber sees the Fed’s zero interest rate policy (ZIRP) lifting equities in nominal terms as long as real interest rates after inflation remain below zero.

In a Bloomberg interview on April 27, 2009, at a time of heightened fear in global equities markets, Faber cautioned, “Don’t underestimate the power of printing money,” arguing that a Fed in want of higher asset prices can achieve its objective through the proverbial printing press.

“The more things will go bad, the worse things become, the more the money printer at the Fed, Mr. Bernanke, will print,” added Faber. “He will print endlessly. Even if things go bad economically, you could have no revenues at companies and no earnings and stocks will go up because of money printing.”