Market Review: Hot Commodities

It’s no secret that Jim Rogers is bullish on commodities…he’s been touting them to anyone who’ll listen, since 1998. And there are many people who listen to Jim Rogers. Not only is he interesting, knowledgeable, experienced and confident, he’s also extremely rich. When it comes to investing, the man’s a money machine.

So it’s no surprise that Jim attracts a great deal of attention from aspiring speculators and investors. His first two books flew off the shelves like hotcakes. He turns up in Barron’s, the Journal and even the Guinness book of records! And if you’re planning to watch him give a speech at one of the many conferences he’s invited to, you’d better be early…otherwise you’ll be standing up at the back!

But here’s the thing. Everybody listens to him, everybody agrees with him, but still nobody follows his advice. It’s definitely an improvement from the old days, he points out, "[In 1998] I was appearing weekly on a program on CNBC, and I started talking about investing in commodities and how the fast-growing Chinese economy would drive the demand for raw materials – and everyone looked at me as if I was crazy."

On January 1, 1999, Jim set off around the world on a three-year road trip. And because it can be tricky finding CNBC in war-torn Mozambique and there aren’t too many stockbrokers out in the Siberian Tundra, Jim stashed a large chunk of his fortune in a commodities index. It’s called the Rogers International Commodities Index, and Rogers designed it himself.

As we’ve come to expect, it was a shrewd move. "When Paige and I returned from our trip – to a post-September 11 America – the fund was up 80%. While we were away, the dot-com bubble went bang. People remarked how ‘lucky’ I was to have avoided all the pain. I tried to be kind. I was now old enough to know that anytime you move away from the herd, the herd will criticize you, indeed revile you; it will call you ‘crazy.’ But that’s a good thing for an investor: Nearly every time I strayed from the herd, I made a lot of money."

Dollar bulls might agree, last week anyway. The dollar snapped back with gusto, sending gold and silver tumbling. In recent weeks, the short side of the dollar has become a very crowded trade. Gold fell nearly $22 last week, while it’s shiny cousin, silver, fell a whopping $1.31, or 16.35%. "We find it almost comical," says the Gartman Letter, "that The Economist had as its front page last week the photo of a U.S. dollar being eaten by an insect, along with the headline ‘The Disappearing Dollar.’ Such headlines mark turning points far more often than not…although we would have preferred having this sort of headline appear in Newsweek or Time or some other more popular magazine, for then we would be absolutely certain that a long term, material U.S. dollar low had been marked." The euro fell almost 2 cents against the dollar, sliding down to 1.3224 on Friday. Sterling now trades for $1.9136, and the yen’s at 104.82.

The stock market suffered mild losses, pushing the Dow down 49 points on the week, to close at 10,543. Bonds, on the other hand, were very strong…10-year yields fell by 11 basis points, while 30-year yields declined 12. Oil came off too, spiking a dollar lower on Friday to close the week at $40.71 a barrel.

Despite the muted response to his advice, Jim persists in spreading the word about commodities. To that end, he’s just completed his third book, titled "Hot Commodities." And just in case you hadn’t figured it out already, the book is entirely about commodities! Like his previous books, ‘Hot Commodities’ is entertaining, easy to read and very informative. Rogers covers the fundamental case for commodities, explains how supply and demand interact with price cycles, and explores the peculiarities of each product. But unlike the adventure stories he’s better known for telling, this book actually explains how to invest in commodities – from tick size calculations to choosing a broker. It’s a very persuasive piece of work.

"I’m convinced that the value and strength in the commodities market will continue for years to come – that we are, in fact, in the midst of a long-term secular bull market in commodities," states Rogers. ‘Hot Commodities’ should be in bookshops early next year.

Rogers is convinced, we’re convinced, you’re convinced. Now it’s time to do something about it…

Regards,

Tom Dyson
The Daily Reckoning
December 11-12, 2004

P.S. You didn’t think we’d leave you in the lurch, did you, dear reader? Of course not. Outstanding Investments is a newsletter devoted entirely to commodities. And as you’d expect, returns have been very good over the last few years.

The current recommedation is taken from the energy sector.Did you know there may be enough oil to last for the next 400 years – on this continent? Well, this month’s edition features a company poised to cash in on this massive new discovery.

P.P.S. There is a second alternative. If you really want to turbo-charge your commodity profits, you might think about Kevin Kerr. He’s got the hottest hand in the business, and is making some serious money – on a daily basis. Yesterday, we received this email from a reader:

"I’m a new subscriber and couldn’t be happier so far…

"I subscribed a couple of days after your recommendation of the coffee calls. I bought 20 of the May ’05 coffee call contracts on Nov. 12 for 3.20 (a total investment with roundtrip commissions of $25,500). Per your recommendation, I sold 9 of the coffee contracts on Nov. 18 at 6.70 for A gain of 109% ($11,812) in 6 days. I continue to hold the remaining 11 contracts and have enjoyed further appreciation on those contracts."
— C. Simmons

Yesterday, Kevin recommended that his readers sell the second half of the coffee position – for a 270% gain!

THIS WEEK in THE DAILY RECKONING

A GOLDBUG’S LIFE 12/10/04
by Bill Bonner

"But the story of paper money is short and always sad. Since the invention of the printing press, a new paper dollar or franc can be brought out at negligible cost. Nor does it cost much to increase the money supply by a factor of 10 or 100 – simply add zeros. It may seem obvious, but adding zeros does not add value." Tom – went…

A NEW ILLUSION: THE FALLING DOLLAR 12/9/04
by Dr. Kurt Richebächer

"There rules a perception in the markets that the U.S. economy is fundamentally strong and, in addition, vastly superior to that of Europe in resilience and flexibility. All that is sheer nonsense. Due to years of unimaginable credit excesses and resulting monumental imbalances, the U.S. economy is highly vulnerable to a sudden downturn."

LUCK BE A TRADER… 12/8/04
by Nassim Nicholas Taleb

"A few years ago, when I told a then Master-of-the-Universe type, that track records were less relevant than he thought, he found the remark so offensive that he violently flung his cigarette lighter in my direction. The episode taught me a lot. Remember that nobody accepts randomness in his own success, only his failure."

TAR BABIES 12/7/04
By Eric J. Fry

"In an era of $50 oil, and increasingly unreliable supply chains, the oil sands of Alberta assume a far more prominent position – strategically and geologically – among the world’s largest deposits. For one thing, $50 oil renders the relatively high-cost production of syncrude immensely profitable."

THE PUNGENT SMELL OF FEAR 12/6/04
by The Mogambo Guru

"There has NEVER been an ‘effective central bank’ in this, or any other, ‘fiat money period,’ you blockhead! And I am here to tell you that if you think that the simmering, constant inflation since 1913 has been a replication of the stability of a gold standard, or even a reasonable facsimile, or a rough approximation, or even a vague resemblance, then you are lying right though your stupid teeth!

———————

HEADLINE, NEWS And INSIGHT:

Making Money in Early America
by Byron King

"Aside from a few limited experiments in paper currency, real money – the gold or silver kind that was accepted in exchange by almost all people in almost all places at almost all times – was not native to the colonies at all. People had to improvise."

China’s Foot on America’s Throat
by Todd Stein

"But the fact that he openly recognized the need to move out of U.S. dollars tells us that a massive dollar decline is not a matter of ‘if,’ but ‘when.’ The largest beneficiary of this will be the precious metals – gold and silver – make no mistake about it."

Computerized Confidants
by Jonathan Kolber

"Computer power continues to double roughly every one and a half years. Today’s supercomputers rival a rat’s brain in their sophistication. Within the next two decades, by every reasonable projection, computers will match human brains and then rapidly outstrip us."