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Get Four
|  | NOVEMBER 2, 2004
The Bull Runs in Commodities That's the belief of Investment Biker author Jim Rogers, who recommends coffee and sugar futures, instead of stocks and bonds For the next decade, the best investment action will be in commodities. That's the view of Jim Rogers -- famous for Investment Biker, a chronicle of his motorcycle trip around the world exploring far-off lands and economies. He has also written Adventure Capitalist, another combination of travelogue and investment guide, and his most recent book is Hot Commodities. When it comes to stocks and bonds, Rogers says, "There will not be any great bear or bull period like there was in the 1980s and 1990s." he says. His pessimism also extends to the U.S. dollar, which he thinks will be in a decline for the next 20 years, with great volatility for all currencies in the coming decade. The commodities Rogers says he would buy today are coffee, sugar, and perhaps cotton. For income in the difficult period he sees ahead, he suggests short-term interest-bearing paper -- he expects interest rates to be rising around the world because of a period of stagflation similar to the '70s. These were a few of the points he made in an investing chat presented Oct. 28 by BusinessWeek Online on America Online, in response to questions from the audience and from Jack Dierdorff and Karyn McCormack of BW Online. Following are edited excerpts from this chat. A complete transcript is available from BusinessWeek Online on AOL at keyword: BW Talk. Q: Jim, based on your world view, what's your take on the markets right now? A: Well, the bond market has now peaked. It peaked in 2003 and will be in a bear market for 15 to 20 years, with rallies of course. The U.S. stock market will fluctuate up and down for the next 10 to 20 years. There will not be any great bear or bull period like there was in the 1980s and 1990s. On the nearer term, I expect the years 2005 and 2006 to be difficult years in the U.S. stock market. That would extend to most Western stock markets as well. If you want to be in a bull market, you should invest in commodities. That's where we'll have a bull market for the next 10 to 20 years. The currency market -- I would suggest that people sell the U.S. dollar because it will be in decline for the next 20 years. Q: Today's news of China's unexpectedly raising its key interest rate knocked down commodities prices and stocks. Is the commodities bull just about over -- or would you still invest in them at this point? A: In every bull market there are many consolidations along the way. Commodities have been very hot for the past five years or so, so we're well overdue for a consolidation. I expect things to get worse in China. I expect there to be a hard landing. But if you see the cover of BusinessWeek next year saying "Turmoil in China," reach for the phone and buy all the commodities you can and all the China [holdings] you can, because that will be your next great buying opportunity, if it happens that way. I'm not selling my commodities or my China [holdings], although I do expect further consolidation in both. Q: It's my opinion that Bretton Woods is on the verge of collapse. What do you think will take its place? A: I concur. I also concur that the U.S. dollar will suffer during this period. I would expect there to be a decade of great volatility in currencies around the world -- and perhaps even exchange controls in the U.S., eventually. I don't know what will take its place. I don't even see a currency that will replace the U.S. dollar as the world's reserve currency at the moment -- perhaps if things get really desperate, people may leap to gold for a while, but gold isn't something that can permanently solve the world's problems. Q: Will this country be able to get rid of its debt? Are we heading for another Depression? A: No country in the world that has gotten itself into this kind of debt situation has ever in history gotten out without a crisis or a semi-crisis. The same will happen in the U.S., unfortunately. And even then, we will not solve our debt problems. When England went from being the richest, most powerful country in the world, the situation declined for over three generations. We have entered a period like that as well. Q: Going to China -- investment ideas to look for? A: Well, it's too early to buy shares in China. I would wait for a hard landing next year. But start looking around and doing your homework while you're there. I don't know what's going to go down the most as China retrenches. Q: You had mentioned a housing bubble about a year ago -- what do you think now? A: Well, there's no question that there was and is a housing bubble in some parts of the country. It has already started leveling off and/or declining in some places. In others, it's still hot. Financial areas such as Massachusetts will certainly suffer housing losses as the bubble pops. Commodity areas such as Iowa will have nice housing markets for several years. The bubble is not everywhere and will not continue everywhere. It just depends on the location. Q: Are you still high on international investing? A: Yes. I'm high on investing in wherever the opportunities are, and that's often internationally. Therefore, yes, one should never limit one's investments to one country because you will miss great opportunities. Q: Where would you look for income/yield? A: That's a great question. I would not own bonds anywhere in the world unless it were a very special situation. I would keep my money in short-term interest-bearing paper and suffer a temporary lower income because rates will be rising in most of the world. Q: Can one be a long-term buy-and-hold investor and make money, or does one need to be a trader? A: Well, if you find the right instrument, the right security, then yes, you can be a buy-and-hold. But in my view, the next 10 to 20 years in the U.S. stock market, that will not be a satisfactory way to invest unless you find the few securities that might do well even in a period like that. The investors who'll do well are the ones who can buy low and sell when things rally and repeat the process throughout the decade.
BW MALL
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