Hot Commodities : How Anyone Can Invest Profitably in the World’s Best Market by Jim Rogers
Jim Rogers, author of Adventure Capitalist and one of the smartest investment minds around, offers up his opinion that the next secular bull market is already underway. But this bull market isn’t in stocks — it is in commodities.
There have been bull and bear markets in commodities through the years just as there have been in stocks – and interestingly enough, the cycles in the two asset classes tend to occur opposite one another. The last bull market in commodities ended in the early 80s, when no one wanted to have anything to do with stocks. Now, a couple of decades later, we find ourselves in a transitional period following one of the biggest bull markets that stocks have ever seen – and very little attention is being paid to commodities.
What are commodities? Commodities are things – food, fuels and raw materials that are either cultivated and grown, or extracted from the earth. Unlike stocks, commodities are things you can actually touch and feel, and they’re becoming more and more valuable every day. Why? As Rogers explains, the reason is simple: the age-old economic principle of supply and demand.
During the stock bull market of the 80s and 90s, commodities were in their own bear market. As prices of commodities were dropping, many people and companies that were in the business of supplying those commodities were getting out of the business – the lower prices just didn’t make it worthwhile.
In Hot Commodities, Rogers says those days of low prices are over, at least for the next 15-20 years (he presents evidence that the bull/bear cycles last approximately 18 years). He says, particularly with the growth in certain areas of the world like China, that demand for commodities is increasing — but supply remains low, due to the lack of investment in exploration and production during the 80s and 90s. Increased demand and reduced supply means higher prices, and price increases in commodities like precious metals (gold, silver), base metals (copper, aluminum), and crude oil over the past year or two give ample proof that the author is right.
Rogers describes the futures markets where commodities are traded worldwide, and lays out the supply and demand case for a few specific commodities, things like oil, gold, lead, sugar and coffee. He gives the investor some ideas on how best to play the commodities markets, be it through one of a very few commodities mutual funds (including Rogers’ own commodity index fund), investment in the futures markets or a managed futures account, or by buying stocks of commodities related companies. He also points out that the lack of investment vehicles available to the public, like commodity mutual funds, is evidence that this asset class has been completely ignored, and likely has a long way to run!
If I were you, I’d listen to what Jim Rogers has to say. Highly respected among those in the investment community, he was able to retire while still in his 30s. Seems to me, he probably knows what he’s talking about!
There’s more to investing than just stocks and bonds. As an investor, you owe it to yourself to read the book, learn about commodities, and decide which method of investment in this asset class might be best for you. Don’t ignore the bull market that no one is talking about…