Updated: May 3, 2013 12:14PM
"Get in before they're hot!" That's how Jim Rogers autographs his new book, Hot Commodities ($25.95, Random House, 272 pages). Rogers believes that commodities are in a long-term bull market that could last for 15 years or longer. Rogers' message was well-received in Chicago earlier this week where he joined the panel of experts at the annual Executives' Club Forecast luncheon. After all, Chicago is the home of the Chicago Mercantile Exchange and Chicago Board of Trade.
Even financial novices have heard of Jim Rogers, the legendary hedge fund manager who co-founded the Quantum Fund with George Soros, and then after 10 profitable years, when the portfolio gained 4,000 percent while the S&P increased less than 50 percent, retired at the age of 37. Rogers rode a motorcycle around the world and wrote about it in Investment Biker. He followed that up with another three-year global trip during the millennium celebrations, this time in a yellow Mercedes. That led to his best-selling book, Adventure Capitalist.
From sugar to lead
Now, in his entertaining and common-sense style, Rogers predicts opportunities for huge profits in a variety of commodities, from soybeans to sugar to lead. What do these commodities have in common, and what's behind this prediction of higher prices for all globally traded commodities? Supply and demand.
The world is growing, and using more natural resources. But in the past 20 years, fewer new oil wells have been dug, fewer new plants have been built, and less investment has been made in finding natural resources and bringing them to market. Rogers points out that no major new oil field has been discovered in the world for more than 35 years, and there hasn't been one new smelting plant started in 20 years.
Now all that's about to change, Rogers predicts. And China will be the catalyst. In his words, "Communist China is now home to some of the best capitalists on the planet." His statistics are fascinating. China is the biggest user of cell phones on the planet, the No. 2 consumer of oil in the world, and the No. 1 consumer of copper and steel. And while it's a country rich in natural resources, China is now an importer of most industrial commodities.
It's not just China, of course, that is pushing up the demand for raw materials, which will result in higher prices as well. It's the simple fact of global growth.
There certainly will be slowdowns and setbacks. In fact, Rogers predicts there could be a big setback for China this year. As a result, prices of commodities could drop. But Rogers advises that when bad news from China makes headlines, it will be a great buying opportunity.
When you suggest people invest in commodities, there's often some fear. But Rogers says commodities today are far less speculative than high-tech stocks such as Cisco and JDS Uniphase were back in early 2000.
Commodity futures are typically purchased on very thin margin, which means leverage. And that can lead to huge swings in the value of your account, based on relatively small price movements. But no one says you can't put up more margin than is required. That's one practical bit of his advice.
In fact, the centerpiece of this book is a sort of "Commodities 101" for novice investors and traders. Rogers explains how the markets work, how to find and understand price quotations, and how to avoid being scammed. He even directs readers to exchange Web sites where they can be linked to legitimate futures brokerage firms and registered commodity trading advisers.
If you're not interested in trading futures, there are several mutual funds that are based on commodity indexes. Rogers created his own index -- the Rogers International Commodity Index -- which is up 190 percent since it was started in 1998. During the same period, the S&P was about unchanged after a wild up-and-down ride. Rogers' company has also created a mutual fund based on the index. There's no speculation, just a diversified, indexed portfolio of 36 commodities weighted by their importance in world trade.
No stocks or bonds for child
Rogers dedicates his latest book to his 19-month old daughter with the following message: "For my Baby Girl, who owns commodities but does not yet own stocks or bonds."
If this master investor is making that kind of commitment, it's something you might want to investigate by reading this book. And that's The Savage Truth.
Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.