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The Guardian: Best is yet to come, says superbull

Jim Rogers, George Soros’ former right-hand man, reckons the boom could last another 16 years

Nils Pratley
Tuesday June 6, 2006

It was in 1999 – when the investment world was still bewitched by the supposed “new economy” – that Jim Rogers, the former right-hand man to George Soros, coined the phrase, “The next big thing is things.”

Buy the old economy, he said – everything from gold to oil to wheat. While you’re at it, sell the US dollar, he added, arguing that it was a currency in decline.

The timing of his investment call could hardly have been better. The hottest debate in the financial world now is whether the price of “things” – or commodities – is a bubble to match the excesses of the dotcom years.

Gold has risen from $250 an ounce to $640. The price of oil, which had fallen as low as $10 a barrel, edged up to $72 a barrel yesterday, as Iran suggested that any western action over its nuclear enrichment programme could hit supplies.

The other hot debate is whether the dollar, having declined for five years, is about to fall off a cliff – dragged over by the debts of the US government and American consumers.

In other words, Rogers has made a lot of money since 1999.

Readers of the Guardian could have done the same, he points out. The New York-based investor had espoused these views in an interview published in these pages in July 2004, when the first leg of the commodity bull market had been up and running. “Remember,” he said then, “that the second leg is wonderful, and the third leg is spectacular. In the fourth leg, there is dancing in the streets, and in the fifth leg, people are hysterical and everything is skyrocketing every day.”

The prime reason for seeking him out again was to ask where he thinks we are now. Copper, for example, has almost doubled in value since the start of this year, to about $8,000 a tonne. Rises of 8% and even 10% have been seen in single days, bringing to mind Rogers’ description of his “fifth leg” – “hysterical” and “skyrocketing”. So, is this the end?

“Looking back at previous bull markets in commodities, the shortest has lasted 15 years and the longest has lasted 23 years,” says Rogers. “This one started in early 1999, so if it’s going to last 18 years or so, we are a third of the way. That’s not a prediction, I’m just pointing out what history would indicate: that this bull market will end some time between 2014 and 2022.”

This statement will strike many as irresponsible. The theory that metals prices are displaying bubble-like characteristics is a pretty solid consensus in the financial establishment.


Rogers is having none of it. “Where is the copper coming from that’s going to drive down the price of copper and keep it down? Where are the mines? All these people talking about a bubble are the same people who missed the move completely and were buying dotcom stocks, so I don’t give them much credibility. I suggest it would be better to listen to someone who was saying, ‘Buy commodities’, in 1999.

“How can you say it’s a bubble when silver is 75% below its all-time high? Copper, when you adjust for inflation, is not at an all-time high. And oil, when you adjust for inflation, is far below its all-time high. Where’s the oil going to come from? Nobody can give me an answer, including Shell, Exxon, Chevron. They’re out there looking for oil, and they don’t know where it’s coming from.” It is well-accepted that oil and mining firms under-invested in exploration in the 1990s. Low prices are never an incentive to look for more of anything. High prices encourage exploration and investment, but it can take a decade to bring a find to production. The miners would love to cash in on current prices but, with short supplies of everything from dumper-truck wheels to oil for lamps, it is a struggle to dig faster.

However, even Rogers, the superbull, admits that commodities are not a one-way bet in the short term.

“There will definitely be consolidations along the way,” he says. “In the 1970s, gold went down by 50% in two years and then it rose by 850%. That sort of thing happens in bull markets.” The cause of a correction – or consolidation, as Rogers calls it – could be anything, he argues, from a slowdown in China to a bird flu outbreak in Germany. “Something always causes consolidations and some of them will be dramatic. It could go down 20%, 30%, 40%, but I’m not going to try to time it because the bull market will still be there. Oil went down 50% in 2000 and has since risen 500%. Some people will be scared by consolidations and will get out. I think they’re mistaken. I’m not selling anything. This bull market’s got another 10 to 15 years to go.”

To sceptical ears, that sounds horribly reminiscent of some of the wild declarations of dotcom gurus who spotted a good thing but not the subsequent crash.

Rogers, 63, is rich enough to do his own thing. Having worked with Soros to found one of the first and most successful hedge funds, Quantum, in 1973, he retired at 37 to manage his money. But it is only fair to point out that most other long-term bulls of commodities accept that prices are infected by speculative money. Their advice would be to wait for a correction before stepping into the market.


Rogers thinks the best opportunities in commodities lie not with metals. “Agricultural commodities are the most attractive,” he says. “Sugar is 80% below its all-time high. Maize is 60% below its all-time high – so is cotton. Adjusted for inflation, some of these commodities are 80%, 90% below their all-time highs.

“The hectares devoted to wheat have been declining for 30 years. The world has consumed more food than it has produced for the past five years, and that’s the first time in recorded history that that’s happened. We’ve had no worldwide drought for several years. I don’t know if we’ll have one again, but I know what happened in the 1960s and 1970s when we had droughts with low stocks of nutrition. The price of sugar went up 47-fold in an eight-year period.”

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