Mr. Rogers Pushes Commodities For Kids, Adults

Wall Street Journal ^ | 9 December 2006 | Ann Davis

[shrinkermd]

Ask Jim Rogers what to leave the next generation, and he will tell you what is in his three-year-old daughter's portfolio: commodities and Swiss francs.

Mr. Rogers, 64, is a longtime bull on commodities who, for many years, seemed early to the party. But commodities prices were creeping up even in the dot-com years and have soared in the past few years -- largely driven by China's massive appetite for everything from gold to concrete. It has given him plenty of chances to say, "I told you so."

The question he faces now: Is it still a boom when prices droop in key markets like energy? Commodities are famously volatile, and some markets have hit rough spells in recent months. After flirting with $80 in July, crude oil recently fell to the mid-$50s; it settled at $62.03 Friday on the New York Mercantile Exchange. Copper is 23% off its May high on the Comex division of Nymex and could turn sluggish amid a housing slowdown in the U.S. that damps demand for pipes and parts.

Mr. Rogers calls the pullbacks a buying opportunity and points out that agricultural commodities such as corn and wheat are hitting multiyear highs. Now he is talking about moving his family to China from his current Manhattan residence (where, incidentally, the furniture and appliances are labeled with both English and Chinese names to help his daughter learn the language...

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...However, he says a part of his net worth is invested in the Rogers International Commodity Index, which he launched in 1998 and licensed to other financial institutions. The RICI, as it is called, has returned 253.3% from August 1998 through November. During that period, the S&P 500 Total Return Index rose 42.5%, and the Lehman Brothers U.S. Long Treasury Index rose 74.7%.

"...Most of the money he allocates to the index is in the main RICI index. But this summer, he moved funds into RICI's agricultural index. Because of world demand for food, as well as fuels based on food, agriculture is "the best place for investors right now," he told the Morgan Stanley crowd.

[JLGALT]

I've been following the Roger's Index for the last couple of years. It is heavily invested in petroleum and petroleum products. It is interesting that the inception date for this index is 7/31/98 which is only a few days before the long term bottom of the oil price at about $14. The latest futures price is $62 which means the price of oil is up 342%! But, Roger's Index is up only 253% meaning that the whole of the value increase may have come from oil only!

Just an observation.

[shrinkermd]

Yes, excellent point and post. He basically made his bet on oil when you could buy almost 30 barrels for an ounce of gold whereas now you can only buy 10 barrels of oil for an ounce of gold.