MINING FINANCE / INVESTMENT
Recent commodity downturn just a blip - Jim Rogers
Jim Rogers says that until significant amounts of new supply come on stream, the commodities super cycle will continue.
Posted: Wednesday , 29 Aug 2012
GRONINGEN (MINEWEB) -
The commodity super cycle still has legs, says renowned investor, Jim Rogers, as supplies remain constrained.
Asked on Mineweb.com's Gold Weekly podcast if the recent slowdown in many metal prices and a number of high profile comments about the end of the bull market, Rogers said, "this is nothing more than a blip. The bull market will continue until a lot of supply comes on stream and the problems since 2008 ensure not a lot of supply is coming on stream."
Rogers said, usually after eight or nine years of a bull market, companies begin to bring new sources of supply online. But, this time around, those that were beginning to think about new supply in 2008 were hit by the financial crisis and many such plans were shelved.
This has continued into 2012 where you have had a number of the world's top miners, including the likes of BHP Billiton, slowing expansion plans.
"All these guys are delaying or suspending or cancelling new supply which is bullish. Until the supply comes we're not going to have an end to the bull market and, certainly in agriculture, my goodness, inventories are near historic lows, we have serious shortages of everything in agriculture developing, including farmers."
With regards to the growth engine for commodities that is China and reports of a loosening in monetary policy in the country, Rogers maintains that it has tightened up two or three times in the past decade in a bid to pop the real estate bubble.
"Every time that they have begun to pop the real estate bubble in the past, once things start getting tough they get a lot of phone calls and they start loosening up again. In my view, China has loosened up too early every time in the last decade, which is why the real estate bubble has continued and it's gotten worse. So it looks as though China is going to loosen up again and in my view they're going to loosen up again too early this time around, and you'll probably have a continuation of the same old thing - more inflation and perhaps excesses in real estate again."
In terms of specific commodities, Rogers would not commit but said were he a new investor looking at the sector, he would look at those commodities that have fallen the most.
For example, he said, he would look at silver rather than gold because, on a historic basis, silver is down more than gold.
"Silver is about 40% below its all-time high, and gold is 10% or 15% below its all-time high," he pointed out.