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  1. 601 Posts.
    March 03, 2008

    Jim Rogers Predicts That Commodities Prices Across The Board Will Go Through The Roof In The Next Twenty Years

    By Charles Wyatt

    Jim Rogers, who was guest speaker at our Christmas 2006 Forum, is a man not afraid of calling a spade a bloody shovel. He is also one of those rare Americans who has journeyed extensively outside of his own country and learned from what he has seen. As if to emphasise this propensity for travel he was in Tokyo last week where he gave a talk to 750 fund managers. The main gist of this talk was that America is ‘completely out of control’, that there will be a 20 year bull market in commodities, and that prices will be in turmoil.
    His views seem to have hardened since he spoke to us 14 months ago, and in quite significant ways. At that time he was a little milder on America, though he recommended that the dollar should be sold. But that was before sub-prime ripped through the financial system. In Tokyo, however, he said he said that global competition for resources may end in armed conflict. This statement is clearly aimed at food as no politicians are going to allow people to go hungry if they can help it and it’s countries such as China, India and Russia, with huge populations, that are most at risk.

    One defence for Russia, which may cause further instability elsewhere, is its ability to manipulate the European gas market to force access to the breadbasket to its south west. South Africa is already some way down the track to civilian unrest as a result of the highly publicised power problems there, which may take at least ten years to resolve. If mines and furnaces have to shut down, huge numbers of workers will be on the streets and things will get tough.

    In specific terms Jim Rogers told delegates to the CLSA investment forum that the prices of all agricultural products would ‘explode’ in coming years and that the price of gold, which hit an all-time high of US$980 an ounce this week, will continue its surge to as much as US$3,500 an ounce. In support of his opinion analyst Christopher Wood told fund managers that this was because “gold is the exact opposite of a structured finance product”. Fair point.

    In a blistering attack on US monetary policy and the “helicopter cash drop” responses of the Federal Reserve, Jim Rogers described the American dollar as a “terribly flawed currency”. He said that the plan by Ben Bernanke, the Fed Chairman, to “crank up the money-printing machines and run them until we run out of trees” had exposed America’s weakest point to her rivals and enemies. The dollar may have declined recently, he added, “but you ain’t seen nothing yet”.

    Talking to a room almost exclusively populated with Japan-focused equity investors, Jim Rogers recommended an immediate language course in Mandarin and a switch into commodities: “the second-biggest market in the world behind foreign exchange”. Those who attended our Christmas Forum will recognise some of this advice as he said at that time that he had engaged a Chinese nurse to teach his daughter Mandarin.

    He went on to tell the CLSA delegates that that historic drains on wheat, corn and other soft commodity inventories have created market dynamics that could lead to severe food shortages. The outlook over the next two decades is that the prices of everything from cotton and sugar to lead and nickel will be “going through the roof”.

    Heavily playing down the prospects of a big recovery in Japan, Mr Rogers said that that country’s demographics “as the fastest-ageing country in the world” would cause it greater problems and an ever-diminishing quality of life for ordinary Japanese. Not, perhaps, the most tactful observation, but he went on to say that other countries including Britain, Italy, China and the US should take note of what their own demographics would look like if the effect of immigration was stripped out. On a final, and controversial, note Jim Rogers suggested that Japan will be the perfect laboratory for the world to watch how a demographic crisis plays out.

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