Jim Rogers: Short US Bonds, Likes Russia

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December 03, 2012
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Commodities legend Jim Rogers is still shorting bonds, but now he’s looking for ways to go long on Russia.

 

Jim Rogers takes no prisoners in the way he makes the case for commodities. The author of “Hot Commodities” is so bullish—particularly on agriculture these days—that hearing what he has to say can leave you a bit unsettled. When IndexUniverse.com Managing Editor Olly Ludwig caught up with Rogers recently, he said new RBS’ lineup of commodity ETNs that have his name on them are so far superior to the competition.

Surveying the world of agriculture, Rogers talked about the growing shortage of farmers around the world at a time of tight food supplies. He also reaffirmed his bullishness on gold—and his bearishness on bonds—both of which are closely tied to his skepticism that the U.S. and the rest of the industrialized world will ever get out from under all its indebtedness without some additional crisis.

His most surprising revelation? After dismissing Russia for years as a dangerous investment destination, where losing money was almost guaranteed, he said Russian President Vladimir Putin has changed his approach to foreign investment. That means Rogers is poking around the commodities-rich country looking for ways to profit.


Ludwig: What commodity or commodities are flying under the radar that perhaps investors ought to be looking at more closely right now?

Rogers: I’d have to say agriculture, because agriculture is very depressed on any kind of long-term basis. Sugar prices, for instance, are down about 75 percent or so from their all-time high in 1974—38 years ago. We have been consuming more agricultural commodities than we have been producing in the world for the last decade or so. So inventories are near historic lows, which, of course, is a dangerous situation.

But worse still, we’re running out of farmers. The average age of farmers in America is 58; in Australia it’s 58; in Japan it’s 66. In America, more people study public relations than study agriculture. So the farmers are dying and retiring, and no young people are coming into agriculture. Agriculture is facing a serious, serious problem, so prices have to go much, much higher, or we’re not going to have any food at any price.

Ludwig: So a broad approach would serve investors well, say, in a multicommodity futures-based ETF, such as PowerShares’ DBC or United States Commodity Funds’ USCI?

Rogers: I prefer the Rogers indexes, because they are better constructed to outperform the others. But yes, a broad fund.

Ludwig: Let’s talk about your new securities that just went live here in the United States, the broad family of contango-mitigating RBS ETNs. Can you offer some observations about them—the broad one, and the ones focused on agriculture, energy, industrial metals and precious metals—first in relation to the pre-existing Merrill Lynch “Elements” ETNs that are already on the market and that don’t have a contango-mitigating feature?

Rogers: As you know, the markets do have contango and backwardation. It’s always been the case with commodities, and always will be. These products attempt to mitigate the problems of contango. And so far, the ETNs have been able to do a good job, better than the regular, original index. Will that be the case in the future? I don’t have a clue.

 

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