Jim Rogers Sees Opportunity in Silver and Palladium ~ market folly

Tuesday, June 29, 2010

Jim Rogers Sees Opportunity in Silver and Palladium

From time to time, we like to check in on investment guru Jim Rogers to catch up on his thoughts on the markets and global economy. We do so of course due to his past success with the Quantum Fund he previously ran with George Soros. Nowadays, Rogers invests his money under Rogers Holdings and he has some pretty staunch viewpoints. Rogers himself proclaims he is a poor market timer. So while he may be early on an investment theme, he often finds and rides macro trends. To some, his views seem repetitive. But you must keep in mind that he very frequently appears in the media and is seemingly asked the same questions over and over. The last time we checked in on Jim Rogers we saw that he was shorting market indices. From all of these interviews, one of his stances has become abundantly clear: he loves commodities and in particular, precious metals.

In his recent slew of interviews, Rogers has proclaimed that he is fond of gold and still owns it. However, he is not buying more nor is he selling. In the end, he actually thinks gold will be a bubble in the distant future. For some reason he tosses out the year 2019 as his estimate, and it seems he thinks gold's reign will last a decade or so. He thinks this bubble top is a ways off because governments have been debasing their currencies at a rapid rate. Historically, he points out, this has always led to higher prices for real assets and he thinks this time will be no different.

Speaking on the subject of gold, Rogers says that, "I know the old (gold) high, adjusted for inflation, is over a couple thousand dollars an ounce. I know it'll get over that in the next decade. It depends on how much they debase the currencies. It's all part of the same picture... most governments everywhere only know one thing and that's to print and spend money that they don't have. Whenever you do that, it debases currency, always has, and until I see some governments realize that they have to do something else, then I plan to own gold and other precious metals and other real assets."

This of course is not the first time we've detailed a prominent investor's fascination with gold. John Paulson's hedge fund Paulson & Co started a gold fund mainly to bet against the US dollar and the currency debasement that Rogers centers his thesis around. We've also seen John Burbank's hedge fund Passport Capital lay out the rationale for owning physical gold. Not to mention, David Einhorn's Greenlight Capital has owned physical gold for some time now. Inflation is a very legitimate future concern for some of the top minds in the investment industry. Rogers is no different.

His main rationale here stems from the fact that many long-term bull markets end in hysteria and bubbles. He doesn't like to buy things at all time highs and that's pretty much where gold is trading these days. As such, Rogers' interest has been piqued by other metals.

If he had to buy a metal right now, he said he would focus on depressed metals such as silver or palladium. Rogers points out that silver is 60-70% below its all-time high while palladium is around 50-60% below its all-time high. He already owns all four metals: gold, silver, palladium, and platinum. Throughout all his interviews, he was very adamant that he was not selling his gold, but he was not buying more either.

Shifting to Rogers' views on currencies, he is particularly fond of the renminbi. While it is not his favorite overall investment due to liquidity concerns, it is the long-term investment he is most certain of. Rogers mentioned this last week in talking with Bloomberg. And on CNBC that same week, Rogers reaffirmed that he is still long commodities and short stocks due to the withdrawal of government stimulus and his anticipation that central banks will keep the printing presses rolling. This is directly in line with what we saw from Rogers' portfolio in early May.

Lastly, we wanted to highlight that Rogers has been eyeing the events surrounding the oil spill as well. We've already detailed how Whitney Tilson's T2 Partners has bought BP, citing valuation and extreme circumstances. Rogers hasn't quite gone that far yet, but it has definitely caught his eye. On the topic Rogers ponders, "Is it the end of BP? I doubt it. Somewhere along the line I expect that I will buy BP. But I'm not buying it now - just watching to see what happens." In his experience, he notes that disasters are usually a great time to buy. On that same note, he also cautions that there's usually plenty of time to buy into the opportunity presented by the problem. For the time being, Rogers is more than comfortable to wait and watch the proverbial knife drop before jumping in the (oil coated) water.

Embedded below is one of his recent television interviews with CNN Money where he talks about various topics of interest (email readers will need to come to the site to view it):

That wraps up the latest views and portfolio positioning from investment guru Jim Rogers. For more of his thoughts and to learn from this investment guru, check out Rogers' books, Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market as well as A Gift to My Children: A Father's Lessons for Life and Investing.

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