Jim Rogers on Grains and Gold
After three straight days of a market rally, a lot of investors are starting to slowly move back into the markets. Leading the way up has been agriculture and gold stocks. In a recent interview, Jim Rogers explains why he’s still bullish on both.
The man who turned bullish on commodities at precisely the right time nearly a decade ago and has managed to stay one step ahead of the rest of the investment world is speaking publicly again. This time, Rogers (view Jim Rogers Bloomberg interview here) provided some further insight into his thoughts on where the markets are headed over the medium and long-term.
Although he didn’t say much of anything new, he continued to stick closely to many asset classes which we’ve been watching come down in price a lot.
Rogers continues to be bullish on gold and said the United States and other western economies are headed for an “inflationary nightmare.” He added, “Gold is still in a bull market and will continue to be for a long time.”
That’s no surprise. The gold bulls are starting to come back to life. He is continuing, however, to be as bullish as ever on agriculture stocks. Rogers says, “I expect to make more money in agriculture than I do in gold or stocks.”
I agree completely there. The agriculture story has been unfairly beaten down. Yes, for readers of many of my other posts, I’ve been bearish on agriculture stocks since the middle of the summer. It seemed like a very frothy high and it was no time to be chasing after many of the hot names like Mosaic (NYSE:MOSE) and Potash Corp (NYSE:POT).
Sure, they’re great companies, well-managed, and facing incredible opportunities, but they had just gone a bit too far too fast. And then you add forced selling from hedge funds, mutual fund redemptions, rising U.S. dollar and a worsening economy, and you’ve got the makings of a massive unwarranted sell-off in commodity and mining stocks across the board. Everything was getting sold off hard, gold, fertilizer, silver, copper…everything.
It was a forced liquidation. Rogers agrees. In a recent interview with CommodityOnline.com, Rogers said, “We have had 8-9 periods of forced liquidation over the past 100-150 years wherein everything was liquidated without regard to fundamentals. This is such a period.”
The boom in agriculture stocks is slowly starting to reappear. As I say in my latest agriculture stock report, “We’re in the third inning of the global agriculture boom.”
The root cause of the agriculture boom hasn’t changed a bit. Demand is rising and supply is barely keeping up. The amount of arable (suitable for farming) land is in steep decline compared to the world’s population…and it’s only getting worse.
In 1961 there were only 3 billion people in the world. There was plenty of food to grow around. There were about 40 arable acres for every man, woman, and child in the world. That was more than enough to feed everyone.
In the five decades since, the situation has completely changed. Today, the world has about 6.6 billion people. That doubling of population has pushed the amount of arable land down to less than 25 acres of farmland per person. That’s a 37% decline in arable farmland per person…and falling.
All the fundamentals are still there and now agriculture stocks are as cheap as they’ve been in a couple of years. The world’s population is growing and the amount of available farmland is not. Nothing has changed, except an uptrend has formed.
If this is the time agriculture stocks take off, they’re going to go up for a long time to come.
Good investing,
Andrew Mickey
Chief Investment Strategist, Q1 Publishing
