We talked, in a taped telephone interview at his home in Singapore, with Billionaire Jim Rogers, legendary commodities trader, who picked the bottom of the commodities bull market in 1999. With George Soros, Jim Rogers co-founded the Quantum Fund in 1970.
Over the next decade, Quantum Fund grew by more than 3,300 percent. Rogers retired, later a guest professor of finance at the Columbia University Graduate School of Business, and still later circumnavigating the globe to firsthand discover new investment opportunities. He is widely and often quoted in the media about his views on the commodities market. Bestselling author, investment biker, adventure capitalist and widely followed, Jim Rogers talks about what he's now investing in.
StockInterview: You began investing heavily in commodities, at very close to the bottom of the cycle. What led you to believe the commodities boom would begin in 1999?
Jim Rogers: I could see that nobody had been investing in productive capacity in crude (oil) specifically. For instance, there had been virtually no offshore drilling rigs built since 1981. There had been virtually no offshore tugboats built to service the offshore rigs since 1981. In the 1970s there were dozens of them built every year. I could see that people had cut back their exploration budgets enormously. It was pretty clear that nobody had been investing for fifteen or twenty year, in looking for new (oil) fields. There hadnt been any gigantic fields discovered since the 1960s. It was clear the world reserves were running down. That had to lead to a bull market. It so happens that I got almost the exact bottom. Im not a very good market timer or trader, but I got within a few weeks of the absolute bottom to my surprise. Then you extend that to nearly everything else, whether zinc mines or lead mines or wheat production or anything else, and you have the ingredients for a new bull market.
StockInterview: Will the recent Central Bank rising interest rate policy, which is intended to deflate the commodities bull market, fail?
Jim Rogers: Well, yes. They may cause recessions, and they probably will. Weve often had recessions. That will affect some commodities markets. But in the 1970s, we had horrible economic conditions everywhere in the world, or nearly everywhere in the world. That did not prevent one of the great bull markets of all time in commodities because supply was going down faster than demand. Remember that these markets are made up of supply and demand. If the supply goes down faster than demand goes down, you still have a bull market. There will be setbacks and consolidations, but thats just the way the world works. All bull markets have corrections, as I have said before.
StockInterview: What has convinced you to stay in the commodities bull market for this long?
Jim Rogers: Throughout history, bull markets in commodities have lasted a long time. Theyve averaged about 18 years or 19 years. The shortest I could find was fifteen years; the longest was 23 years. It takes a long time to bring new production on stream for commodities. If you and I decide to go into the lead business today, weve got to go find a lead deposit. Then, weve got to try to raise money. Weve got to deal with unions, environmentalists, governments and everybody else. And put in infrastructure. It takes on average about ten years for any new mine to be opened these days, not just in the U.S., but anywhere in the world. So, thats why the bull markets last so long. Eventually, new supplies come to market, and the bull markets have always ended. But, it takes a long, long, long time for that to happen. Its not like bringing in new shares of a dot com or something, where we go into the garage and start a company and next week we sell stock. Mines and oil fields are much different animals.
StockInterview: Is the commodities bull similar to the Internet boom of late 1999? Does it have a few more years to run, as strongly as it has?
Jim Rogers: Well, theres a bit difference. As I said before, you and I could go into the garage and start a dot com company and bring it public next month. Thats a little bit different from bringing a zinc mine on stream, much harder to bring new production to commodities compared to some of these other things. I do know, if history is any guide, were now seven years into this bull market in commodities. If its going to last 15 to 23 years, were maybe a third of the way through, so we have another 9 to 16 years to go, I guess.
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James Finch contributes to StockInterview.com and other publications. StockInterviews Investing in the Great Uranium Bull Market has become the most popular book ever published for uranium mining stock investors. Visit http://www.stockinterview.com