SUBSCRIBE
NOW!

Jim Rogers - How He Became a Commodities Trader

thejimrogersblog

Wed. May. 11, 2011 12:17am

For the latest Jim Rogers, go to http://JimRogersBlog.com -

In the investment business, Jim Rogers invested in everything both long and short. He came from a rural part of Alabama, but his family weren't farmers. He began investing in commodities because it looked like that was the major bull market at the time.

When it was time to invest in commodities at that time, there weren't any proper indexes to invest in. Because of that, Jim Rogers had to sit down and create his own index that reflected the cost to live all around the world. Dow Jones didn't even know that they had a commodities index. You shouldn't put a penny of your money there.

At times, the investment banks had huge commitments to commodities. They got out during the 80s and 90s because there was a bear market. Now they are starting to come back. The go to whatever is hot because that is what is easy to sell. In 5, 10, 15 years, they will come back to commodities in a big way.

By definition, rising prices is inflation. Central banks are printing huge amounts of money all over the world. There are supply demand imbalances compounded by the central bank printing money. Who knows what will happen at the end of the bull run. At the end of bull markets, things get wild and hysteria.

When prices get so extraordinarily high, that will reduce demand, and that is one of the factors that will lead to the end of the bull market. Normally, Jim Rogers has gotten out too soon, because he can see what is happening. But the prices can double very quickly at the end of a bull market. But it is the most dangerous part of the bull market.

The US Dollar is a terribly flawed currency. It is going into its demise over the next couple decades. That commodities are traded in dollars will be a factor on their prices. 100 years ago commodities were traded in the Pound Sterling. But that changed, and now they are traded in the dollar. That too will change.

India and China have 2.3 billion people, but their economies combined are still only a tenth of the size of the US and Western Europe. So they aren't as big of a factor right now, but that will slowly change.