Talk of a commodities bubble is balderdash, according to legendary investor Jim Rogers: history indicates that the bull market has at least eight more years to run and may not lose steam until 2022.
And as Nils Pratley reminded Guardian readers, Rogers has proved unusually prescient since he urged others to buy into the old economy back in 1999 when gold and oil were coming off 25-year lows.
But the best bets are in agricultural commodities rather than metals, says Rogers. He singles out sugar, maize and cotton, which are 80-90% below their all-time highs after adjustment for inflation.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"The world has consumed more food than it has produced for the past five years and that's the first time in recorded history that's happened," he says, despite there being no worldwide drought for several years. With supply tight, a replay of the 1970s, when sugar prices rose 47-fold over eight years, is conceivable if supply disruptions occur again.
Not that current favourites such as oil and copper will lag far behind, Rogers argues. "Where is the copper coming from that's going to drive down the price and keep it down? Where are the mines?" Miners would love to profit from high prices, but new discoveries can take years to bring onstream and short supplies of everything from dumper-truck wheels to oil for lamps prevent them from digging faster.
Rogers dismisses those talking about a bubble as "the same people who missed the move completely and were buying dotcom stocks" when the current bull run began. But he agrees that commodities aren't a one-way bet in the short-term. A correction or consolidation, as he prefers could be triggered by anything from a slowdown in China to a bird flu outbreak in Germany.
"Something always causes consolidations and some of them will be dramatic. It could go down 20%, 30%, 40%, but I'm not going to try to time it because the bull market will still be there."
Of course, as Pratley observes, Rogers, now 63, is rich enough to ride out any consolidation', having retired at just 37. Most other long-term bulls of commodities "accept that prices are infected by speculative money", and advise investors to await a correction before venturing into the market.
