Not to say that everything Rogers says is idiocy, but he’s a regular guest on that talking head show on Foxnews on Saturday, and he does say some pretty dumb things. For example, one thing I remember very well is that they were going around the table asking each talking head what to buy. When they got to Rogers, he said “cotton.” The other guests let out a guffaw, of course. Your average investor does not and cannot make money investing in cotton, even when the market trends are good.
Rogers is simply telling the truth from his perspective. He’s a commodities guy, not a stock guy. And right now, commodities are hot. Rogers told people back in ‘99, well before the election, Bush or the Iraq war, that we had bottomed out of the previous commodities cycle and that in the next couple of years, the easy surpluses of commodities were going to dry up.
He was right.
Right now, the best place to be positioned in the market is with companies that make/sell “stuff” - particularly those companies that make “stuff” and sell it overseas.
This was in the Financial Times today ....
http://www.ft.com/cms/s/1/c424190e-7e7f-11dc-8fac-0000779fd2ac.html
Spinning cotton Published: October 24 2007 09:41 | Last updated: October 24 2007 20:30
Lex: Cotton: the next commodity craze?
Having already helped push up the cost of meal times, Washington’s love affair with ethanol might now do the same for the shirt on your back.
Cotton is the latest commodity to feel the inflationary effect of government incentives designed to encourage US farmers to grow more corn for ethanol, a fuel additive. As land is turned over to corn, there is less acreage available for other crops. That has already fuelled a boom in wheat prices. In the 2006/07 planting season, just under 11m acres of cotton was planted – down 29 per cent on the previous year. A further drop is expected next year. And no wonder: the cotton price has risen only 17 per cent this year compared with 35 per cent for soyabeans and 67 per cent for wheat. As cotton is also trickier to grow, switching into wheat or beans is a no-brainer for most farmers.
With global inventories of cotton shrinking, there is talk of prices hitting $1 a pound, a level last seen in 1995. That is still far below the $12 level, in real terms, reached during the US Civil War. But it would mean a 54 per cent gain on the current price of 65 cents.
As with many other commodities, the actual amount of cotton that is physically traded is low. At its current price, the implied size of the annual market is $36bn, making it comparable with nickel, which tends to be volatile and has been subject to a short squeeze in the past year. And while acreage is declining in the US, high prices will encourage other producers – particularly in China,the world’s biggest importer of cotton – to grow more, causing a sharp correction. Only those investors with impeccable timing should buy direct exposure to cotton. Others risk losing their shirts