Jim Rogers (pictured left), the bullish commodities investor, has predicted that demand for raw materials will outstrip supply for the next two decades, fuelling an extended boom. The chairman of Rogers Holdings, based in Singapore, believes the weakness of the dollar will underpin a flight towards commodities. "I don't see any adequate supply situation in any commodity market over the next decade or two," he said. "The commodities boom is not over and the bull market has several years to go. - Telegraph
Dominant Social Theme: Raw materials make a comeback.
Free-Market Analysis: Commodities' biggest bull is back in the news. Jim Rogers does like commodities and he will certainly not hesitate to point to gold or silver as an example of booming commodities, we believe.
And that brings us to one of our favorite complaints (as we collect complaints as others collect fine wines!). Gold and silver may be considered commodities but they are really MONEY METALS and have dynamics all their own.
Many people, and Rogers comes across as one of them in the media (the mainstream media being fairly simplistic) conflate money metals with, say, zinc, but this is just not the case. We are comfortable making the assessment that silver and gold will rise over the next five years (our own personal beliefs) because of the financial cycle the West finds itself in. But we do not believe, necessarily, that a financial cycle and a commodity cycle must overlap.
We are not sure where Rogers is coming from regarding commodities. We know he is bullish on silver and gold, but it does no one any service to lump money metals with commodities and predict that a bull market for one is a bull market for the other. Of course, we also note that Rogers may not be saying this. But it is an important point nonetheless - and a jumping off point to restate a favorite insight (not necessarily ours).
Conclusion: We don't believe raw material shortages will necessarily persist long term because the market will eventually even out supply and demand. But a financial cycle is not so easily ameliorated by supply and demand interactions. Gold and silver will go up in price not because they are necessarily scarce but because the fiat money system itself is in dire straits. The mechanisms are different and so are the results. Investors should keep that in mind when reading about commodities. Gold and silver are money.
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