The Case for Investing in Chinese Commodity Producers

Many asset classes around the world are overvalued right now, but I recently watched a video with Mike Maloney and Ronald-Peter Stöferle (of Incrementum AG) with the latter showing a chart we may be back to 2000 valuations for commodities.

The chart above represents the ratio between the SPGSCITR commodity index (aka S&P GSCI) against the S&P 500. It just shows stocks are really expensive compared to commodities.

And if we look at the long term chart of the GSCI commodity index courtesy of trading economics, commodities are indeed back to price not seen since the end of the 90's.

Great! Let's find a GSCI ETF tracker and we should get a nice return you may think. But not so fast, as you may remember commodity ETFs are usually terrible investments due to the contango effect. But let's double-check as in the US, there are two ETF's tracking GSCI: GSP and GSG.

Those are down around 70% since May 2016. The GSCI index is also down since that time, but only about 60%, It's not that bad considering the ~15 years time frame.

However, my brokers won't let me invest directly in ETF's in the US. So instead, I looked at mining stocks like BHP and Rio Tinto listed in the US.

While both stocks are well below their peals in 2006 or 2011, they have recovered a lot since the bottom in early 2016.

So I went looking for other opportunities in the Hong Kong stock market (Hang Seng). There aren't any commodity ETFs anymore apart from Gold based ones. So we can look at the charts, earnings, dividends and P/E of some of the commodity producers. It's always more risky to selecting individual stocks, especially those depressed, as they may go bankrupt, so I personally prefer to focus on larger companies.

Petrochina 0857.HK

We are back to the year 2014 price. The company is still making profits (0.33 HKD EPS), and paid a 4.6% dividend last September. With a one trillion market capitalization, it's one of the biggest companies in the world. There may be more downside, but patient investors will be rewarded by the dividend and potentially higher price in a few years.

Sinopec Shanghai Petrochemical Company Limited (0338.HK)

Sinopec is another large Chinese oil company back to 2014's prices. The dividend yield stands at 13.49% according to Yahoo (I suppose this will be revised down), and the company is still making a healthy 0.561 HKD profit per share. Market capitalization: 37.30 billion HKD.

China Coal Energy Company Limited (1898.HK)

Still a large (57 billion HKD) profitable (0.387 HKD per share) company, but probably more risky if the Chinese government really decides to scale down on coal-powered power plants. The company also pays a 3.28% dividend. The share price is really depressed well under the IPO price in 2006.

Sinofert Holdings Limited (0297.HK)

If you believe in the long term potential of agriculture, Sinofert looks promising. The company specializes in Potash which shot up in 2007/2008, and came down hard since then. The stock is really depressed at 0.80 HKD. But Sinofert is one of the largest fertilizer producers in China, is still making money (.075 HKD per share), and pays a dividend of 2.8%. The same could have been said in 2012 however, but the longer the undervaluation remains, the more the stock may gain when the market reassesses.

All those companies also have a price-to-book and price-to-sales well below 1, and they are very unlikely to go bankrupt. In the worst-case scenario, the stock price goes nowhere, but you still get paid to wait thanks to the dividend.

Do you know of any other HK listed commodity stocks that are paying dividends, depressed, and profitable? Let us know in the comments.

Jeremy Grantham's Quarterly Newsletter November 2012 Summary

Jeremy Grantham, GMO, has just released GMO Quarterly Newsletter which includes 2 parts:

• On the Road to Zero Growth by Jeremy Grantham (16 pages)
• "Help, Help, I’m Being Repressed!" by Ben Inker (3 pages)

The first section Jeremy Grantham explains that GDP growth in excess of 3% a year for the US is a thing of the past, and going forward growth is likely to be within 0.9%  a year. Even this estimate is optimistic as resources price increases are not taken into account, and those could eventually lead us to growth very close to 0%.

Here are the key points brought forward by Jeremy Grantham:

• The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever.
• Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year, and adjusted growth about 0.9%.
• Population growth that peaked in the U.S. at over 1.5% a year in the 1970s will bob along at less than 0.5%.

• Productivity in manufacturing has been high and is expected to stay high, but manufacturing is now only 9% of the U.S. economy, down from 24% in 1900 and 15% in 1990. It is on its way to only 5% by 2040 or so. But growth in service productivity in contrast is low and declining. Total productivity is calculated to be just 1.3% through 2030, if we use current accounting methods.
• Current accounting cannot accurately handle rising resource costs. Spending $150-$200 a barrel in offshore Brazil in the future to deliver the same barrel of oil that cost the Saudis $10 will result perversely in a huge increase in (Brazilian) GDP. In reality, rising resource costs should be counted as a squeeze on the balance of the economy, as they lower our total utility.
• Measuring the non-resource balance of the economy produces the correct effect. The share of resource costs rose by an astonishing 4% of total GDP between 2002 and today. It thus reduced the growth of the non-resource part of GDP by fully 0.4% a year.
• Resource costs have been rising, conservatively, at 7% a year since 2000. If this is maintained in a world growing at under 4% and a developed world at under 1.5% it is easy to see how the squeeze will intensify.
• The price rise might even accelerate as cheap resources diminish. If resources increase their costs at 9% a year, it would take just 11 years before the economic system would be in reverse in the US! If, on the other hand, our resource productivity increases, or demand slows, cost increases may decelerate to 5% a year, giving us 31 years to get our act together.
• Increasing climate damage, reflected mainly in food prices and flood damage, is going to increase. With  any luck this will not be severe before 2030 but it is very likely to accelerate  between 2030 and 2050.
• U.S. real growth, according to GMO forecast, is 0.9% a year through 2030, decreasing to 0.4% from 2030 to 2050.
• GDP measures must be improved so that they begin to measure output of real usefulness or utility. The  current mish-mash of costs and of “goods” and “bads” produces poor and even damaging incentives. 
• Investors should be wary of a Fed whose policy is premised on the idea that 3% growth for the U.S. is normal.  Remember, it is led by a guy who couldn’t see a 1-in-1200-year housing bubble! Keeping rates down until productivity surges above its last 30-year average or until American fertility rates leap upwards could be a  very long wait! 

In the second part, Ben Inker talks about the Federal Reserve monetary policy, and even though QE managed to increase assets value, it did not really succeed in creating a wealth effect. The only one who benefited are households owning a house and carrying mortgage debt. as they could refinance their debt.  However, the other side is the coin, is that banks (such as Fannie and Freddie) have to pay the bill, and since those are owned by the government (i.e. taxpayers), as a whole there is no wealth effect. Due to low interest rates. this policy actually hurts prudent investors.

5 New "Jim Rogers" Commodities ETNs: RGRC, RGRA, RGRE, RGRP and RGRI

This week, Royal Bank of Scotland (RBS) has added five new ETNs to its offering, giving exposure to commodity indexes created by Jim Rogers:

• RBS Rogers Enhanced Commodity ETN (RGRC)
• RBS Rogers Enhanced Agriculture ETN (RGRA)
• RBS Rogers Enhanced Energy ETN (RGRE)
• RBS Rogers Enhanced Precious Metals ETN (RGRP)
• RBS Rogers Enhanced Industrial Metals ETN (RGRI)

RGRA is the ETN equivalent to RJA ETF, RGRC is the equivalent of RJI ETF and RGRE is equivalent to RJN. ETN and ETF are structured differently, but I assume the 3 new products I've just mentionned should provide similar returns to the existing ETF, unless there are important ost differences between managing those 2 different types of financial products.

The real novelty is with RBS Rogers Enhanced Precious Metals ETN and RBS Rogers Enhanced Industrial Metals ETN, which as far as I know do not have equivalent ETF products.

GEAB 69: Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it

Here are the highlights of GEAB 69 (Novenber 2012) entitled "Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it":

• Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it - The LEAP team has a controversial view that says Sandy, a small storm that has put New York to its knees, has shown that America has greatly weakened, and that it's the country we once knew anymore. In this section they also address the political division of the US and its dire financial & economic situation.
• 2013, the king is naked: The great geopolitical dislocation of America. - The US economy is slowly but surely weakening, and 2013 will be the year of the real crisis where the "dollar wall" will collapse.
• China 2013 : The global riot laboratory - A view of riots in China, and their consequences.
• A Canadian Tragedy – The Slump of its Real Estate Market - Contrary to the view of Canadian banks who see a market stabilization, LEAP believe the recent slumps in Toronto and Vancouver announced the popping of the Canadian real estate bubble.
• Strategic and operational recommendations. Currencies may remain irrational for a little longer, it's not to late to escape from the stock market, get physical Gold and do not play short term trades, energy commodities are better for the long term, but may suffer in the short term, and it's really not a good time to invest in Canadian real estate..
• The GlobalEurometre - Results & Analyses. Only 65% of respondents expect the dollar to go down, which is the lowest figure since the survey started.

The full GEAB 69 report (PDF format) is available to LEAP 2020 subscribers for 200 Euros per year for 10 new issues + the 6 issues published before registration.

Jeremy Grantham's Quarterly Newsletter July 2012 Summary

Jeremy Grantham, GMO, has just released GMO Quarterly Newsletter. This time there are 2 sections:

• "Welcome to Dystopia! Entering a long-term and politically dangerous food crisis" by Jeremy Grantham (17 pages)
•  When Bad Things Happen to Cheap Assets by Ben Inker (4 pages)

The first part is basically an update of last year April newsletter entitled. "Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever" where he discusses constraints on resources and particularly food, water and energy, and the lack of awareness by the media and authorities saving some military establishments.

Here are the key points brought forward by Jeremy Grantham:

1. Last year, GMO reported than we are 10 years into a paradigm shift or phase change from falling resource prices into quite rapidly rising real prices.
2. It now appears that we are also about five years into a chronic global food crisis that is unlikely to fade for many decades, at least until the global population has considerably declined from its likely peak of over nine billion in 2050.
3. The general assumption is that we need to increase food production by 60% to 100% by 2050 to feed at least a modest sufficiency of calories to all 9 billion+ people plus to deliver much more meat to the rapidly increasing middle classes of the developing world.
4. It is also widely assumed that at least the lower end of this target will be achieved. Grantham believes that this is substantially optimistic. At very best, if we reach that level we will not be able to hold it. Much more likely, we will not come close because there are too many factors that will make growth in food output increasingly difficult where it used to be easy:
   
   • Grain productivity has fallen decade by decade since 1970 from 3.5% to 1.5%. Quite probably, the most efficient grain producers are approaching a “glass ceiling” where further increases in productivity per acre approach zero at the grain species’ limit (just as race horses do not run materially faster now than in the 1920s). Remarkably, investment in agricultural research has steadily fallen globally, as a percent of GDP.
   • Water problems will increase to a point where gains from increased irrigation will be offset by the loss of underground water and the salination of the soil.
   • Persistent bad farming practices perpetuate land degradation, which will continue to undermine our long term sustainable productive capacity.
   • Incremental returns from increasing fertilizer use will steadily decline on the margin for fertilizer use has increased five-fold in the last 50 years and the easy pickings are behind us.
   • There will be increased weather instability, notably floods and droughts, but also steadily increasing heat. The last three years of global weather were so bad that to draw three such years randomly would have been a remote possibility. The climate is changing.
   • The costs of fertilizer and fuel will rise rapidly.
    
5. Even if we could produce enough food globally to feed everyone satisfactorily, the continued steady rise in the cost of inputs will mean increasing numbers will not be able to afford the food we produce. This is a key point that is often missed.
6. On the positive side, scientists are now very optimistic that they will be able to engineer more efficient photosynthesizing “C4” genes (corn belongs to that family) into relatively inefficient but vital “C3” plants such as rice and wheat, in 20 to 30 years. If successful this would increase output up to 50% and would buy time for a less painful transition to a sustainable population.
7. Many of these increasing difficulties were reflected in the original 2008 food crisis and the 2011 rebound. The last six weeks’ price rise is more threatening because it occurred despite very much larger plantings than were available in 2008. Global demand is now so high and rising so fast and reserves are so low that price sensitivity to weather setbacks has become extreme.
8. It seems likely that several countries dependent on foreign grain imports have in fact never recovered from the 2008 shock. Countries like Egypt saw the percent of their consumer budget for food rise to 40%. At this level, social pressures may be at an extreme and probably have already contributed to the Arab Spring.Any price increases from here may cause social collapse and a wave of immigration on a scale never before experienced in peacetime. Another doubling in grain prices would be catastrophic.
9. Strong countermeasures to prevent a food crisis would be effective in curtailing the current crisis and preventing the development of a much greater crisis, but these measures will likely not be taken. This is because the price signals for the rich countries are too weak – they can afford the higher price – and there is inertia in all parts of the system. Also, the problems of malnutrition in distant countries are not generally felt as high-order priorities in the richer countries.
10. If food pressures recur and are reinforced by fuel price increases, the risks of social collapse and global instability increase to a point where they probably become the major source of international confrontations. China is particularly concerned (even slightly desperate) about resource scarcity, especially food.
11. The general public, the media, the financial markets, and governments badly underestimate these risks. Only the military of some countries, including the U.S. and the U.K., seem to appreciate them appropriately.
12. Natural gas supply increases buy some time, mainly for the U.S., but seem more likely to create complacency and continued dependence on hydrocarbons. The energy situation is less pressing globally in the short term than is the food problem. Supplies are sufficient to cause merely a slow and erratic price increase. The main problem with oil is in its contribution to the food problem through higher farming costs and generally increasing cost pressures on poorer countries.
13. In the longer term, in contrast, energy costs and absolute shortage in the case of oil form a serious problem second only to food shortages and will result in prices so high that they will impact global growth and even the viability of modern, rather fragile, economies.
14. On paper, though, the energy problem can be relatively easily addressed through very large investments in renewable and smart grids. Those countries that do this will, in several decades, eventually emerge with large advantages in lower marginal costs and in energy security. Most countries including the U.S. will not muster the political will to overcome inertia, wishful thinking, and the enormous political power of the energy interests to embark on these expensive programs. They risk being left behind in competiveness.
15. Availability of metals is, in contrast, a minor problem in the next few decades. The prices will steadily rise but the consequences will be less. In the long run though, metals are the most intractable problem. There is no brain-intensive solution as there is for agriculture (i.e., organic farming), nor is there any capital-intensive or technology-intensive solution as there is for energy. We will just slowly run out and prices will rise.
16. The results of these problems will be felt mainly as price pressure in rich countries. The need to obtain adequate resources will squeeze national budgets, profit margins, and economic growth. For poor countries, though, it is literally a matter of survival.
17. We are badly designed to deal with this problem: regrettably we are not the efficient species of investment theory, but ill-informed, manipulated, full of inertia, and corruptible. Only once in a blue moon – like World War II – do we perform anywhere near our theoretical capabilities and this time the enemy is amorphous and delivers its attack very, very slowly. But the stakes globally are very high indeed. We must try harder.
18. The following comments on this topic are Jeremy Grantham's personal comments and reflect his Foundation’s portfolio. These comments are based on a time horizon of 10 years and beyond. The portfolio investment implications are that investors should expect resource stocks – those with resources in the ground – to outperform over the next several decades as real prices of the resources rise. Farming and forestry, though, are at the top of the list. Serious long-term investors should have a very substantial overweighting in a resource package. He suggests for long-term investors a resource position of at least 30%. Another relative beneficiary of resource pressure is the quality group of equities. Resources are a smaller fraction of final sales than average and higher profit margins make them more resilient to margin pressures.
19. Perhaps more importantly, the resource squeeze, coupled with other growth-reducing factors (to be discussed next quarter), is likely to reduce the return from the balance of the portfolio.

The second part, Bne Inker explains that bad things can also happen to cheap assets, and as expensive assets usually return to fair value, it is possible that the new value if indeed a permanent adjustment, as in the case of banks in 2008, and possibly Eurozone equities which are now 15% below fair value according to GMO methodology. GMO has increased Eurozone equities allocation (and become overweight), and Ben discusses the potential capital impairments or gains ahead.

Marc Faber: China is Weak, Don't Short Commodities and Buy Europe

Marc faber is interviewed on CNBC on the 15th of July to discuss the (fake) Chinese GDP number and his outlook on commodities and stocks

His view is that China economy is much weaker than  expected, and there should be some stimulus. He would not short Copper, because it can be easily manipulated, and rally in commodities could be in the making.

He sees good investment opportunities in Europe in countries such as Spain, Portugal and France.

Time to Buy Commodities Again?

Commodities have gone down by nearly 30% (CRB Index) since Q2 2011. If you are a believer that money printing by central banks will eventually increase commodity prices despite the poor economy, it may be a good time to buy again.

Let's have a look at the CRB index chart (Source: stooq.com) since 1994 and draw a trend line.

This is a "dumb" method to time your investments, but it can be terribly efficient. Since the start of the bull market in 1998, the CRB index has rebounded 3 times on this trend line, and we are now very close to hitting it again. We have about the same buy signal has we have on Gold and Silver. So it might be a really good time to increase exposure to commodities (or get back into commodities).  Although the bull market is getting old (14-year), many projects have been cancelled or delayed in 2008 which should give more legs to the bull market on top of money printing by central banks.

For individual investors, the easiest way to get exposure is to buy commodities ETFs such as RJI, or funds composed of commodity stocks such as Carmignac Portf Commodities A. As usual check the chart of the ETF or mutual fund against the index tracked over at least 2 or 3 years to make sure you are not scammed into paying high fees and that the financial product you plan to buy suffer from excessive decay.

Investing in Natual Gas Revisited - FCG ETF

I've been keen on investing in natural gas for well over a year, and the timing hasn't been right until now. But with natural gas spot price dropping below 2 dollars per million British thermal units (MBTU) yesterday, and hitting a 14-year low, I thought I might deal with this investment idea again.

First let's make the case for investing in US natural gas.

The best time to buy commodities is when they are depressed. Let's have a look at US natural gas for the last 15 years (Source: IndexMundi.com)

The price is now back to 1997/1999 levels, right before the start of the massive commodities bull market and massive monetary inflation by central banks do not appear to be affecting natgas price.

If you think a 15-year low might be a good investment opportunity, what about an inflation adjusted 36-year low?

Source:Our Finite World

This chart was updated in January 2012, when natural gas was still above 2 USD per MTBU and it has since dropped to 1.98 USD per MBTU, so we are at least at a 36-year low (or very close to it) when adjusted with official inflation numbers.


Pundits explains the price is low because of the glut of natural gas attributed to new technologies such as fracking, and this is certainly a very good point. But there is another aspect which is very bullish for US natural gas: international gas market. Russian natural gas and Indonesian LNG are still in a upward trend, and currently Russian natural gas is over 6 times more expensive than US natural gas as shown in the 15-year charts below (Source: IndexMundi.com).

Russian Natural Gas (1997-2012)

Indonesian LNG (1997-2012)

Natural gas is not has easy to transport as crude oil for example, but one of the issue is the lack of LNG terminal with the ability to export liquefied gas to international markets which would increase the price of natural gas in the US and help decrease the cost of natural gas overseas. According to Wikipedia, there is only one liquefaction terminal (for export) in Alaska for the whole US, but there are 13 regasification terminals (for import). There are 2 proposed liquefaction terminals in Louisiana and Oregon. Once completed, the US will be able to export more natural gas and hopefully take advantage of the differential between local and international prices.

Finally, Crude Oil (WTI) to Natural Gas price Ratio stands now at over 50, whereas the historical norm has been around 8 to 10. See chart below (Souce: stockcharts.com)

So that means for a given amount of energy natural gas is about 5 times cheaper than crude oil. In reality, this is obviously not that easy as those 2 fuels are not interchangeable, but companies may start to invest more in power plant and transportation that can accommodate natural gas.

Now we have made the case to invest in natural gas, let's see how it can be done

There are some ETF to invest in Natural Gas such as UNG (USA) that are supposed to track natural gas price. However, their cost (due to diverse costs and contango) is prohibitive so that I would really advise against investing in those, unless you are able to correctly guess the price of Natgas within 3 months. Those types of ETF will go to zero by design.

You could potentially invest in companies such as Chesapeake or SandRidge Energy (SD), but if natural gas stays too low for too long some of those companies may go bankrupt and you'd lose all your investment. If you have enough capital, you could buy a list a companies involved in natural gas extraction and exploration, but for most of us, the simplest is to invest in mutual funds or ETF.

First Trust ISE-Revere Natural Gas Idx (FCG) is an ETF tracking ISE-REVERE Natural Gas Index which is composed of the stock of companies dealing with natural gas production and exploration.

Let's see how FCG fared in the last five years (Source: Yahoo Finance).

The first obvious thing is that it tracks natural gas rather poorly. FCG followed the price hike in 2008, but since 2009 it has more or less tracked the performance of the S&P 500. This makes me a little uneasy to buy FCG right now, but in case of further weakness (at least  below 15), it might be interesting to start buying this ETF to have some (limited) exposure to natural gas.

I'm not fully satisfied with this method of investing in natural gas, but it's the best I've found so far. If you have better ideas, let me know.

I've also seen some companies are selling Oil and Gas Royalty Rights, but I have not checked this into details yet, as it may not be easy to access such investment for oversea investors.

Jim Rogers on Crude Oil, Gold, Silver and Agriculture Commodities

Lots of media appearance by Jim Rogers this week. Here's an awesome interview by VisionVictory, where they discuss crude oil, precious metals, commodities, the future of the US dollar and potential civil unrests.

Jim Grant: How About Capitalism, Ben Bernanke ?

James Grant is interviewed on Bloomberg and the 13th of March 2012 after the federal reserve meeting.

He first talks about the Federal Reserve monetary policy and the bond market.

He explains that by distorting interest rates, the Federal reserve has suppressed price mechanisms and with little value in bonds (he calls the bond market a "desert of value"), many people flock to high yielding junk bonds.

Ben Bernanke

He also "translates" terms of Bernanke speech:

• Highly accomodative = high manipulative
• Quantitative easing = money printing

He explains that Gold price is a function of the action of central banks and note that the ECB has increased its balance sheet by an astounding 89% on an annual basis, the British central bank by 67% and the fed by only 15%. All those numbers are unprecedented and the way they do it is by simply taping numbers on a computer screen.

Jim Grant also took a stab at Warrent Buffet's "Stocks outperform Gold" by showing a chart between 1996 and today with the prices of Gold, sugar and Coca-Cola stock. During that period Gold was the best performer, followed by sugar and then Coca-cola. He explains that valuation is important. Whereas Coca-cola had a PE ratio of 39 in 1996, it now has a much better 16 PE ratio. He also mentioned that while Gold is now the refuge of the fearful, back in 1996, Gold was considered to be the refuge of the idiots. :)

Finally he says he's bearish on the Chinese economy and worries about the consequence of a Chinese slump, since many people think the Chinese have found the formula to make it work...

Baltic Dry Index Near All Time Low

The Baltic Dry Index (BDIY) now stands at 784 USD, basically at the lowest level it reached in November 2008 as you can see in the 5-year chart below.

This index tracks the price of shipping (by sea) and shows an oversupply of ships vs demand for shipping. I've seen some reports saying that this slump is due to the delivery of ships ordered during the boom in 2006/2007 to meet demand. There is indeed a long leadtime to manufacture large vessels. However, this indicator could still confirm the recession call by Hussmann and ECRI as well as a sharp correction for industrial commodities. I've also seen a 12-year chart that shows we are near all time lows.(Sorry I can't find it back).

Another metric for maritime traffic can be the Guggenheim Shipping ETF (SEA), composed of shipping companies. It has also been dropping sharply since February 2012 (-50% top to bottom), although it has stabilized during the last 4 months. The 2-year chart can be seen below.

Both the Baltic dry index and SEA ETF either indicate serious economic troubles ahead, or they have bottomed out and the SEA is a buying opportunity. I know where I stand at the moment...

I previously wrote about BDI in February 2011, as I was worried it would on industrial commodities. In retrospect, it would not have been a bad time to sell stocks and commodities.

Jim Rogers: Short Emerging Markets, Long Base Metals

Jim Rogers is interviewed by ETNow (India) on the 13th of January 2012.

He explains he sees the markets faring relatively well in 2012 because there are 40 elections in the world this year and politicians will spend money to get reelected. However, we may have a serious crisis coming in 2013 or 2014. In 2012, he seems particularly bullish on base metals. He is still short on emergent markets such as Indian, Brazil and Indonesia because they went up too much, too fast.

When asked about Gold, he says he owns it, do not plan to sell, but do not plan to buy for now as Gold has been in a bull market for 12 years without yearly corrections.

6 Video Interviews With Jim Rogers

TheStreetTV has uploaded 6 short video interviews with Jim Rogers on the 6-7 December 2011.

2012 Investment Strategy

Fed Is the Worst Central Bank

Own Japanese Stocks for 2 to 3 Years

Adam Smith for President?

China's #1 Problem

Euro Will Survive 2012

Jeremy Grantham Quarterly Newsletter December 2011 Summary

Jeremy Granthan from GMO has just released its Quarterly Newsletters entitled "The Shortest Quarterly Letter Ever".

Yes, it's short, it's just 4 pages long and comprise a list of notes to himself, subject that he plans to write about mainly:

• Caution is advised due to the situation in Europe.
• The U.S., and to some extent the world, will not easily recover from the current level of debt overhang.
• Western world will know a period of slow growth due to population dynamics and lack of savings especially in the US and the UK.
• US income gap inequality.
• Equity markets have been absolutely bombarded by bad news since last spring.
• Profit margins are likely to decrease.
• “No Market for Young Men.”: A market forecast of the market (S&P 500) based on previous bear market and showing it return below 1000 and staying there for about 10 more years.
• Underweight equities until the market becomes cheap again or during the next 3rd year of the presidential cycle (2015) whichever comes first.

Finally he gives some recommendations:

• Avoid lower quality U.S. stocks but otherwise have a near normal weight in global equities.
• Tilt, where possible, to safety.
• Try to avoid duration risk in bonds. For the long term they are desperately unattractive.
• I like (personally) resources in the ground on a 10-year horizon, but I am nibbling in very slowly because, as per my Quarterly Letter on resources in April 2011, I fear a major short-term decline in commodities based on a combination of less bad weather – which has been bad, but indeed less bad – and economic weakness, especially in China. Prices have declined, often quite substantially, since that letter. However, I believe chances for further price declines in resources are still better than 50/50 as China and the world slow down for a while, and the weather becomes a bit more stable.
  

You can read the complete 4-page newsletter available for free on GMO website.

Marc Faber: Chance for Hard Landing in China

Interview with Marc Faber on CNBC on the 2nd of December 2011.

He talks about the Chinese economy and explains it's likely to have an hard landing.
If the Chinese economy slows down, commodities price goes down and country such as Brazil, Canada, Australia will all be affected.

Jim Rogers: The US is Becoming More and More Dictatorial

Very interesting 40 minute interview of Jim Rogers by Alex Jones (prisonplanet.com).

They talk of the current economic situation in Europe and US, why Jim Rogers has move to Singapore (for is daughters), the loss of freedom in the US, Jim Rogers current investment themes (commodities), his views on Silver and Gold and more.

How to Invest in Water with ETF

Many emerging countries such as China and India have a large population and are growing rapidly. This put strains on water resources that are needed for agriculture and industry. Jim Rogers who is a well know long term bull on China, said the only thing he can think of that may change China success in the 21st century is if China does not manage its water issues properly.

It's not practical to store potable water as an investment and if you were able to do so, your government would probably seize it if there was a real water crisis. An easier way to invest in Water is to buy companies that provides pipes, valves and solutions to water treatment. You can invest via 2 ETF:

• PowerShares Water Resources (PHO) an ETF focused on small and medium US companies such as Valmont Industries and Badger Meter.
• PowerShares Global Water (PIO) an ETF focused on medium-sized to large international companies such as Suez Environment and KSB Aktiengesellschaft.

Investing in water companies is probably a long term bet (5 to 10 years or more) and you should probably not expect rapid gains, especially in the current environment.

Jim Rogers: Agricultural Supply Problem is Serious

Jim Rogers interview on Fox Business news on the 2nd of November 2011.
He explains his view on the situation in Europe and the US regarding debt issues, mention commodities bull markets during economic hard times and tells his worry about agricultural supply issues including the worrying aging of farmers. (Average farmer age in the US: 58, Japan: 66 and Australia: 66).

Jim Rogers: Bernanke Has Already Announced QE

Jim Rogers is interviewed on CNBC's Larry Kudlow on the 10th of October 2011.

He discussed about the current bailout of European banks and called for letting the market work and let bad banks fail.

He's still long commodities and expects the ECB and FED to print more money.

QE is already there as Bernanke said interest rates will be kept low for 2 more years.

Jim Rogers BBC Interview - 26 August 2011

Interview transcript:

Jim Rogers: I hope it's only one decade of loss that we lose in America. Japan has had two lost decades now, as you probably know, and America is in much, much, much worse shape than Japan.

America is the largest debtor nation not just in the world, Justin, in the history of the world. We have serious problems. They are not addressing the problems in America. So I hope it's only one or two decades we lose. It may be three or four.

Justin Rowlatt: So what do American politicians need to do?

Jim Rogers: First they need to get a little education about the rest of the world and about their own economic situation and then we have to change our tax code dramatically. We have to cut spending with a chainsaw; not with an axe, with a chainsaw.

We got troops stationed in over 120 countries around the world. I mean the politicians have sent them there you know, and those military establishments are making things worse for America, not better. We got to change our total way of thinking just as the British did when the British started facing reality.

Justin Rowlatt: When you say face reality, you seem to be suggesting that the age of American supremacy is over?

Jim Rogers: Absolutely, aren't you? Listen to the BBC and you will hear what's going on in the world. The 19th century was the century of the UK, the 20th century was the century of the US, the 21st century is the century of China, of Asia, Justin.

I mean, here is a simple fact. The largest creditor nations in the world now, Justin, are China, Korea, Japan, Taiwan, Hong Kong, Singapore. Those are all Asian countries. This is where the assets are. This is where the energy is, the dynamism is. You know who the debtors are and where they are.

Justin Rowlatt: I mean the Chinese economy, for example, just to take one Asian economy, isn't looking so healthy itself, is it? I mean, yes, it's still growing, but there are these real concerns about inflationary pressures within the economy, which could derail Chinese growth, couldn't they?

Jim Rogers: Extremely insightful of you. Yes, China has got some problems and they will continue to have problems. Fortunately, they realised the problem. They are trying to cut back on the inflation.

They have made some mistakes too. They should have opened their currency to make it a convertible currency. The fact that it's not convertible and all that money trapped in China is just adding to the inflation. So yeah, they are making mistakes too. Still, I'd rather be with the creditors than with the debtors any day.

Justin Rowlatt: I suppose what I am suggesting is that you look at America, you look at Europe, you even look at China and India, the two great Asian behemoths, and you see problems across the world economy. Are we entering now a period of slow growth globally?

Jim Rogers: Oh, yes. Yes, yes, absolutely. If that's what you meant, there is no question about that. You just pointed out that China has got its own problems, but this is the way the world has always worked. We have gone through long periods when things were great followed by long periods when things slowed down for a while and we cleaned up mistakes of the past.

Justin Rowlatt: So you think we are entering one of these cyclical periods of slow growth worldwide?

Jim Rogers: Unless you know something I don't know, yes, absolutely. The only areas of the world economy I see that are going to be dynamic are natural resources; farming is going to be one of the best professions of the next 10 or 20 or 30 years.

Justin Rowlatt: You seem very sanguine about it, but you don't seem very worried by it?

Jim Rogers: No, not at all. The world has been going through big changes like this throughout history. In the '20s and '30s, the world moved from the UK to America exacerbated by a financial crisis and mistakes made by politicians.

The world is going through a historic shift again from the US to Asia exacerbated by a financial crisis and mistakes made by politicians. Justin, the world has been going on for a few thousand years and there have always been big changes and adjustments.

At some times in history, the financials types have been in charge; at other times in history the people who produced real goods have been in charge. It's the way the world has always worked. The key of course is to figure out what's coming next and go there. Become a Chinese farmer, that's what you should do, Justin.

Justin Rowlatt: You say farming, why do you think farming will be such a crucial sector in the next couple of decades?

Jim Rogers: Farming has been a disaster for 30 years, Justin. The average age of farmers in America is 58 because it's been such a horrible business. The average age of farmers in Japan is 66. In Australia, it's 58. I could go on and on. In 10 years, those farmers are going to be 68 if they are still alive.

Justin, we have huge shortages developing in agriculture and great fortunes are going to be made by the people who address those problems.

Justin Rowlatt: And commodities is the other sector you said we should look up. Now hold on a second. If the world economy is entering a period of slow growth that you think is going to last not one decade but a number of decades, why on earth would you put your money in commodities?

Jim Rogers: Because you asked where the best areas of the world economy are going to be, that's where the shortages are developing. In the 1970s, most of the world's economies were in the tank, but commodities boomed.

Justin, we had one of the great world markets of history in commodities for about 15, 20 years in the '70s, between the '60s and the early '80s in commodities, because we had huge shortages everywhere and because governments everywhere printed money.

Well, governments are printing money again. It's a wrong thing to do Justin, but that's all they know to do. So between shortages of supply and money printing, if you want to be in the dynamic parts of the world economy, don't get an MBA and go to Wall Street, go and get a farming degree and move to Asia.