Rosco

Kitco 2012 gold view

http://www.businessweek.com/video/#video=BkYTQ4Mzq-41gBMpzUhNezpik_9aC-FM

Dont know if this has been posted elsewhere.....

Jim Rogers: Stop Buying Gold; Buy Agriculture Stocks

Robert Zurrer

August 5, 2011

Jim Rogers is good at what he does. Really good. This masterful investor co-founded with George Soros the Quantum Fund. A fund that posted astonishing returns of 4200% in 10 years, over the same period the S&P gained a mere 47%. Rogers retired 31 years ago in 1980 at the age of 37, but is still active as a private investor.

Clearly one of the most successful investors of all-time, Rogers buys value. Accordingly, in 1999, he predicted a "Supercycle" commodity bull market, raw material prices advancing for longer than in any previous uptrend led by gold and silver. At that time, gold was trading near its low at $252, the lowest real price in nearly a 100 years, and silver at $4, the lowest real price in 5000 years.

Click on the chart "The real price of gold 1344-1988" for a larger image.

With gold up 650% from its lows and silver with an even greater gain - obviously Rogers was right.

Rogers has stopped buying gold now. "I wouldn't buy more gold and silver right now" "I don't like to jump on a moving bus". That doesn't mean Rogers is selling, he still believes that "gold is certainly going to go to $2,000 over the years; it looks like it's going to go much higher during the course of the bull market.". Even after soaring to an all-time high of $1678.25 on August 4th, 2011, Rogers thinks "gold prices are not in a bubble because not everyone is buying yet". Right now Rogers is moving towards a greater commodity opportunity that he thinks offers the same kind of values that gold and silver did a decade ago.

Agriculture: The Next Big Bull Market

Consistent with his devotion to buying undervalued assets, he now sees the same quality of values in agriculture that he saw in gold and silver. No, he's not selling his gold and silver, but he is predicting that:

Agriculture prices are still, on a historic basis, extremely depressed, and in my view I'll probably make more money in agriculture than other things.

Rogers thinks that the current commodities supercycle will last for 20 to 25 years, a view supported by the research of Chris Watling of Longview Economics. Whatling traced secular bull cycles back to 1750 and identified that commodity super cycles last 20 to 25 years. As this commodity bull started in 2000, if Whatling and Rogers are correct, this bull will run higher until 2020-2025.

In short, if you missed buying gold and silver at extremely depressed levels, if you missed participating in what Peter Grandich calls The Mother of all Bull Markets, Rogers thinks you have another great chance to buy into an imminent bull market at great value:

It's about demand and low historical prices. Rogers said:

If the fundamentals weren't right the price would not go up. Many people invested in commodities in the 1980s and 90s and didn't make any money because the fundamentals were bad, now people are investing and making money because the fundamentals are good.

There is a powerful underlying demand for food. When food prices surged in 2007 millions went hungry, and there were riots from Egypt to Haiti and Cameroon to Bangladesh. Rioting calmed down in 2008 when prices dropped, but starting at the beginning of 2009 they’ve been going up and Rogers expects "more turmoil, but I didn't expect it to happen this quickly because food prices are somewhat depressed". Clearly a bull market rise from current levels will cause even more starvation, riots and urgent demand.

The FAO Food Price Index measures the prices of Dairy, Oils & Fats, Cereals Sugar & Meat.

On the longer term chart, real food prices were more expensive in 1917 than they are here today. Demand is there. Agriculture will be "wildly exciting" as global food shortages worsen, according to Rogers. "You pick an agriculture product and I'll say buy it," he said. Shortages are showing up right now as the world population has more than doubled from 3 billion in 1960 while the amount of arable farmland has been decreasing. If the world population rises from its current 6.8 billion to 9.1 billion by 2050 as the United Nations forecasts, a lot of people are going to be scrambling for food.

Click on the 1900-2008 FAO Food Chart for a Larger Image

What to Invest in to Take Advantage

Good advice from Daniel Keirnan in his article "Farmland Investment, the next big Portfolio":

The question is what are the best ways for making money from the agricultural sector? One way is to invest directly into agriculture stocks such as farm equipment maker John Deere (DE), global seed giant Monsanto (MON) or fertilizer company Potash Corp of Saskatchewan (POT).

Another method is to invest in agricultural futures through Exchange Traded Funds (ETFs) such as AIGA on the London Stock Exchange or DBC in the US which tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs. These commodities ETFs try to track the spot price of the various commodities they include.

The advantage of these stocks or ETFs is that they are easily trade-able by anyone who has an online brokerage account. The disadvantage, however, is that they are still financial instruments, and as such can fluctuate widely in price.

One option most individual investors tend to overlook is direct investment in farmland. In many ways, a farmland investment is more secure, stable and tangible then putting money into stocks.

Farmland investments for individuals will pay a regular yearly dividend from the sale of crops, and also provide the opportunity for long-term capital gains as farmland increases in value during a bull market in food.

Don't buy gold now. Rogers says food and agriculture are great values and will be the next big demand driven bull market.

http://seekingalpha.com/article/285115-jim-rogers-stop-buying-gold-buy-agriculture-stocks

If it's not just a mistake / glitch then it puts into context the puny 26,800,000 ounces left at the Co(n)mex.

 

Remember nowadays with registered stock they have tight limits on the amnt of contracts that u can carry into the expiry month....so most will just roll it to the next active month as the exchange will not allow a dominant position...I'm not sure of the silver number but for gold it is 3000 lots ( 300,000 oz gold) which is not huge for someone trying to make a play on it

Interestingly in the options the market has a big skew to Puts. A couple of reasons;

- When spot was $30ish a lot of producers hedged themselves by buying $20 Puts and selling $50 Calls. The calls are now ATM and Puts way OTM so market makers massively short downside strikes.

- At these levels a lot of funds are hedging their longs as too much of crap shoot right now. Also hearing a lot of Swiss bankers advising clinets to hedge at these levels as well.

Chinese are top spenders on prime property

 

Buyers from mainland China are now the biggest spenders in the prime central London property market, overtaking Russians as the buyers of the most expensive houses over the past year, according to new research.

 

Chinese buyers spent an average of £6.5m on top-end property purchases in the 12 months to the end of February, outspending the 60 other nationalities that have bought in London over the same timeframe.

 

According to figures from Knight Frank, investors from Malaysia and Hong Kong were the next biggest spenders, paying average purchase prices of £6.2m and £5.5m respectively.

 

Overpriced London properties are being sold with real enthusiasm in Hong Kong

Here is the Knight Frank quarterly review for Prime London

http://resources.knightfrank.com/GetResearchResource.ashx?versionid=556&type=1

Chinese are top spenders in Prime London property

http://www.ft.com/cms/s/2/054b7c32-570e-11e0-9035-00144feab49a.html#axzz1Hj9zDZq1

Folks, this presentation lasts an hour, but it really is excellent.

 

I am halfway through and just heard this line which I loved. 'There's no way out. It's either austerity-induced collapse or debt-induced collapse.'

Just finished the final video...your right Dom really excellent......

What do you read into that?

With the ATM vols lower that obviously indicates an expectation of lower price dispersion than from start of year.

With the OTM options it is more interesting. Generally for the majority of the recent PM moves higher the OTM Calls have traded at a much hgher vol that the OTM puts (indicating bullish speculative activity). We are now seeing short date OTM Puts trading higher than equiv OTM Calls in both Gold & Silver which indicates demand for Put protection. I understand this is speculator hedging in gold and producers hedging in silver.

One thing Ive noticed is that option volatility for PM's have been sold heavily since the start of the year.

1 month Gold was 24%, now 20%

1 month Silver was 39%, now 31%

1 month Palladium was 44%, now 32%

Also OTM skew moved more to Puts than b4

Similar story for long dates as well

From the article in the link. TBH he doesn't really know what he's talking about... I expected better reporting from the FT.

Hmmm..... not too sure about that.

I would say he raises some interesting points ie I agree with him gold is very difficult to value.

I dont know whether it is worth $500 or $5000... I guess he is just saying it is a little higher than historical data suggests it should be against other items.

FT article on valuation of gold;

http://www.ft.com/cms/s/0/33aba278-1a96-11...l#axzz1AeLkzqvU

Dan Norcini. Sounds to me as if we could see the G/S ratio go further down over the next few weeks.

Was looking for option quotes on the Gold/Silver cross but no one seems to quote.

Silver options on the futures dont look that rich to me. Dec 2011 $50 Calls trading at 65cents...

You could try the HSBC site as it is comprehensive and lets you get valuation for specific sites.

That worked perfectly, thanks for the heads up...

I used to use the Hang Seng page for property values but that site doesnt seem to work anymore. Does anyone know of an alternative site to value specific properties?

As I said at the time (6th Oct '09) the is no chance gold will go back below $1000. We took over a year and half to break through it, a massive inverse head and shoulders was built. When the break out from it happened it was the last we will see of sub $1000 gold.

 

There is always to much talk of pullbacks on here, it stops people buying when they should have IMO.

 

I agree it's unlikely. Looks like the market is pricing in a 20% probability that we hit 1000 within the next 12 months.

Very large buying of PAAS (Silver) Puts today.

Nov OTM strikes trading in large volume

Sure, what I'm saying is this much heralded target was considered a dead cert by Sinclair. If the target falls well short of the mark, and that target was based on his view of hyper-inflation, then it would be sensible to question his view of hyper-inflation...... and how it would play out. Rather than rejecting hyper-inflation outright, this may just involve modifying it to fit in more with present day events.

 

 

Don't believe everything you read on the net ......and I'm not sure if Bubb would consider himself a hyper-inflationist....

 

 

Jim Sinclair Bets a Million Dollars Gold Price Will Hit $1650 before the 2nd Week in January 2011

 

http://www.goldprice.org/gold-news/2008/04...llars-gold.html

I wonder what odds he wants for that bet ? I'm assuming pretty long..........

This article from Mish in Jan 07 seems prescient given the gold / deflation story

http://globaleconomicanalysis.blogspot.com...nd-k-cycle.html

That the Yen should continue to strengthen is predictable in hyper-deflation. Core funding currencies will strengthen due to "short-covering".

 

 

 

 

The article is full of half truths. Here is another one; that gold is not really an investment. Too right! Yet the author fails to perceive gold is in the process of being re-monetized... ie, increasingly performing the function of a currency for both investors and central banks. The investor is dis-investing when buying gold.

 

The reason gold is strengthening alongside Yen is in a period of uncertainty it becomes a prime form of liquidity.... being the strongest symbol of money. Even the Yen has political uncertainty hanging over it... even though it should continue to strengthen.

 

The dynamic of a debt deflation, where short-covering on currencies swells the currency, will also continue to crucify their economy. I expect the same to happen in the US.... and gold to continue strengthening.

I agree but I dont believe the article was disputing the upside for gold vs other currencies , he simply has the opinion that the Yen will do better than gold.

In case people didn't see here is an article from yesterdays FT comparing Gold vs Yen.

http://www.ft.com/cms/s/0/81552e06-9fe2-11...144feabdc0.html

Mish highlighting the risk of U.S copying Oz and heavily taxing gold.

http://globaleconomicanalysis.blogspot.com...in-us-gold.html

"It will not be long before the US considers doing the same thing to its natural resources industry. Indeed, anything that makes money, especially gold and energy will be easy targets.

For several years running I have been asked at precious metals conferences about the possibility that government will confiscate gold as did FDR. My response has always been "Physical confiscation will never happen again . However, they may tax the hell out of it."

That possibility looks increasingly likely, and the end result is essentially the same"

Another Paulson & Co , gold +ve article......

http://www.marketfolly.com/2009/11/john-pa...ng-against.html

At this rate by 2012 the average price of property in London will be £1,000,000 thanks to those 12 sales to Hedge Fund Managers.

Hahah yeah amazing 6.5% in one month, 12.6% in Ham & Fulham !!

up, up and away !!

http://www.bloomberg.com/apps/news?pid=206...id=aTAk2M_ZrU2g

From Mish's blog;

http://globaleconomicanalysis.blogspot.com...moking-gun.html