On the very day I speak to Jim Rogers, Goldman Sachs has put the cat among the pigeons. The biggest commodity trader on Wall Street has just issued a strategy note advising profit-taking in key commodities including oil, copper and cotton. The entire complex is off as a result. But Mr Rogers is not selling. "This bull market's been going for several years already and it's got several years left to run," he says, pleading indifference to such short-term factors. "I did wonder why they were all lower today. Now I know."
The reasons for his optimism are well rehearsed – he's been outlining them for the best part of a decade. Demand is growing strongly because of the industrialisation of Asia, while years of underinvestment have left capacity struggling to catch up. Two years of loose monetary policy is just the icing on the cake.
Surely supply will catch up eventually? Yes, just not yet. "By 2008, commodities had been in a bull market for eight or nine years and normally you'd expect to see a supply response by then. But then along came the financial crisis and anybody that was thinking of expanding or building new production said 'hey, not me'. In the meantime, mines and oil fields continue to deplete."
"Bull markets always end, and this one will too. I don't know what will cause that… but right now I can't see a lot of extra supply in any market."
Perhaps technology will help us out. It always has before; after all, the use of sidetrack drilling to exploit shale gas has transformed the US energy market, while genetic modification could revolutionise agriculture. And if it does, won’t this turn out to be just another fad, a bubble, like the one in stocks in the 1990s or real-estate in the noughties? There's a pause, then the sound of laughter down the 'phone.
"A bubble is where everyone owns it and everyone's talking about it. I bet you don't know anyone who's ever owned wheat, or cotton," he retorts. And of course, he's right. Even mainstream commodities are still off many investors' radar. "I went to an investment conference a few weeks ago and the moderator asked the audience how many of them had ever owned gold. Seventy-six per cent of them had never owned gold."
He warms to the theme. "Sugar is up 500 per cent but it's still 60 per cent below its all-time high. That's a funny definition of a bubble."
Agriculture is his favourite right now. He trots out some pet factoids: "There's a shortage of farmers. The average age of farmers in some US states is 58. In Japan, where they don't like foreigners very much, they're bringing in farmers from China because they've got empty fields and no-one to farm them," he says, emphasising that output of anything can't be increased at the flick of a switch.
We talk about non-exchange-traded commodities, like uranium and iron ore. "Uranium is probably going to lie fallow for a couple of years while we get over the shock [of Fukushima]," he predicts. "But in the longer term there's no choice – we need nuclear energy. I have owned stocks in the nuclear power business in the past, and I plan to revisit this in a year or two."
That aside, he's reluctant to get into the business of individual tips and chooses his words carefully. "I'd rather spend my time looking at silver than gold, and I'd rather spend time looking at rice than, say, rubber."
These days, Mr Rogers tends to invest in his own index, The Rogers International Commodity Index. "My lawyers say I shouldn't invest in individual commodities because I'm always talking about them on television."
Jim Rogers devised the Rogers International Commodities Index in the late 1990s as a way of tracking the price of a basket of commodities. It contains 35 different futures contracts and, like most other commodity indices, it's dominated by energy; oil, gas and related products account for 44 per cent of the overall index. This helps account for a sharp slump in 2008, when the oil price fell from $147 to just over $30 a barrel within six months. In the UK, the index is tracked by an RBS exchange-traded fund (TIDM:RICI) with a total expense ratio of 0.85 per cent.
He still maintains that "countless studies" show that investors are better off getting exposure to hard assets than shares in companies that produce them. This intrigues me, as another Jim – Jim Slater, the UK investment guru – argues the reverse. The two are well-acquainted, since Mr Rogers is an adviser to Agrifirma, the unquoted Brazilian agriculture company co-founded by Jim Slater.
"If you find the right stock, sure you can buy the shares instead. If you know a company that's found natural gas near Berlin, you should buy all the shares you can. And then call me," he laughs. Before I can regale him with the IC's most successful resource stock tips, he's evangelising about how much easier it is for ordinary folk to buy the underlying commodity.
"You can buy tracking products on commodities, or you can buy countries like Australia or Canada or Norway. Australia is going to do a lot better over the next 10 years than Belgium."
It's no surprise to hear that he's currently short of US technology stocks – a high-beta play on a market and an economy that he thinks is last century's thing. He has previously described Fed chairman Ben Bernanke as "an idiot" and likened the dollar to "toilet paper". But he's also gone off emerging markets to some degree. Given that commodities are in many ways a play on emerging-market growth, I wonder why this is.
"Right now there's 20,000 MBAs flying around the world looking for new emerging markets. The whole thing's just got overhyped and overexploited," he says. Including China, one of his past favourites? "China has an inflation problem and it has a real-estate problem which they're trying to cool," he says. But even if China continues to tighten, and quantitative easing comes to an end, he'd still rather be in hard assets than shares.