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Keep punting on resources?

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by Peter Switzer

I always like it when my view is reinforced by someone described as a legendary investor, and that happened when US market player Jim Rogers argued that the bull market in commodities was not running out of legs. In fact, he insists it has a "long way to go".

Sure he could be talking his book as he said all of this to CNBC as he launched his Global Resources Equity Index, which puts together two hundred global resource companies.

"The best sector that I know in the world economy is going to continue to be commodities," he said. "We have huge shortages of everything developing. The facts are we are running out of known reserves of everything and shortages are going to get worse.”

His point is that even if demand subdues, say if China slows down a tad, we still will have a supply problem with everything from lead to wheat. And when it comes to agriculture, there is a massive shortfall and it partly explains why there are people protests around the world right now.

Headwinds for the US market

I think there are headwinds ahead after the US market has done so well since August last year, but the Yanks’ company profits and balance sheets are in good shape and if they can do something about their bad mortgages, I reckon we could see some real employment growth.

Two points

David Murray, the chairman of the Future Fund is cautious about the potential inflation ahead but as I prodded him for whether he saw a bear-like sell-off ahead, he made two points that are worth remembering.

First, it won’t be easy for the market to rocket along for a long time because inflation will kick in and second, and importantly, his Future Fund still has a big exposure to stock markets. That has to say something.

Like many, he’s cautious but still investing in stocks and some special fund managers.

Personally, I don’t mind taking tips from the likes of David Murray and the people he invests with and in. I’m also happy to be at one with Jim Rogers.

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Published on: Tuesday, March 01, 2011