It can be difficult to separate the message from the messenger. Legendary investor Jim Rogers is not my kind of guy - more Donald Trump than Warren Buffett. While I would not have lunch with him, I am glad that I read his 2004 book titled Hot Commodities, which predicted the super-cycle in commodities began in 1998 and would continue at least fifteen years.
Here's a news flash: Jim Rogers was right. The super-cycle in commodities has ended!
Oil has crashed below $30/bbl. Copper and other industrial metals have been crushed. Nobody ever suspected rare-earth-minerals would lose value, but they have! Even precious metals like gold are relatively lifeless.
Commodities reflect the emerging markets, many of whom have commodity-based economies and need different commodities from other nations. China has been a huge buyer of commodities, but their economy is now slowing even faster and need fewer commodities. Not many analysts are predicting strong growth in any of the emerging markets . . .
Commodities have been a driving force in stock values for a long time. What will take its place? Look up Singularity University, where they believe we are entering a Age of Abundance, which could propel the stock market, but how long before that lift-off?
Until we experience that lift-off from some propelling forces or engine, I suspect equity returns will be lackluster. Instead of the 8% target we usually expect, those returns could be more in the range of 4%.
There has been a long-running argument as to whether passive investing beats active investing. In other words, should you buy an ETF, that mimics an index like the S&P 500, or buy a more-expensive mutual fund, where a manager actually tries to beat the index? Retail investors are fleeing mutual funds and loading up on ETFs. Last year, they took $207 billion out of stock-picking mutual funds and put $414 billion into index investing. I think that should be just the opposite. If you know the index will be lackluster, why try to match that? Index investing is easier when you have a propelling engine like commodities, but I expect old-fashioned stock picking is now more important.
Here's a news flash: Jim Rogers was right. The super-cycle in commodities has ended!
Oil has crashed below $30/bbl. Copper and other industrial metals have been crushed. Nobody ever suspected rare-earth-minerals would lose value, but they have! Even precious metals like gold are relatively lifeless.
Commodities reflect the emerging markets, many of whom have commodity-based economies and need different commodities from other nations. China has been a huge buyer of commodities, but their economy is now slowing even faster and need fewer commodities. Not many analysts are predicting strong growth in any of the emerging markets . . .
Commodities have been a driving force in stock values for a long time. What will take its place? Look up Singularity University, where they believe we are entering a Age of Abundance, which could propel the stock market, but how long before that lift-off?
Until we experience that lift-off from some propelling forces or engine, I suspect equity returns will be lackluster. Instead of the 8% target we usually expect, those returns could be more in the range of 4%.
There has been a long-running argument as to whether passive investing beats active investing. In other words, should you buy an ETF, that mimics an index like the S&P 500, or buy a more-expensive mutual fund, where a manager actually tries to beat the index? Retail investors are fleeing mutual funds and loading up on ETFs. Last year, they took $207 billion out of stock-picking mutual funds and put $414 billion into index investing. I think that should be just the opposite. If you know the index will be lackluster, why try to match that? Index investing is easier when you have a propelling engine like commodities, but I expect old-fashioned stock picking is now more important.
