Derek Sivers

Hot Commodities - by Jim Rogers

Hot Commodities - by Jim Rogers

Go to the Amazon page for details and reviews.

Very specific book about understanding the commodity markets.

my notes

Almost every time I've made serious money, it's been by heading in the opposite direction of the crowd.

I am the world's worst trader. Over decades, I've learned that the best way for me to make money is to find something cheap that I like, take a position, and hold it for the long term. I'm a lousy trader and I avoid short-term investments.

Search for opportunities in one or two sectors, then focus on a specific commodity or two that intrigue you. Say copper catches your eye, the overriding question is:

#1 : Will the price go higher?
This might require serious homework. CRB Commodity Yearbook. Brief summary of inventories and demands in recent years. But you need to look deeper than that.

#2 : What to look for? Supply and demand.

Always better to invest in the commodity itself, not the companies around it. Saves a lot of effort and reduces a lot of mistakes. Also on average will get 300% the return over the companies!

I would not advise anyone to buy a house in New York, Boston, or London. Not only have those cities been subject to overpriced real estate for years, but their economies are much too dependent on financial services, a market sector that has not done well in previous commodity bull markets.

If you want to speculate in real estate, buy a house at the lake in a farm state (Iowa or Nebraska), or in an oil and natural-gas area (Oklahoma) or a mining state (Montana or Colorado), where communities will benefit from the rising prices in metals, energy, and agricultural products. If you had bought property several years ago in commodity-rich countries as Canada, New Zealand, Australia or Chile, you would have increased your equity severalfold.

I don't like to sell something short, unless it's *unbelievably* expensive. (And I mean unbelievably. I've shorted plenty of things in my life that were expensive, only to see them get more expensive.)

"Facts and Fantasies about Commodity Futures" - article by Yale School of Management's Center for International Finance - is a truly revolutionary document. Gary Gorton and Geert Rouwenhorst.
Since 1959, commodities futures have produced better annual returns than stocks and outperformed bonds even more.
Commodities have had less risk than stocks and bonds, as well as better returns.
During the 1970s, commodities futures outperformed stocks.
During the 1980s, the exact opposite was true, showing the negative correlation between stocks and commodities.
Commodity returns do better in inflationary times, while stocks and bonds perform poorly.