Revisiting an old Commodities classic - "Hot Commodities" by Jim Rogers

Over the holidays I re-read Jim Rogers' classic "Hot Commodities" written back in 2004.

In this book, Jim had colorfully introduced the world of commodity investing as one of the simplest bases by which investors can value companies, markets, and whole economies. In particular, I re-read his predictions written in 2004 on his recommended hot commodities - oil, gold, lead, sugar and coffee - and on the ffect of China on these commodities. At the close of 2021, I have to take my hat off to Jim for being spot on and nailing every single call. Jim's book is available on amazon.

Dramatic shift in India's Oil import sources - from OPEC to non-OPEC

The world's third largest oil importer and consumer importing 85% of its crude, India continues to import crude from OPEC producers but a dramatic shift towards new non-OPEC sources seems to be under way as illustrated by these two charts from Reuters:

Back in October of 2021 India's Oil secretary had contemplated forming a group seeking to bring together state-run and private refiners to seek better volume based crude import deals. In November, India's crude imports reversed a declining trend to hit its highest level in 10 months. As reported by Platts, January through November 2021 saw India's oil product exports rise 3.2% on the year to 54.7 million mt, or 1.3 million b/d.

Long term prognosis for the Indian Rupee is abysmal - time to increase exposure to US dollar denominated assets

The Reserve Bank of India (RBI) clearly fears inflationary pressures in India to the extent that it cut the repo rate only by 25 basis points today disappointing markets. RBI governor is quoted in the Economic Times as saying that "Conditional upon a normal monsoon, agricultural growth could return to trend levels. The outlook for industrial activity remains subdued, with the pipeline of new investment drying up and existing projects stalled by bottlenecks and implementation gaps." Persistently high current account deficit, credit growth falling to the lowest growth rate in over a decade, and now the RBI's own admittedly hawkish stance on inflation only add to an abysmal prognosis for the fate of the Indian rupee. Expectations that the Rupee will hit 60 to the US dollar are steadily rising. Government Pollyannas still try to come up with creative explanations to invent a growth story (see video).



As long as the RBI's Liberalised Remittance Scheme is still available to Indian residents, Indian or NRI investors are strongly urged to increase their portfolio exposure to US dollar denominated investments. You only have yourself to blame if your net worth significantly falls due to a sliding Indian rupee.

With the arrest of Musharraf, Pakistan may be stumbling towards total anarchy - followed by a war

How the mighty have fallen! The man who took Pakistan very close to a nuclear war with India back in 1999  is now under arrest in his own country, an event which may ironically possibly trigger another nuclear confrontation with India attempting to finish the job he started. The Washington Post reports that Musharraf faces the prospect of prison or death, if convicted of treason and military commanders would certainly not accept the jailing of their former colleague at arms. Pakistan’s former military rulers have long been held responsible for the instability and militancy plaguing the country and for disrupting democratically elected governments and none have ever been held accountable.



This arrest may either be a game changer prompting the Pakistan army to try to broker a deal to send Musharraf packing - or more ominously - may create a diversion by opening an offensive against India in some way shape or form. Escalating response from India may bring inevitable instability in the whole region. The markets would do well to price in this geopolitical risk.

East of Eastern Europe: a rich distribution landscape emerges in 2008

With the inclusion of 10 previous eastern block (and since 2004 European Union) countries into the Schengen agreement as of December 21st, 2007 the old iron curtain effectively moved eastwards. This area which I call East of Eastern Europe and includes giants such as Russia, Ukraine and Kazakhstan, I predict will bring rich harvests in asset gathering in 2008 for the discerning investment products distributor. I will begin my arguments starting with a survey of almost 400 major wealth and asset managers by Euromoney magazine which found that private banking income in Russia surged by almost 88% in 2007. Granted, this is not surprising as the New York Times has harped on multiple occasions that Russia now has over 50 billionaires worth a total of almost US $300 billion. The surprise here is that private banking as we know it is not developed in Russia and only a few mostly foreign banks offer private banking services. Russia is also reportedly proposing amendments to the current collective investments regulation to offer Hedge Funds to qualified domestic investors. Domestic mutual funds are also around 100.

In Ukraine, signs of conspicuous new wealth are also obvious. Along the tree lined R-12 highway south from Kiev in the suburb of Koncha-Zaspa, a wide array of luxurious multi-million dollar estates are going up at a speed which would make even the most industrious developers in Dubai envious. This wealth is arguably highly concentrated among the Ukrainian oligarchy. Rinat Akhmetov, who ranks 214th on Forbes’s 2007 global rich list with a fortune estimated by Forbes at $4 billion is the owner of System Capital Management which alone is responsible for 8 per cent of Ukraine’s GDP. Ukraine's capital market is relatively small, about US $80 Billion. Investing in Ukraine's equity market remains difficult due to limited investment and local investors have very limited choices among a handful of mutual funds. The scene is similar in Kazakhstan, where there are about 14 pension funds, 40 insurance companies and 113 mutual funds for local investors to choose from. In 2007, the government of Kazakhstan set up a regional financial center in Almaty, (the commercial capital of Kazakhstan) open to any foreign or domestic financial organization to set up operations. Local asset managers such as Almaty based Ansher Fund Management and chief investment officer of the firm's Central Asia Opportunity fund have recognized this unprecedented opportunity and have been very busy floating new funds.

A decade ago, East of Eastern Europe markets seemed very exotic and highly risky to the western investor and yet the tremendous growth offered in these markets over this period has been heady. Ukraine's equity market which was established as part of the country's privatization program started to take off in 2004 and by July 2007 provided the best returns of any equity market globally. From its inception in 1997 to Nov. 20, 2007, the PFTS index has yielded a 131% return. In the last three years, the index has yielded 514% and over 2,000% for the last five years. 2008 is indeed the right year to tap the asset gathering potential of East of Eastern Europe and set up distribution channels for investment products.