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Jim Rogers is a legendary commodities investor and the chairman of Rogers Holdings. in late 2009, he predicted that the price of gold would increase to $2,300 per ounce within the near future. Though mr. Rogers may love gold, he is not taking any steps to invest in it.

The reason for his lack of action is that gold prices are peaking and anyone making investments at this time will be taking on a big risk. most of the larger investors are taking the opportunity to sell gold now, in order to generate a huge profit. the price of gold is sitting on a market bubble, which can burst at any time, so these investors are getting out while the getting is good.

Most recently, mr. Rogers advised investors to steer clear of the bond market and invest in commodities. He believes that commodities are a safe haven from the volatility in the world economy. He recommended investing in silver rather than gold, based on his mindset of last year that anything rising straight up does not represent an ideal investment. the fact that silver is trading 60 to 70 percent below its peak prices makes it a better investment than gold, which is trading at record highs.

Investors would be wise to adhere to the advice of mr. Rogers because is he well-known for being ahead of the crowd when it comes to investment thinking. He co-founded the Quantum Fund with the iconic George Soros and saw the fund gain over 4,000 percent during a time that the S&P rose not even 50 percent. this Fund is perhaps most well known for earning $1 billion dollars when it bet against the British pound during the early 1990s.

Just because one holds gold already and recognizes its strong potential to increase in price does not mean this precious metal is the favored investment. this is the thinking of commodities investor Jim Rogers and it seems to have served him well so far. Following this line of thought, now is not the time to buy gold coins or make other purchases of the precious metal. Those who have gold holdings may want to start thinking about selling them before the bubble bursts.

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Tags: gold investments, invest in gold, Jim Rogers.

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Millions of people have invested money in stock and bond mutual funds over the past few years. Now money is flowing into commodity mutual funds. New funds are constantly being released. Why is this? there are several big trends that people say will drive a boom in the commodities market in the years to come. any investor interested in improving their returns should understand what is involved and serious look into investing in the sector.

For one, remember that famous investors such as George Soros and Jim Rogers have made their fortunes in commodities. This is because the markets are very volatile, and with volatility comes opportunity. And despite the markets being gigantic, there are relatively few players involved meaning there is more chance for pricing discrepancies.

So what are the big trends that are predicted to drive a long bull market in commodities? the developing world. the world has already seen the price of agricultural goods and commodities such as iron ore skyrocket because of China’s growth. but this story has only begun. China is still relatively undeveloped. And there are many countries that are growing very quickly – India’s population is expected to exceed China’s in a few decades. India is growing slower, but this unprecedented growth is expected to greatly increase the demand for basic commodities. the emerging use of ethanol as an energy source will also increase the demand for agricultural goods.

The investment fundamentals are clear: commodities are headed for a big demand. An excellent way to profit off of this are mutual funds.

Why Many People Predict a Boom in Commodities

By SCOTT PATTERSON

The man considered by many to be the greatest investor of all time just had his worst year ever.

But the results released Saturday for Warren Buffett’s company, Berkshire Hathaway Inc., also demonstrate how recently, and over time, the investor has positioned his far-flung empire to weather the financial storm.

Associated Press

Mr. Buffett, in his annual letter, read closely by shareholders and nonshareholders alike, reported Berkshire in 2008 lost 9.6% in book value per share, a common metric Berkshire uses to track performance. that marks the biggest decline since mr. Buffett took over in 1965, when it was a family-run East Coast textile maker.

Mr. Buffett conceded he “did some dumb things.” among them: scooping up shares of oil giant ConocoPhillips when oil prices were near a high and investing $244 million in a pair of Irish banks that hit trouble, resulting in an 89% loss.

Berkshire shares fell nearly as much as the rest of the market last year, indicating that investors are worried about the company’s ability to keep growing. in 2008, Berkshire’s Class A stock fell 32%. This year, the shares are down nearly 19%, slightly better than the Dow Jones Industrial Average.

Yet many analysts were pleased that the decline in book value per share wasn’t steeper. and mr. Buffett’s results also show he has made moves that have paid off and should continue to do so even if economic woes persist, as he predicts.

He limited his exposure to complex and potentially costly derivatives in his reinsurance unit, General Re Corp. he has $24.3 billion in cash that can be used to find bargains in a distressed market. and he’s made several investments in preferred stock of firms such as Goldman Sachs Group Inc. that pay out steady income of 10% or more.

“He’s done a great job to prepare for this,” said Paul Howard, an analyst at Langen McAlenney, a Hartford, Conn., research group, who rates Berkshire a “buy.” “He’s got good businesses that are generating a lot of cash, and he’s going to continue to put that money to work.”

Berkshire’s substantial insurance holdings haven’t needed to take the massive write-downs on toxic subprime securities that have plagued much of the financial industry in the past two years. One reason is mr. Buffett’s longstanding dislike of complex derivatives, which he famously called “financial weapons of mass destruction” in his 2002 shareholder letter and which he railed on again in his latest letter. he pushed General Re, the large reinsurance company Berkshire acquired in 1998, to disentangle itself from a vast web of derivatives — financial instruments tied to the value of other securities, such as stocks or bonds — over the course of five years, winding down its book of 23,218 derivatives contracts at a loss of about $400 million, he said in the letter. the losses may have been far more substantial if General Re had held onto to the contracts, mr. Howard said.

“Upon leaving, our feelings about the business mirrored a line in a country song: ‘I liked you better before I got to know you so well,’” mr. Buffett wrote, referring to General Re’s derivatives book.

Separately, Berkshire took a loss of $5.1 billion in the fourth quarter on several derivatives contracts entered into in recent years. the contracts, essentially insurance policies against long-term declines in U.S. and foreign stocks, expire in 15 or 20 years. Berkshire will have to pay out if the indexes are below where they stood when the deals were struck. the derivatives, whose current estimated value has to be reflected on Berkshire’s books, are one reason the company reported a grim fourth quarter on Saturday — its fifth year-over-year quarterly decline.

The $117 million quarterly gain it eked out in the quarter marked a 96% drop from last year’s $2.95 billion in fourth-quarter net income.

Beyond commenting on Berkshire, mr. Buffett shared his views on the broader economy and financial systems. he doesn’t expect the economy to improve soon but did expect better times, eventually.

“Our country has faced far worse travails in the past,” he said. “Without fail, however, we’ve overcome them.” he declined to draw a correlation between stocks and economics, saying that while he was certain the economy would be “in shambles for 2009,” that “does not tell us whether the stock market will rise or fall.” he credited the government for stepping in with massive assistance last year, saying the intervention was “essential” to avoiding a total breakdown. But he cautioned there could be “unwelcome aftereffects,” such as inflation.

He contended the “investment world has gone from underpricing risk to overpricing it,” which he said is reflected by investor appetite for Treasury bonds. Future historians will comment on the Internet bubble of the 1990s and the housing bubble of the early 2000s, he said, but “the U.S. Treasury-bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Write to Scott Patterson at scott.patterson@wsj.com

Printed in the Wall Street Journal, page C3

Warren Buffett's Berkshire Reports Worst Year Ever

The Snowball: Warren Buffett and the Business of Life
There are many books out on Warren Buffett but this is the first authorized biography. as someone who has read most of what is publicly available on the Oracle of Omaha, I pre-ordered the book on Amazon as soon as I found out about it and started reading it as soon as I received it. The focus of the other books is mostly on Buffett’s stock picking skill; this book delves deeper into the formative experiences and his drive, focus and competitiveness that earned him the largest fortune of the modern era not tied to a particular industry. Other books have chronicled his transition from a pure Graham type investor to incorporating more Phil Fisher growth type approach to investing. as this book makes clear, there is more, a lot more to the Buffett magic than just stock picking. a lot of his value add is from working through difficult situations post-acquisition; and from “Carnegizing” management that is making good choices; you don’t get this influence over the operations of companies without ownership control. Buffet prides himself on being able to make quick decisions on acquisitions but as the book makes clear, he has no crystal ball to avoid nasty surprises like the rest of us. This is well documented in the history of his acquisitions – Blue Chip Stamp (drop in consumer interest), Buffalo News (labor unrest), Berkshire Hathaway (foreign competition in textiles), Coca Cola
(management succession), Salomon Bros. (culture/compensation), General re (off balance sheet derivatives). Buffett makes it through decades of challenges with his reputation for basic honesty and fair dealing intact. Particularly exceptional is his willingness, when Salomon was under fire for fixing Treasury auctions, was to step in as chairman and appear before prosecutors without attorneys present and to forgo accepted legal defenses in resolving the matter.
The book details Buffett’s “elephant bumping” (consorting with celebrities of various types) at great length; too much for my preference but probably will contribute to the commercial appeal of the book. it is also a cautionary tale of the corrosive effect of great wealth on family relationships.

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