Jimmy Rogers was on with Maria yesterday and although his message doesn’t change very frequently (not a bad thing), I do think he is worth listening to.
He does not think equities have put in the bottom, which I took as his expecting the stumble along the bottom to continue. If SPX 666 turns out to be the low it could still be a while before the market breaks through the upper band of the trading range, so feel free to assign whatever number you want to upper band. He has been buying commodities still, as he says that if stocks have bottomed, commodities will lead the way out and if stocks have not bottomed, commodities will not go down as much.
Maria asked if he is still buying agriculture which he took as agricultural commodities – but I think Maria meant farmland. Buying farmland is something he just started talking about in the last couple of months or so — long time readers may recall my writing about farmland stocks quite a while ago.
He said that the fundamentals are not improving for Citigroup (C) or General Motors (GM), but they are improving for commodities. He said banks everywhere are printing money which has always lead to higher prices. He thinks they are crazy for doing this, but he knows the end result: higher prices for all of us.
The only stocks he bought recently were in China, back in October and November. He said that China has huge reserves for a rainy day and now they are starting to spend some of it. He said Singapore is in a similar situation as China but he did not say he bought any stocks from Singapore. He also said that China is not big enough to bail out the world or the U.S., and he said you need to own the right sectors in China; if you sell to Wal-Mart or Sears you are having trouble – and it’s going to get worse.
Kind of interesting to me that his timing on China was similar to mine. I went back in a little earlier than him, after being out for just over a year. I have also been saying that I do not want exporters or financials from China. For the stock in question I was a clearly a few weeks early but the point is that after a market drops 60%, even if it is on its way to 70% down, it has discounted an awful lot of problems.
Next up is what I believe to be the latest portfolio allocation from the Harvard Management Company. Per that link it is allocated as follows: 34% of the portfolio in public equities, 17% in private equities, 18% in absolute return strategies (hedge funds), and 26% in real assets (real estate and natural resources). HMC CEO Jane Mendillo denied rumors that the endowment sold illiquid assets, presumably private equity investments, for pennies on the dollar.
Per the article, the endowment was down 22% from June 2008- to October, the S&P 500 was down 24% during the same stretch. Obviously during that period of time just about every asset was down a lot and based on the above information it would seem that the HMC did not find too many hiding places for capital. I am a huge believer in owning some diversfiers, but they are not the be all end all for every market scenario.
While I incorporate small allocations to those sorts of things, and I do believe they smooth out the ride, there is nothing wrong with overweighting cash every once in a while.
