I am retired and take educated guesses on all things financial.

April 20, 2009

April 21, 2009: Jimmy-ing Up To Commodities

I admit to having a negligible position in commodities for many months. Over the past few weeks I have been watching all four of the Jim Rogers-inspired commodity funds, kick starting my portfolios out of some bonds (especially Treasury Bonds) and leaning towards purchase of two of Jim's creations: RJI (AB Svensk International Commodity Index) and RJZ (AB Svensk Ekportkredit Commodity Index (metals sub-sector).

Years ago, when I began my initial portfolios, commodity investment was eclectic and generally reserved for a relatively select few high net worth blue bloods - such as Anderson Cooper's "360" genetic forefathers, the Vanderbilts. Now, commodity investment is considered by many financial experts to be an essential part of a balanced, diversified portfolio. A good example is the rule of thumb declaring 10% gold to be portfolio smart. I don't subscribe to that percentage nonsense, but informed readers get my point.

I selected RJI because of its diverse allocation and percentage weight of grains and the overall percentage directed towards a light exposure to fossil fuels. RJI is trading at at $5.94/share with very good daily volume (Monday it was over 477,000 shares). Near its 52-week low of $5.26 and well off the June 2008 high of $14.33, the fund appears to have limited downside risk on a valuation basis. Seeing as the world has to eat and produce products calling for metal, one has international exposure to vital commodities that are unlikely to undergo extreme taxation or regulation. No villains for the politicians to crucify in this bunch. RJI is a relatively safe bet regardless of the economic scenario, given the current price.

My second selection, RJZ, is to a large degree an extraction of the metals sub-sector found in RJI. This fund is trading at $6.72/share with decent volume of about 35,000 shares/daily. The 52-week low to high spread is $5.17-11.24. This fund gives the investor excellent exposure to a variety of metals both precious and industrial. RJZ can be viewed as a mild bet against the dollar and a strong bet for emerging economic giants such as China and India's thirst for metals in this fund.

Neither fund pays a dividend. I will probably purchase roughly 80% RJI for my Permanent Portfolio and 20% RJZ for my Speculative Portfolio, gradually. I remain suspect of government solutions to bail out the world economies.I am confident that taxes and other confiscatory revenue enhancement schemes are going to whittle down gains for many investments, especially hitting dividend-rich stocks.Commodity funds may be a nice fit for the "New World Order" within your portfolio.

For those interested, the other two Rogers commodity funds are RJA (agriculture) and RJN (energy). AB Svensk, the marketing agent for the funds, may not have the same level of transparency as do mainstay funds in the United States, so don't "buy it and forget it".