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Reply #62: Decline in Commodities Is 'Artificial' [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-25-11 09:47 AM
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62. Decline in Commodities Is 'Artificial'

The recent decline in commodity prices has little to do with fundamentals and everything to do with the collapse of brokerage firm MF Global, says renowned investor Jim Rogers, who described the sell-off as artificial. "With MF Global going bankrupt which was a gigantic commodities firm there was a lot of artificial forced liquidation of commodities. People have to sell whether they like it or not. It's artificial selling right now," Rogers told CNBC on Wednesday.

The CRB Jefferies Index which serves as a measure of the broad commodities complex has fallen 4 percent since MF Global declared bankruptcy nearly 4 weeks ago. Agricultural commodities have been the hardest hit, with rice futures falling more than 14 percent and wheat futures down 9 percent in the period. Rogers says the drop isnt surprising. "This happened before in 2008, when Lehman and AIG went bankrupt, they were both huge in commodities and everybody had to sell," he said, referring to the onset of the global financial crisis in late 2008, when the CRB Index fell by half in a matter of months. Prices have rebounded since, climbing nearly 60 percent from March 2009 to May this year, when the sector took a hit again on concerns over the headwinds facing the global economy.

Rogers remains bullish on the sector, saying investors will benefit whether the global economy improves or not. "I'm long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money; if the world economy doesn't get better, I'd rather own commodities because they're going to print money," he said, referring to the easy monetary policy central banks have taken in the last few years to stimulate anemic growth...

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