What if Jim Rogers was wrong?

Following my previous post a couple of weeks ago, I have been trying to think for myself about a few statements that Jim Rogers often makes.

On options, my opinion was that:
I am remember a few years ago reading Jim Rogers say that he never buys options because 80 or 90% of them ends worthless. I would disagree with him on this one! I am happy to have bought this options, because they insured my portfolio for about 4 months. If I had shorted the markets instead of buying these options, I would have made major losses on this portfolio instead of making big gains.

My opinion on options is the following: Options are very good deals when you are very good at timing (big gains!) and also when you are completely WRONG (limited losses)! This had previously happened to me about 18th months ago, when I had bought options on some European companies, thinking its shares should rise a lot and not be affected by the US subprime collapse. Well, the shares actually collapsed to about 40% less than the strike of my calls! So I couldn't be more WRONG on the short term ! Should I have bought the shares instead of the options, I would have lost about 4 times more money than on the options.
On cotton:
Jim Rogers keep on saying that cotton will do very well in the future because its price is very depressed. I have been thinking about that, and have come to the two following realisations:
  • Given that during the inflationary boom of the past several years, quality has been falling, it might be a good reason for the price of cotton to have fallen as well, replaced by cheaper lower-quality fabric.
  • Synthetic fabrics are now far cheaper to produce than cotton and so it might be one of the reasons why cotton's price is depressed.
On sugar:
When asked for investment advice he most often says he buys his own index, the RICI but that sugar is one of the most depressed commodities, about 80% bellow its all time high 20 years ago. Again, I have come to the following realisations:
  • Synthetic sweetners have been competing with sugar because people are eating more and more rubbish food and drinking rubbish beverages but they are more 'health conscious' and prefer having Diet Coke than regular Coke, etc. So sugar is competing against Aspartame and the likes.
  • Not only sugar is no longer the only 'contenter' but it's actually competing against cheaper products. Have you noticed that Diet Coke tends to be cheaper than regular Coke? So Aspartame must be cheaper than natural sugar, which probably won't help the price of sugar to rise.
Nevertheless, he might be wrong on this two single picks but I believe he must be right on the general trend: commodities will rise, specially agriculturals ones which prices are more depressed and more needed during recessions than base metals etc.

What do you think? Please share your opinion by commenting on this post.

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