Welcome all bankrupt commodity funds

September 6, 2008

A few months ago Jim Rogers announced an interest in buying airlines, the interviewer (shocked and amazed) highlighted the obvious (as if he didn’t already know) that many are going bankrupt, and Jim responded by saying, “Good… bankruptcies are signs of a bottom, not signs of a top”. He is a regular customer of the industry, and he knows there exists strong demand for their service at current prices, which means they could probably get away with some price hikes to restore profitability.

I hold a similar view with respect to commodities. Despite my inflation worries I took advantage of the froth this summer to raise cash from my agriculture and coal holdings, but my decision was motivated by gains, not losses. Since then, the market has formed a short term top and began a dramatic decline. You might even say it Tanked, with a capital T.

So how do you know when to get back in? When the weak hands capitulate. What we are witnessing today is not profit taking, it’s liquidation. To find the best time to enter a market, you need to wait until the fundamentals are in your favor but the headlines are not. Gold peaked when it hit the front page of my local newspaper and some of my never-invested-before friends started asking about gold and oil. So I say, bring on the doom and gloom. Kudlow is your best friend. I almost want to avoid posting new articles on this blog for fear I may give people hope. I want so many people to lose so much money that everybody is convinced the commodity “bubble” is toast, then I will quietly snap everything up.

Let’s have a few more funds go bust, I have plenty of cash and plans to retire early.