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Guest comment: Forget hedge funds, focus on commodities

Commodities combined with Mandarin is the best recipe for a successful long-term career in financial services, says legendary investor Jim Rogers.

If you’re at an early stage in your financial services career, I have one piece of advice: go into commodities. There’s a gigantic need for commodities people and there’s a very limited supply of them. You can go into any business school in the world and they have plenty of courses about stocks and bonds, but they don’t have courses on commodities. Why go into the stock market when the supply of people is skyrocketing, but commodities can’t get enough staff? It’s a simple case of supply and demand.

So how can you learn about commodities? Research. There’s a lot to be said for just picking up a book or reading the internet – I never took a course in stock picking. Choose a subject – say cotton, zinc, or copper – and learn everything you can about it. When you get to interview you’ll then be able to dazzle them with everything you know.

Don’t be afraid to start low down the ladder – join a bank as an assistant to a commodities trader, or go and work on the trading desks of one of the commodities companies like Cargill or Exxon, which are hiring all the time. If you’re determined, it won’t take long for you to progress, I can assure you. Call any commodities investing firm in the world right now and they’ll tell you they’re desperate for good people and just can’t find them.

If you want to make yourself even more marketable, learn Mandarin at the same as you’re learning about commodities. If you can speak Chinese and you know about commodities – unless you’re a total dunce – you are going to be one of the most successful people in the world in the next 20 to 30 years.

What about hedge funds? Frankly, the world has 20,000 to 30,000 hedge funds and there are simply not that many smart 29 year olds. Right now, we have good markets, but in a bad market plenty of those hedge funds are going to blow up – and there’ll be a mess.

And what about private equity, which together with hedge funds is where most business school students want to go right now? Private equity is no longer a place where there’s easy money to be made; 20 or 30 years ago these guys were brilliant, but now everyone’s copying the process. You’ve got a lot of people who are overpaying and using excessive leverage.

In terms of location, I’d advise Asia – and if possible, Shanghai. Right now, the Asian countries are the huge creditor nations, and the US is the big debtor. If you want a 20 to 30 year career you want to be in one of the places that has the money, not one of those that’s going faster and faster into debt.

· Jim Rogers is an investment guru and co-founder of the legendary Quantum Fund with George Soros. Over a decade in which the S&P rose only 47%, the fund rose more than 4,200%.

· Want to write a guest comment for eFinancialCareers? Send suggestions through to Editor@eFinancialCareers.com.

Comments (28)

  1. Couldn’t agree with you more on that Jim, commodities are the way forward. At some some point paper money is just going to burn out

  2. I see what Jim is saying, but don’t agree that paper money, as Alf puts it, is going to burn out. All the big money in commodities IS in paper, not physical.

    Understand the markets as Jim says, but also understand that in commodities that are physically present such as oil, minerals etc. there are big holders. And also understand that other things are in the process of being commoditised such as temperature and wind speed. By which I mean the standardisation of price for such things which nobody owns.

    Be very careful to simply say get into commodities. Easy to do when everyone is looking at where the world is going to be driven by China and India (Urdhu also a good language to get into).

    It is motherhood and apple pie to say get into commodities for a career – it has always been so. Commodities such as metals, oil, have always been a job for life as a trader.

    It is much more forward thinking to look at how one can make a career in these markets by looking at not only how to make a fast buck now but how the substitutes will fair (as they have to) in the future. All of our pensions depend not on the commodities of now but those of the future.

  3. I strongly agree to Mr.Jim Rogers,Asia is the emerging market for Commodities Futures

  4. I disagree – not with Mr. Roger’s market view, commodities are definitely gonna fly – but I strongly encourage people who are at an early stage in their career to try to figure out what they are good at and what they can be passionate about for the next few years rather than focusing on market trends.

  5. jake, well put. i’ll add that commodities, like any asset class, have their ups and downs. the space has been red hot for a while, but there’s nothing like a good global recession to bring down a hot asset class temporarily.

    although i will say, with a rising middle class in these emerging markets its hard to not see significant price increases in non-renewable resources. which leads to the question of the big “I”. with rates up substantially in the last month or so, are we headed finally for inflation?

  6. Can I make a career shift at 39 and be a commodities person?

    it looks very very interesting

  7. I think Indian Govt. will play pivotal role for the growth of Commodity Mkt. in India specially Agri. Commodity.

  8. What about hedge funds focusing on commodities? does this comply as an exception to Jim’s incitation to forget hedge funds and go into commodities?
    there are also a number of very successful hedge funds in the energy and mining business , investing directly in exploration projects .

    As for Chinese/ Mandarin, I bet the Chinese will be faster in learning proficient English..

  9. I have just arrived in London from Australia and have a strong background in natural resources, though not as a trader. I agree they are all the rage at the moment, however (with the exception of the large IBs which I am trying to avoid) I am struggling to find smaller credible boutiques that focus on commodities. The ones I have found are looking for younger (I am only 28) less experienced personnel. Anyone have any tips??/

  10. I agree that the commodities market is a very lucrative area. Along with Asia I believe that North America is also highly invested in the commodities sector. Calgary, Canada has a booming economy that has been funded through commodities, majority being oil and gas. Jobs are not scarce and many big banks (CIBC) are looking for students to take on board and you dont need to know mandarin!

  11. Just to point out that if one is looking to build a career in India, they need to learn Hindi, the official and national language, and not Urdu.

  12. If one is looking to work in India all you need to know is English

  13. I don’t agree that this is the “best” possible way to utilise the opportunities of the future. If you really want to make money, you have to get into an economy at the ground floor. I think the 3 key points are:

    1. Master English – I don’t think anyone will be seriously handicapped by not learning Mandarin any more than we have been by not learning Japanese. English is widely spoken in business in most emerging areas as they are also trying to reach and interact with the global markets. Besides, unless you are committed to full mastery, it probably won’t be much to your benefit: i.e. are you going to draw up your agreements in English or otherwise?

    2. Focus – Develop an in-depth understanding of a specific emerging market or region. You will probably derive the best value by visiting or working in your selected region to learn how things work, who you should be doing business with and the cultural sensitivities in the area. A good knowledge of the culture and commonly used words will be much more useful to you than learning simply how to converse in their languages.

    —continued later

  14. 3. Ignore CNN/BBC – They tend to make big news out of insignificant things and totally miss the news that is truly useful in a financial sense. E.g. Places like Nigeria (150m pop, stable curr & gov, best performing stock market globally, 2nd fastest growing economy in Africa, 7th largest oil exporter, huge untapped commodities – gas (4th largest globally), coal, steel etc) offer the potential for huge returns, primarily because no one is looking. MTN a small South African telecoms player was catapulted into an emerging markets giant on the back of this kind of strategy (see http://www.mtn.co.za). The international news agencies don’t talk about these kinds of opportunities, but continue to “inform” the world about the odd kidnapping in the middle of nowhere.

    Yes, there are risks & truly emerging markets can be uncomfortable (at least initially). That means is a few people, like me, are going to make the big bucks long before people realise what’s going on because they continue to be deceived by the rumors coming out of the region, or are unwilling to make fact based decisions. Don’t take my word for it, ask Renaissance Capital (www.rencap.com). They’re making Africa their next big thing

  15. I haven’t got a clue what you guys are talking about!

  16. I agree with Jim and I am really hoping it will be the case as I am on the commodity sale side (although I focus on carbon emission now) and I speak Chinese…..

  17. There definitely are far fewer experts of commodities than there are of FI, and yes commodities markets are being deregulated all over the place, so regardless of whether prices do go up or down by a lot the markets are expanding.

    Less than 20 years ago electricity was not traded anywhere and now it is an extremely lucrative trading arena for banks, funds and trading houses. It is still not liberalized in many European countries and will be soon if the governments continue in this line. The same with Nat Gas. With Oil it will probably be very interesting to see what happens once Brent becomes negligible.

    2/3 of worl’d crude are traded against the benchmark which is now of a miserable stream. But then you’ve got Dubai and Oman….not sure really. Also you’ve got the whole emissions story. 2012 is looking pretty decent and regardless the market will have to expand as the US is forced to slowly change winds. Weather in Europe is a tricky story, let’s wait and see. Metals is not quite my area but they’ve been wild for the night….Softs is run by a few cowboys using technical analysis and yet has been blowing hats off.

    Commodities, give me a market.

  18. everybody is sure commodities will fly in the next 20 years…..great consenus…might be soon time to bet on falling prices

  19. Toni I don’t think we are concerned with whether the market falls or whatever. My point is that it is a market in great expansion, in the sense that new underlyings are being formed with liquidity gaining ground and notionals. On the other hand there is not as much expertise. If you look at Credit any young graduate or professional thinks it is the market to be in, because they’ve seen MD raking in huge bonuses. This means that in the future you will have a huge mass of credit professionals while in commodities the numbers are far fewer and, at least in energy, given the issues with consumption and supply hedging should increasignly become an important issue…meaning more stuff to be sold and traded.

  20. I disagree with nearly everything Jim says (excepting the Private Equity view).

    1. Learn Mandarin? There are ,more people in China learning English than there are people in the English speaking world, probably. In terms of it being the next superpower, let’s not forget that at the start of the 20thC the US had a nationwide referendum on whether its primary language should be German or English. Thank God the latter won by a small margin.

    2. Commodities, might rocket, but its volatility which is profitable for most places. Besides, i don’t think the growth in prices will be as great as expected, the dynamics of supply and demand aren’t that simple in the long run, go learn some economics. Also, bring tech. progress and all the other moving parts into the equation, and it becomes harder to make a blanket statement.

    3. The good hedge funds have led the way in technology terms, their trading operations are largely zero beta, they’re indestructible.

    4. “leave the debtor nations”, get real.

  21. “…..they’re indestructible.”


  22. Which data provider offers best coverage of the commodities market? Reuters or Bloomberg? Need to choose…

  23. Thank you very much for clarifying that irritant for me Parijat. Urdu is the national language of Pakistan and Hindi is that for India, two completely different economic cultures.

  24. Segun,

    Have you got any contact details, I would like to discuss a few things with you

  25. Does anyone work for Cargill or Exxon on the trading desk. If so can you please share you’re experience.

    Also can one really just pick up a book on a partuclular commodity and learn all about it?

    Finally, in light of the above, would commodity brokers be in demand in the future?

  26. Commodity traders beware!!!! A very young man who operates in Europe has been secretly buying up hundreds of tonnes of Gold Bullion of the market with a discount on behalf of royals from the mid east especialy Saudi Arabia and Kuwait.The last known transaction was in Zurich December 07 time ad the quantity purchased privatly was 1,000MT. We all know the value of gold and what the markets predict and so on however, wha most dont know about is what this young man is planning. Rumour has it that he will be purchasing 1,000MT + from the trading market (gold/au) at what ever the marketprice is and hold it until price rise rapidly. He will then release more than the amount purchased back onto the market which will in turn drop prices even quicker. Can he do this? and will he be able to speculate or influence what prices gold should be after he drops the bomb shell onto the gold market?

    mark longhurst Reply
  27. What an encouraging message – I speak Mandarin and was just wondering about how to get into the commodity market after working in financial journalism for 10 years. Do hope the market is not just for the young and fresh graduate!

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