I asked a portfolio manager yesterday what he thought of the financial crisis, and he quickly replied, "I had nothing to do with it." Although good for a chuckle, the statement also contains a timely lesson for every Fool: Be defensive.
When economies get into trouble, many investors seek the relative safety of hard assets. Following the late-summer launch of the Market Vectors RVE Hard Assets Producers ETF (AMEX:HAP), investors now have access to a broad basket of commodity-related equities tracking a benchmark index which commodity expert Jim Rogers himself helped to construct.
Commodity equities have been anything but safe lately, as these sectors have been taken to the cleaners. This monstrous correction comes as no surprise to Rogers, legendary co-founder of the Quantum Fund. In Jim's words:
We have had eight or nine periods of forced liquidation over the past 100 to 150 years wherein everything was liquidated without regard to fundamentals. This is such a period. ... Historically, the things which have come out best on the other side are things where the fundamentals have been unimpaired. Commodities are the only thing I know with unimpaired fundamentals.
I would augment that statement by suggesting that some commodities will be slower to rebound than others. Nonetheless, this exchange-traded fund (ETF) contains a formidable list of names among the top 10 holdings, with a notable emphasis upon oil and agriculture. Fools who believe that oil will resume its bull run will appreciate the exposure to ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX).
For those nutty enough to think that food may be important in the future, the fund includes familiar names from the presummer agriculture rally, including Potash Corp. of Saskatchewan (NYSE:POT) and Deere (NYSE:DE). Unfortunately for this Fool, at more than 8% of assets, the current largest holding is Monsanto (NYSE:MON). After reading this article back in April, I vowed never to own shares.
While I have deep respect for Jim Rogers, and I do not doubt that the Market Vectors ETF will reverse course and ultimately outperform the broader markets for a while, I believe that investors could do even better with an independent approach capitalizing on the range of resources at The Motley Fool. The Motley Fool Income Investor newsletter service -- with recommendations like Petroleo Brasileiro (NYSE:PBR), which also appears in the Rogers index -- can be a great place to start. Try Income Investor free for 30 days.
Further Foolishness:
- Motley Fool CAPS All-Star Ares Financial posts Jim Rogers interviews.
- Jim Rogers at his best on my CAPS blog.
