Jim Rogers says what everybody's thinking.

Bloomberg: U.S. Housing Is one of History's `Biggest Bubbles,' Rogers Says.

Quotes:

``This was one of the biggest bubbles we've ever had in credit,'' Rogers, who predicted the start of the global commodities rally in 1999, said in an interview from Hong Kong. ``I have been and am still short the investment bankers in America. I'm also short homebuilders.''

....

``This is only time in world history when people were able to buy houses with no money down and in fact, in some cases, the builders gave them money for a down payment,'' Rogers said. ``So this bubble is the worst we've had in housing and it's going to be the worst we've had cleaning it out.''

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I've been meaning to read the book Bubble Man, about Alan Greenspan, but I've got a few books to go before I get to it.

Jim Rogers: Time to buy natural gas.

Here's an interesting trade.

Jim Rogers, former hedge fund manager, on Cavuto on Business this weekend:

"Two hedge funds have collapsed recently, have driven down the price of natural gas. Two things:

It's gonna be cheaper to heat your house if you use natural gas; if you don't use natural gas, switch to natural gas.

But secondly, buy natural gas, you'll make a fortune."

[Note: The transcript on Foxnews.com contains only the first comment about using natural gas in your house. The quote above is more accurate.]

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One of the funds he's referring to is Amaranth which hasn't collapsed and is trying to stay open, though that seems a little unlikely given the circumstances, so ultimately he'll probably be right. Using borrowed money to gain serious leverage, they played natural gas futures for early 2007, in the process basically cornering the market for themselves. When they ran out of money to keep buying, it turned out everybody else had taken their toys and gone home (quite possibly on purpose), and the market plunged, leaving Amaranth holding the bag.

The other fund he's likely referring to is MotherRock LP which also incinerated itself with natural gas trades. The notable thing about MotherRock is that one of the managers was a former President of the New York Mercantile Exchange (a major commodities exchange) who probably had a little bit of experience with trading commodities before trying his hand at running a hedge fund portfolio.

So, justifiably, natural gas is considered the most volatile commodity of all, and it has certainly proved it recently, burning even those with experience. After spiking last year to $15, it's now down to under $5.

Jim Rogers is probably counting on three things to support this trade: First, that the blowup of these two hedge funds has created a temporary dislocation in the price of natural gas to the downside, and secondly that natural gas is now trading at the low end of it's range in it's normal relation to oil. This idea is also supported by energy analyst Kurt Wulff, who recently wrote "Natural gas may not have positive price momentum, but it has value at near the lowest ratio to crude oil in the 00's decade." Finally, we are just ahead of winter and natural gas has a tendency to spike sharply if you get a period of very cold weather during the winter.

A couple of things to keep in mind: This is a trade he is recommending, so you need to keep a watchful eye on your position to sell into a spike. Predictions for this winter suggest it will be warmer than normal.

If you don't trade the commodity, you could take a look at stocks that generally trade along with natural gas, some of the ones I found correlated are EGN, PXP and WMB. The larger producers of natural gas include COP, ECA, EOG, APC, XTO, CHK.

Jim Rogers: "Be very careful."

From this weekend's Cavuto on Business on FoxNews:

Ben Stein: "The world economy is slowing, the growth of demand for oil is slowing dramatically. I think the long term trend of demand for oil is very, very strong, but in the short run, inventories are piling up, even the Saudis can't find anyplace to store the oil, they're putting it in old oil tankers. There is a disconnect here, the price has got to fall with this huge overhang of supply. When it does, it knocks the props out of inflation, the interest rate rising cycle will stop, and stocks will rally."

Jim Rogers: "Well, Ben may be right, the market should rally after this collapse it's had recently, but Ben, we may already be in recession and the markets are gonna be down this year, and probably down into next year, so be very careful."

The ingredients are certainly there: rising interest rates, high energy costs, and what is increasingly smelling like a housing bust. And the whole stock market is stinking up the joint.

Jim Rogers, as far as I am concerned, has good gut instincts. He also ran one of the early hedge funds with George Soros.

3 out of 3 knowledgeable investors recommend..

Suncor (SU).

A Canadian oil sands play. In the recent past, and at somewhat lower levels, I've heard this recommended by Jim Rogers, T. Boone Pickens, and Charles Maxwell. I don't know about you, but I'd say these are three guys who know a little about oil and making money.

The basic idea is that the company has a huge amount of potential oil reserves in it's oil sands, with the added bonus that it's close nearby and in a fairly stable country. [Though you never know when one of their politicians is going to get a kink in her skirt and call our President an idiot, but I digress. Thank God they have democracy over there or ...]

Oil sands are apparently just what they sound like, a mix of oil and sand that must be mined and separated to produce a lower grade of crude oil. The catch is that the process is seriously energy (generally natural gas) and water intensive, dirty as all get out, and has significantly higher costs than regular oil wells. However, as oil prices rise and stay elevated (above $35 is particularly good), oil sands become cost effective and profitable.

(Disclosure: I own no SU, though I plan to buy it at some point in the next 6 months.)