Thursday, February 02, 2017

commodities

  • oil. gold, lumber, timber, energy, minerals, precious and semiprecious metals, agriculture (pork belly, grain, forest products), metals (gold, silver, steel, cooper), mineral (oil, natural gas)
  • bull alternates between stocks and commodities; historically, this has happened in cycles of 15 to 23 years; the commodities market became bullish in 1999, the commodity bull may run until between 2014 and 2022 (1999+15=2014, 1999+23=2022)
  • interplay between stocks and commodities---cereals are made from commodities such as rice, wheat, corn, and sugar. When there is a downturn in the commodities market, the cost of these foods drops. Provided that sales levels are sustained, the company's net profit goes up, which in turn is reflected n a rise in its share price.
  • when the price of commodities rises, Kellogg's can't reflect its cost increase in the price of its cereal immediately, this will affect the company's net profit, and its stock price will suffer as a consequence
  • companies benefit from low costs when commodities are sluggish; when commodities prices rise, profits drop off, taking stock price with them
  • commodities and stocks are inversely correlated 
  • a single country's political turmoil can drive up commodity prices around the world, the price of price of gold in particular will usually rise; a full-scale war will drive up not only the price of gold but the price of most other commodities
  • the rise of China brings with it a rise in demand for commodities, with its 1.3 billion people consumes steel, iron ore, and soy; it is the largest consumer of cooper in the world and the second leading consumer of energy, including oil; in the interim, this imbalance will continue to drive up the price of commodities despite the normal, periodic corrections to prices
  • it is important to have at least some exposure in ur portfolio to a variety of commodities
  • it is best to keep only a small portion of ur investment in commodities
  • direct exposure in some commodities
  • indirect exposure in some commodities--- investing in heavily dependent commodities-exporting countries and in companies dedicated to commodities, like mining and oil companies
  • it is preferable to select a commodities fund that includes a larger portion of all the commodities
  • given commodities does not organically grow as does a stock or a bond, keep commodites to less than 10 to 15 percent maximum, with a minimum 3 to 5 percent
  • commodities should be broadly invested across precious metals, industrial/commercial materials, energy, agricultural goods, and timber. Make sure not to be solely exposed to just oil and gold, they tend to dominate certain indices
commodities index funds
  • u need to make sure that the fund if not over concentrated in just one or two of the dominant asset types

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