How to invest in commodities from the world's great investors. Could be extremely relevant if we enter a bear market in 2022
Rating: 4/5
If no one wants to be in a market, it’s a good time to look at investing in that market
Wandering away from the action is where to find new action
Check out Reuters CRB commodities price index
Investing in commodities can be a hedge against a bear market in stocks, rampant inflation and a downturn in the economy
There’s a new bull market in commodities
When supply and demand are out of whack, it’s a classic sign of a long bull market
Meat requires corn so look for increased corn prices as people eat more meat
No major oil fields discovered in the last few decades
More than 60% of the world’s ethanol (used in gas) is made from sugar
War pushes commodity prices higher
Rising commodity prices hurt companies and their margins so stocks drop
Commodity producing companies and those that support them do well in commodity bull cycles
No bull market in any asset class has gone straight up, periodic corrections always occur
The last leg of a bull market always ends in hysteria, the last leg of a bear market always ends in panic
If stockpiles of commodities are rising, the bull market is over
Commodity futures need less margin
Investing in commodity producing companies can be riskier than buying the things outright
Commodities cannot go to zero while shares in companies can
Bull markets in commodities last 15+ years
If you want to invest in commodities, pick one and learn everything about it
Look at the CRB commodity yearbook
Understand supply of the commodity first
Demand:
Returns from commodities were 3 times those of companies producing commodities
Think about buying property in areas rich in commodities
Just buy the commodity itself through futures or a commodity index fund
Trading commodities and trading futures are the same
Commodity futures are highly liquid
Speculators determine the market and they close positions before the expiry date
Don’t sell something short unless it’s unbelievably expensive
Most traders lose most of the time so limit your losses
Contago - prices of futures more expensive farther into the future
The 21st century will be China’s
Supply is tight and China needs more materials now than it has
No fixed currency in history can maintain its peg
Oil production has been declining for years while demand increases
US is extremely dependent on foreign oil
Peak cheap oil has likely already happened
Under investment in the capacity to pump, regime and transport oil and a supply/demand imbalance
Decreased demand does not mean decreased supply is supplies are decreasing further
From 1959 to 2000, commodities outperformed stocks and bonds with less risk and better returns
Bull markets in commodities mean bear markets in stocks and vice versa
When there’s high stage hysteria, it’s the end of the bull market
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