Commodities

[PDXTabs]

Commodities aren't really an investment, per se, as they produce no real return over time. They can serve as an adequate diversifier, however, if one is inclined.

Yup, long term you would expect them to lose value. I don't own any, but if I did it would be COM/ABCERI.

[BicycleB]

Had been meaning to buy a little commodities to diversify, got around to it 9 weeks ago or so with a few oxy.ws. Up 43%, glad I did. Hard to know the long term though. Continuing to follow thread, learn.

[vand]

Top is NOT in.

Commodities power higher after a period of consolidation. The Bull market is very much alive.

Beautyful chart, actually.
+40% YoY.

https://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=CMDY&insttype=Fund

[MustacheAndaHalf]

SPDR Gold has the most options volume.  I bought GLD calls, which have just been losing money so far.  GLD itself is -7% YTD, but also -7% for 1 month.  I'm surprised that during inflation and predictions of higher inflation, gold is going nowhere.

I got 7 USO January 2021 $50 calls at $1.39 recently. Let’s do this inflation.

Fun little trade.

Could you clarify the duration?  You made that post in Feb 2021, so you couldn't have bought a Jan 2021 expiration date.  Did you mean 2022?  Are you still holding those?

I joined that All Start Charts trade the next day, on Feb 10, but with longer duration calls.  I added some in March & May, but have been cashing out over the past 4 weeks.  I had lots of exposure to OXY and XOP, and wanted to take profits.

[bthewalls]

Checked my commodity etf recently, up over 30 percent now

Baz

[vand]

This commodities bull market is about to nudge into the next gear as crude oil, which is still by far the most important natural mineral we know, has broken out to multi year highs.

Commodities are understandably overlooked but they are the one asset class you absolutely 100% want to hold during periods of distressing inflation. Not stocks, not real estate, and certainly not bonds or cash. I am reasonably certain that the mainstream financial world is about to rediscover this forgotten lesson.

[bthewalls]

My stuff up 50pc since last checked

[daverobev]

This commodities bull market is about to nudge into the next gear as crude oil, which is still by far the most important natural mineral we know, has broken out to multi year highs.

Commodities are understandably overlooked but they are the one asset class you absolutely 100% want to hold during periods of distressing inflation. Not stocks, not real estate, and certainly not bonds or cash. I am reasonably certain that the mainstream financial world is about to rediscover this forgotten lesson.

What about producer companies?

If not, what's a good EU-compliant fund?

[vand]

This commodities bull market is about to nudge into the next gear as crude oil, which is still by far the most important natural mineral we know, has broken out to multi year highs.

Commodities are understandably overlooked but they are the one asset class you absolutely 100% want to hold during periods of distressing inflation. Not stocks, not real estate, and certainly not bonds or cash. I am reasonably certain that the mainstream financial world is about to rediscover this forgotten lesson.

What about producer companies?

If not, what's a good EU-compliant fund?

yes, commodity producers are a reasonable play, although I wouldn't hold them without aslo having exposure to the underlying commodity also if you believe in the inflation narrative.

https://www.schroders.com/en/sysglobalassets/staticfiles/schroders/sites/americas/canada/documents/investment-perspective-what-are-the-inflation-beating-asset-classes.pdf

When discussing the general equity market we suggested that reducing equity exposure in the presence of
structural inflation may be beneficial to portfolio returns. However, as we can see in
Chart 8, certain sectors of the equity market (predominantly those linked to commodity prices) tend
to outperform a diversified equity index when the economy is suffering from structural inflation.
It should also be noted that commodity-related equities are more significantly exposed to equity market
movements than to commodities. This means that these equities provide less diversification benefits than
commodities. We discuss this in our third paper when we examine portfolio construction of an inflation
hedging portfolio.
However, as mentioned before, unlike commodities, equities are cashflow generating assets and despite
having slightly lower short-term inflation beta, they are more likely to provide higher returns over the longer term

Interestingly they also highlight that Tech stocks have a high beta with changes in inflation.

[vand]

I thought the world was going carbon neutral?!.....a 4.1% move in oil today takes it to new multi-year highs

[MustacheAndaHalf]

I sold my oil stock holdings this past week.  I have OXY-WT which act like long duration call options, and they were profitable enough already.  If Russia does invade, I expect they'll sell oil to China instead of Europe, which could reduce the impact on oil markets.  Overall I'm seeing a few more downside risks than upside for oil, so I sold.

[ZaraThustra]

I really need to stay more active on this board. Great discussion, great article.

Article mentions equity plays in Rio Tinto, XOM, RDS. Looks like VAW would be a reasonable sector etf choice.

But, all of these were 2020-21 moves based on the rumor of inflation. Now that the news / reality has been here, the mentioned sectors looks overbought.

[ZaraThustra]

I thought the world was going carbon neutral?!.....a 4.1% move in oil today takes it to new multi-year highs

I know! But, I still hear my furnace burning NG right now, and I have a 2010 Toyota full of gas out front, etc etc.

Perception is not reality?

[BicycleB]

I thought the world was going carbon neutral?!.....a 4.1% move in oil today takes it to new multi-year highs

I know! But, I still hear my furnace burning NG right now, and I have a 2010 Toyota full of gas out front, etc etc.

Perception is not reality?

Reality can take time.

It seems like shifting from fossil fuel to renewables would most efficiently be done by building renewables up while still using existing fossil fuel facilities until they wear out. We're not going to scrap gasoline cars that run, just let them wear out, maybe decommission a few of them a year or two early.

Maybe the first thing to actually stop will be oil exploration. Next, as capacity shrinks but there is still short term oil demand, prices rise. We may see this several times before finishing the switch - if indeed it ever happens completely. Maybe we're seeing an episode of it now?

Financially, I'd guess that oil companies should have a lower stock price than once expected, due to the reduced expectation of future income. But current profits will be high. Low P/Es (or high short term earnings, if you like) should be common. If that's what we're seeing, then events match the expectation of a gradual shift. (Just my 2 cents, thinking out loud.)

PS. I had oxy.wt but waffled out of a it a few months ago. Made some money but nothing big.


***

After selling my house a few weeks ago, did include some gold, gold mining and a commodities producer of sorts when investing the proceeds. Producer was Mosaic (MOS), the phosphates and potash producer, fwiw. My hope was that it would have some of the inflation benefits of general commodities, some safety from a low P/E (around 8 last I checked) and be more solid long term than oil because it has a larger % of ag use. Hopefully it's overlooked/mispriced relative to oil, rather than just cheap because of flaws that I overlooked.

It's been on a tear since then (up 19%) so be cautious, I guess.

[vand]

I really need to stay more active on this board. Great discussion, great article.

Article mentions equity plays in Rio Tinto, XOM, RDS. Looks like VAW would be a reasonable sector etf choice.

But, all of these were 2020-21 moves based on the rumor of inflation. Now that the news / reality has been here, the mentioned sectors looks overbought.

Yes.. investing is not that easy, because if its obvious then a large move has probably already happened and it much of the future worries priced in.

People who don't understand this invest based on what's on the front page of the papers. Proper investors who enagage in level-2 thinking - as Howard Marks aptly puts it - invest based on what's on pages 5-7 of the papers.. stories that have the legs to eventually make it to the front pages.

I'll tell you what the obvious non-obvious play right now is.. gold. Why? Its been in a pathetic bear market for the last 18 months even as inflation has gone to multi-decade highs. People think its useless and has no use. It's a commodity that has failed to participate in the overall commodity bull market. It's the ultimate contrarian play right now.

When sentiment is so low then it usually doesn't take a lot to start outperforming. Gold is due a massive rally.

Come back in 12-18 months and lets see if I'm right.

[ZaraThustra]

I really need to stay more active on this board. Great discussion, great article.

Article mentions equity plays in Rio Tinto, XOM, RDS. Looks like VAW would be a reasonable sector etf choice.

But, all of these were 2020-21 moves based on the rumor of inflation. Now that the news / reality has been here, the mentioned sectors looks overbought.

Yes.. investing is not that easy, because if its obvious then a large move has probably already happened and it much of the future worries priced in.

People who don't understand this invest based on what's on the front page of the papers. Proper investors who enagage in level-2 thinking - as Howard Marks aptly puts it - invest based on what's on pages 5-7 of the papers.. stories that have the legs to eventually make it to the front pages.

I'll tell you what the obvious non-obvious play right now is.. gold. Why? Its been in a pathetic bear market for the last 18 months even as inflation has gone to multi-decade highs. People think its useless and has no use. It's a commodity that has failed to participate in the overall commodity bull market. It's the ultimate contrarian play right now.

When sentiment is so low then it usually doesn't take a lot to start outperforming. Gold is due a massive rally.

Come back in 12-18 months and lets see if I'm right.

I think you're right, right now.

https://www.wsj.com/articles/investors-pile-into-gold-seeking-safety-from-market-geopolitical-turbulence-11643123826

[vand]

WTI crude oil just hit $70

Triple digit oil within the next 12 months?

Lollipop for me.

Maybe when Cathie Wood was forecasting $12 oil she forgot to add the additional zero on the end?

[vand]

I've sold half my holding in LSE:ACGP now.
Thinking of redeploying it into Russian equities..

[bthewalls]

I've sold half my holding in LSE:ACGP now.
Thinking of redeploying it into Russian equities..

Vand I was wondering bout that...what you recommend for a large cap Russian etf thru London exchange?

Baz

[vand]

I've now completely sold my commodities position. A nice 75% return over 20 months, but the risk/reward profile of this play is now seriously skewed towards the downside in the short term imo, as the contrarian play has now become the panic buying play.

Buy low, sell high. Now is the time to be selling.

[vand]

I've sold half my holding in LSE:ACGP now.
Thinking of redeploying it into Russian equities..

Vand I was wondering bout that...what you recommend for a large cap Russian etf thru London exchange?

Baz

I already own some JRS.L which is now down about -80%. I added more, but I honestly not going to risk more than I can afford to write off.
DYOR - this is not for widows and orphans.

[MinorMiner]

I think there is a good chance that copper will be hot for the next decade. I spent $250 just on wiring to install a basic EV charger. There's also a lot of copper in EV's, just the switch to EV's requires roughly 1/3 of the current worlds supply (Lots of copper in a motor). An upgrade of the grid to renewables will require even more. The switch to renewables in Europe will be kicked into high gear by the desire to move away from Russian gas as quick as possible. Today copper hit $4.90 /lb. This is the highest it has ever been.

[bthewalls]

I've now completely sold my commodities position. A nice 75% return over 20 months, but the risk/reward profile of this play is now seriously skewed towards the downside in the short term imo, as the contrarian play has now become the panic buying play.

Buy low, sell high. Now is the time to be selling.

I wonder....inflation shows no sign of slowing?

[vand]

I've now completely sold my commodities position. A nice 75% return over 20 months, but the risk/reward profile of this play is now seriously skewed towards the downside in the short term imo, as the contrarian play has now become the panic buying play.

Buy low, sell high. Now is the time to be selling.

I wonder....inflation shows no sign of slowing?

Tops are difficult impossible to call.  A contrarian investor will tell you that the time to buy something is when no one else is interested. The time to be cautious is when everyone else wants it.  Where do you think we are on that scale right now in the commodities space?  All the good news is in the price, at least in the short term. 

People think that it will keep going up in a straight line. It won't. Even if there are higher highs ahead for commodities, it needs to take a breather and there is going a big scary correction and months of sideways chop to get through.  The easy money is made at the start, and at the end - the middle phase is often the most difficult, and my feeling is that we may be entering the middle phase of the bull market now.

[bthewalls]

Yeah that makes sense vand....