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Learning, Sharing, and Teaching => Investor Alley => Topic started by: AgileTurtle on November 13, 2014, 06:56:38 AM

Title: Commodities
Post by: AgileTurtle on November 13, 2014, 06:56:38 AM
Anyone here trade commodities? Seems like most people plans are index investing or real estate investing. I worked for an energy hedge fund for a bit and those guys did fantastic. I never really had enough extra money to attempt to get into commodity trading. They all told me that equity trading is far more difficult than commodities and it is foolish to trade equities (I think most here agree). Anyways, just wondering if anyone here trades commodities and what your strategy is?
Title: Re: Commodities
Post by: DaKini on November 23, 2014, 07:48:26 AM
My allocation contains 10% (of my risky part of portfolio which is 80%) of  iShares EXXY which contains futures on the most important industry commoditys. This position is meant mainly as a diversificator to my stocks portion.
Title: Re: Commodities
Post by: hodedofome on November 23, 2014, 12:15:14 PM
I have DBC and GLD as ETFs that I will buy as part of a global momentum portfolio. However, I'll only own them if they are outperforming everything else. Buying and holding commodities is a poor investment over the long haul.

I don't trade futures contracts as my account size is not large enough for my risk tolerance. Perhaps if I'm trading millions of dollars I'll run a CTA style strategy but for now ETFs serve me just fine.

IMO the 'difficulty' in trading comes from trading markets with lots of smart traders doing the same as you. There are plenty of guys trading large caps as well as commodities. About the only persistent edge I can see in commodities is in the long term trends that hedgers play a part in creating. However, if you look at small and mid cap equities, you can find yourself only competing with a few others. Not to mention, a stock that is growing earnings at 50% a year is almost impossible to price correctly. It can be an incredibly inefficient space.

All trading is hard, but you can make it more difficult by competing with a lot of smart people, or make it easier by competing with a few.
Title: Re: Commodities
Post by: RyeWhiskey on November 23, 2014, 02:06:07 PM
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.

The way I see it, our lives are already filled with and dependent upon so many commodities, why leverage a portion of one's investments as well?
Title: Re: Commodities
Post by: eudaimonia on November 24, 2014, 01:15:44 PM
I trade commodities spreads but don't talk about it here since everyone is about boglehead style investing. Agree with the other posters that this isn't something to invest in per se but rather something to trade. My mentor is a former fund energy trader. I trade some of that but am partial to interest rates and grains (which is what I started with). The returns you can make in this business would snap the heads off most boglehead investors (and even real-estate guys) but you have to know what you are doing and to do that be willing to learn the business.

What role were you doing at your former fund? Depending on your role you might be able to get into doing PJM (physical power) at a utility and learn the ropes that way. Lot of money in that area right now.
Title: Re: Commodities
Post by: AgileTurtle on November 24, 2014, 01:51:49 PM
I trade commodities spreads but don't talk about it here since everyone is about boglehead style investing. Agree with the other posters that this isn't something to invest in per se but rather something to trade. My mentor is a former fund energy trader. I trade some of that but am partial to interest rates and grains (which is what I started with). The returns you can make in this business would snap the heads off most boglehead investors (and even real-estate guys) but you have to know what you are doing and to do that be willing to learn the business.

What role were you doing at your former fund? Depending on your role you might be able to get into doing PJM (physical power) at a utility and learn the ropes that way. Lot of money in that area right now.

I worked in IT at the fund they did both physical power and commodities. I saw what kind of % returns they were making and it was insane. I understand that it is not so much investing as a skill that in itself earns money.

I have no interest in being a landlord if I wanted to work construction and manage properties i would do that. I like trading stocks but it seems like the poor mans version of futures if you want to trade and not invest. Trading seems like it is a skill that is very valuable to become FI and I dont get why it isnt more popular.

Do you think getting a mentor to teach you the way is the only way? Or is it learnable on your own? I still need to build up enough disposable money anyways, it is going to be a few years.
Title: Re: Commodities
Post by: hodedofome on November 24, 2014, 02:04:31 PM
I learned on my own. I wish I had a mentor, that would have been easier I believe. I've read about 50 books so far and I follow 100+ trading/investing blogs. When I first started out I followed a lot of pro traders on twitter. My personality is conducive to being self-taught, some may need a mentor because they won't spend the time alone to learn like I did.

The most important thing, however, is that you find a strategy that suits your personality. Just because some people you worked with doubled their money every year or two by trading energy futures, doesn't mean you would. And it won't have anything to do with your intelligence, but rather your personality. You may be more suited to special situation investing or quantitative/mechanical systems. In your journey you'll hopefully figure out what suits you the best, and become an expert at it.
Title: Re: Commodities
Post by: AgileTurtle on November 24, 2014, 02:10:15 PM
I learned on my own. I wish I had a mentor, that would have been easier I believe. I've read about 50 books so far and I follow 100+ trading/investing blogs. When I first started out I followed a lot of pro traders on twitter. My personality is conducive to being self-taught, some may need a mentor because they won't spend the time alone to learn like I did.

The most important thing, however, is that you find a strategy that suits your personality. Just because some people you worked with doubled their money every year or two by trading energy futures, doesn't mean you would. And it won't have anything to do with your intelligence, but rather your personality. You may be more suited to special situation investing or quantitative/mechanical systems. In your journey you'll hopefully figure out what suits you the best, and become an expert at it.

That is interesting about the personality. When i worked there and have meet other pro traders ive tried to find at least one that is simalar to me. My hopes was to befriend them and get some information out of them. But at least the place I worked they were all super aggressive type A. The VPs were the same, so I am guessing they hired a ton of similar people. Or maybe there is a reason people like me werent there. Really laid back type. 
Title: Re: Commodities
Post by: DaKini on November 24, 2014, 02:52:23 PM
I trade commodities spreads but don't talk about it here since everyone is about boglehead style investing. Agree with the other posters that this isn't something to invest in per se but rather something to trade.
Please tell me more about this!
Title: Re: Commodities
Post by: eudaimonia on November 24, 2014, 03:30:29 PM
I learned on my own.

Mad respect to you for learning this business on your own.

@AgileTurtle

Was the fund HFT/algo driven with a bunch of quant types or macro driven? I'm guessing the latter. With your IT background have you looked at the quant side of the business? I totally agree with hodedofome that you need to find something that suits your personality.

@DaKini

What specifically would you like to know?
Title: Re: Commodities
Post by: DaKini on November 26, 2014, 12:21:03 PM
I wanted to learn the reasons why commoditys arent for investing per se, but for trading.
As you can read above i hold some commodity etf for diversification (which worked so far), what do you think about it and why?
Title: Re: Commodities
Post by: steveo on November 26, 2014, 01:58:09 PM
I wanted to learn the reasons why commoditys arent for investing per se, but for trading.
As you can read above i hold some commodity etf for diversification (which worked so far), what do you think about it and why?

I think its a good idea. I reckon most of your portfolio should be in stocks and the house you own however some diversification is a good idea and commodities is a good way to diversify.
Title: Re: Commodities
Post by: eudaimonia on November 26, 2014, 01:58:25 PM
I wanted to learn the reasons why commoditys arent for investing per se, but for trading.
As you can read above i hold some commodity etf for diversification (which worked so far), what do you think about it and why?

Commodities themselves don't generate cash flow like a business does and therefore do not increase in value. At best they are a hedge against high inflationary periods and you'll see that they tend to go up in price during those periods and go down in prices during deflationary cycles.

Take a look at this 100-year inflation adjusted chart for gold: http://www.macrotrends.net/1333/gold-and-silver-prices-100-year-historical-chart

For the past 100 years the price has gone from about $425 in 1915 to about $1200 today. That is a 183% increase over 100 years or about 1.83% per year. Factor in the non-trivial carrying cost (storing gold isn't cheap) of 1% per year and you are down to .83% per year. Want to exchange that gold for something else - there is a fee for that as well.

Other commodities have a similar or worse long-term return. Take a look at the price of corn - it has been going down steadily for the past 50 years.

As far as your EFT working so far - define working? Are you trading in and out of this position, accumulating position for the next inflationary cycle or something else?

To be clear I'm not saying one cannot make money in commodities; however, a buy and hold approach is not effective in the long-term (20 year+ cycle).
Title: Re: Commodities
Post by: index on November 26, 2014, 02:04:54 PM
I am setting the frame work to start a tree farm next fall. The outlay will be around 30k at should net around 700k 25 years from now. Throwing off a little cash flow from a few acres of Christmas trees in the interim. I guess timber is a commodity right? 
Title: Re: Commodities
Post by: eudaimonia on November 26, 2014, 02:18:37 PM
I am setting the frame work to start a tree farm next fall. The outlay will be around 30k at should net around 700k 25 years from now. Throwing off a little cash flow from a few acres of Christmas trees in the interim. I guess timber is a commodity right?

I would say that what you are doing is essentially farming in the timber industry which is a business and not really an investment in commodities per se. I wasn't suggesting that corn farmers don't make a profit in my previous post but rather that holding a speculative position (as opposed to hedge which may farmers do) in corn is not a wise long-term investment.
Title: Re: Commodities
Post by: hodedofome on November 26, 2014, 08:05:54 PM
When you start thinking about commodities as a hedge, and you look at the long term returns and obvious up and down trends, you naturally find yourself trying to time the market. Why hold gold for the 20 years it sucks? Why couldn't you just find a way to hold it for the 10 years you really need it? This usually leads to tactical asset allocation ala Meb Faber and his Ivy Portfolio. It works. Diversify and only hold the assets that are going up, because the ones that are going down aren't worth owning.
Title: Re: Commodities
Post by: DaKini on November 27, 2014, 01:09:04 PM
My approach is that the correlation to stocks and bonds is not 1, so i would buy commodities if they are the cheapest asset relative to all other assets and sell if it is the most expensive one. Usually currently i just buy other assets with new cash inflow as the portfolio is not big enough for big rebalancing actions.
But later when my inflow is dwarfed by the portfolio size, this should lead to sell high-buy low.
Title: Re: Commodities
Post by: steveo on November 27, 2014, 02:04:09 PM
My approach is that the correlation to stocks and bonds is not 1, so i would buy commodities if they are the cheapest asset relative to all other assets and sell if it is the most expensive one. Usually currently i just buy other assets with new cash inflow as the portfolio is not big enough for big rebalancing actions.
But later when my inflow is dwarfed by the portfolio size, this should lead to sell high-buy low.

I think that this is a good approach. If your portfolio is smallish and you are still working you can put money into whatever asset class looks best at that time within reason. If gold is always cheap and you end up with a massive gold portfolio I think your long run returns will probably be poor.

I would though think about asset allocation and invest in that fashion. In my opinion commodities should not make up a significant proportion of your portfolio as they are not businesses that are earning money.
Title: Re: Commodities
Post by: DaKini on November 28, 2014, 07:31:47 AM
Exactly that is the reason its only 10% of my allocation.
In the case would have a massive gold portfolio i would also have a massive stocks portfolio. In case the 10% would always eat my money, its would have to drop hugely all the time like a black hole with no end which is not possible despite the world coming to an end. The etf mentioned above is quite diversified for that reason, i would never ever invest directly in gold only.
When companys produce goods they need ressources, if demand rises so does the commodities price (usually at least).

What is your opinion on the contents of the specific etf i mentioned above?
Title: Re: Commodities
Post by: steveo on November 28, 2014, 05:59:37 PM
I don't know that specific ETF however I still like the idea of having some commodities within your portfolio if you can do it cheaply. Its just a hedge.

In stating all of that I think commodities could help your portfolios performance. There will be times commodities go up a lot more than stocks simply because of demand and supply as well as the way markets work (bull and bear markets). If you can sell when the commodities/stocks are way too high and re-balance at that time (it doesn't have to be perfect) my assumption is that you will come out ahead and have a more balanced performance.
Title: Re: Commodities
Post by: Buffaloski Boris on August 07, 2020, 08:11:40 AM
This is an interesting if old thread and relevant given the high price of other assets. Including gold. Seems like commodities are part of a diversified portfolio.

 Are you investing in commodities and if so how are you going about it?
Title: Re: Commodities
Post by: vand on August 07, 2020, 09:46:43 AM
Yeah, adding some UK:AGCP. Don't anticipate holding more than 2-3% of my total portfolio, and it's more as an inflation hedge should we get a rerun of the 1970s or worse. I think my PM holdings will do fine as an inflation hedge too, but as you know I love being well diversified with tilts towards value.

Also more aggressively accumulating Platinum which is an interesting play both as a PM and an industrial metal.  I consider by far the best play in the PM sector right now. I wouldn't put all my PM allocation into platinum though, but imo it's worth 10-20% of your PM allocation.
Title: Re: Commodities
Post by: Buffaloski Boris on August 07, 2020, 01:03:56 PM
Yeah, adding some UK:AGCP. Don't anticipate holding more than 2-3% of my total portfolio, and it's more as an inflation hedge should we get a rerun of the 1970s or worse. I think my PM holdings will do fine as an inflation hedge too, but as you know I love being well diversified with tilts towards value.

Also more aggressively accumulating Platinum which is an interesting play both as a PM and an industrial metal.  I consider by far the best play in the PM sector right now. I wouldn't put all my PM allocation into platinum though, but imo it's worth 10-20% of your PM allocation.

Yeah, I’m liking the value aspect and inflation hedge. Commodities have just gotten hammered the last 10 years. So of course I’m interested. Buy the hated, sell the loved.
Title: Re: Commodities
Post by: 2Birds1Stone on August 07, 2020, 01:48:52 PM
Yup, roughly 5% of my portfolio in physical Ag/Au.....since 2012.
Title: Re: Commodities
Post by: Imanuels on August 08, 2020, 04:05:46 AM
Is there a reason (apart from currency risk) why you use iShares EXXY instead of ICOM?

My allocation contains 10% (of my risky part of portfolio which is 80%) of  iShares EXXY which contains futures on the most important industry commoditys. This position is meant mainly as a diversificator to my stocks portion.
Title: Re: Commodities
Post by: DaKini on August 08, 2020, 08:50:56 AM
It was not available to me when i set up my IPS.

However I sold all of EXXY in 2018. The reason was Future rollover decay.
I also do not have any commodities position right now, apart from some minor physical gold and silver coins i inherited.

Changed plans make my holdings way simpler; to Stocks only, balanced against cash and pre existing old insurance vehicles i don’t want to liquidate because of tax stuff and good interest.
Title: Re: Commodities
Post by: Imanuels on August 09, 2020, 08:24:19 AM
I see, thanks for the explanation. I'm currently considering adding a broad commodities ETF to my portfolio. It would provide (a) diversification, (b) benefit if inflation rises due to the massive money printing and (c) bet on reversion to the mean since for example EXXY is completely beaten down.
In principle, I would prefer investing in commodities producing companies, but haven't found a suitable ETF for it jet. Maybe someone has any suggestions? The reason is that, commodities prices might drop, with the underlying companies still being profitable (for example, in the Inflation expectations thread the case for beef price vs price of live cattle was discussed).

Concerning gold and silver, I have them both in ETC's. However, the latest changes in the tax policy starting from 2021, make me re-think what exactly to do with them.
Title: Re: Commodities
Post by: DaKini on August 11, 2020, 07:47:26 AM
Well,
i do not trust in "mean reversion" anymore, at least not with a commodities futures ETF. Look at the long term chart of EXXY, and see how the futures courve erodes its cyclical gains.
I think, that for moderate inflation, stocks are a good-enough vehicle.
For diversification, i think there are better exposures than an futures etf. Physical gold maybe?

Title: Re: Commodities
Post by: Buffaloski Boris on August 11, 2020, 01:18:22 PM
I went and bought a couple of ETFs. Not a significant portion of our portfolio.
Title: Re: Commodities
Post by: vand on August 12, 2020, 04:19:58 AM
Well,
i do not trust in "mean reversion" anymore, at least not with a commodities futures ETF. Look at the long term chart of EXXY, and see how the futures courve erodes its cyclical gains.
I think, that for moderate inflation, stocks are a good-enough vehicle.
For diversification, i think there are better exposures than an futures etf. Physical gold maybe?

Yes, contango is a huge issue in commodity funds. ETFs like USO are hopeless.
I found CMDY which is designed to minimize the forward roll. Haven't really researched it much further tbh.. I probably should. Performance doesn't seem any different on the 2yr chart..

I suppose it's to be expected. Commodities are essentially physical assets. Short of taking delivery yourself and storing it yourself, there's no way of getting around that - you're going to have to pay for the equivilent in the paper market.

The secular cycles can be very long and extreme in commodities and many markets. They don't just fluctuate 30-40% around a 5 year cycle, they move by by ten times that over a 25-40 year cycle.

Soros had insight into this; through his reflexivity framework he basically argued that prices do not tend towards equilibrium, but rather tend toward excess through a positive feedback loop positive price action affects expectation which affects the price action etc.

Title: Re: Commodities
Post by: Buffaloski Boris on August 12, 2020, 08:28:48 AM
Well,
i do not trust in "mean reversion" anymore, at least not with a commodities futures ETF. Look at the long term chart of EXXY, and see how the futures courve erodes its cyclical gains.
I think, that for moderate inflation, stocks are a good-enough vehicle.
For diversification, i think there are better exposures than an futures etf. Physical gold maybe?

Yes, contango is a huge issue in commodity funds. ETFs like USO are hopeless.
I found CMDY which is designed to minimize the forward roll. Haven't really researched it much further tbh.. I probably should. Performance doesn't seem any different on the 2yr chart..

I suppose it's to be expected. Commodities are essentially physical assets. Short of taking delivery yourself and storing it yourself, there's no way of getting around that - you're going to have to pay for the equivilent in the paper market.

The secular cycles can be very long and extreme in commodities and many markets. They don't just fluctuate 30-40% around a 5 year cycle, they move by by ten times that over a 25-40 year cycle.

Soros had insight into this; through his reflexivity framework he basically argued that prices do not tend towards equilibrium, but rather tend toward excess through a positive feedback loop positive price action affects expectation which affects the price action etc.

It'll be interesting to hear what you find out about CMDY as I now own it.  That and COMB. I did some research into them and TBH, didn't see a whole lot of difference.  When in doubt, split the baby and buy both. 

It'd be interesting to see how commodities perform as compared to Au/Ag heading forward.  I tend to think that the Au/Ag train already left the station, so I'm looking at other stuff for portfolio diversification. 
Title: Re: Commodities
Post by: vand on January 15, 2021, 04:35:34 AM
The commodities/inflation play is a definitely a developing theme:

https://www.marketwatch.com/story/inflation-plays-are-outperforming-deflation-assets-by-the-most-in-15-years-as-money-pours-into-energy-sector-and-tips-11610706546?siteid=bigcharts&dist=bigcharts

https://www.marketwatch.com/story/commodity-bull-market-this-ship-has-sailed-says-goldmans-currie-11610649485
Title: Re: Commodities
Post by: J Boogie on January 18, 2021, 09:22:39 AM
I have found that FNV (Mostly a precious metals royalty/stream stock) is a good long term hold to rotate in and out of while maintaining a significant core position.

As others have mentioned, commodities have a long term underperformance problem.

But short term trading opens you up to the risk of mistiming the market and having to sell at a loss and deal with the psychological mess.

FNV however thanks to its royalty based business model gives you some precious metal upside without the long term underperformance downside.
Title: Re: Commodities
Post by: vand on January 18, 2021, 11:31:11 AM
I have found that FNV (Mostly a precious metals royalty/stream stock) is a good long term hold to rotate in and out of while maintaining a significant core position.

As others have mentioned, commodities have a long term underperformance problem.

But short term trading opens you up to the risk of mistiming the market and having to sell at a loss and deal with the psychological mess.

FNV however thanks to its royalty based business model gives you some precious metal upside without the long term underperformance downside.

Yes..I would go as far as to say they have been an absolutely terrible "long term" investment, with negative real returns over decades-long holding periods. That's pretty lousy if you are a buy and hold investor.

But it remains true that they have had some very good streaks whenever it has look like the monetary spigots have been loosened a notch too far and there is a flight hard assets, and paper assets get whacked, and so can perform a role in a diversified portfolio.

It is also largely based on a period of economic history where disinflation has been the dominant trend. If and when that trend ever reverses then commodities will almost certainly be revalued more favourably.

Title: Re: Commodities
Post by: bthewalls on January 18, 2021, 03:55:37 PM
I bought a general commodity etf a few months ago (part of aspiring all weather portfolio structure).....it appears to have popped up 6 percent in last few months.

Baz
Title: Re: Commodities
Post by: effigy98 on January 21, 2021, 01:40:52 PM
I started diversifying into PICK and AG along side GDXJ and SGDJ. I also like PDBC right now and works in taxable!
Title: Re: Commodities
Post by: bthewalls on January 21, 2021, 04:45:21 PM
....winter (inflation)....is coming....
Title: Re: Commodities
Post by: vand on February 08, 2021, 04:41:59 AM
....winter (inflation)....is coming....

Last summer I said that I didn't see much evidence of inflation despite all the monetary stimulus.. however, now I see lots of signs that inflation is starting to ramp up.

Petrol prices
food prices
internet prices
gas prices
childcare prices

have all increased noticeably.  Crude oil has now regain its pre-pandemic level (hands up who thought when crude went negative that we'd be back around $60 a barrel this early?), copper and other raw materials are at multi-year highs.

Anecdotally, we are in the process of building a home extension, and all the builders we talk to have mentioned how lumber, concrete and other materials have rocketed in price and are in short supply.

All said, I am increasingly dubious that our overlords can keep the inflation genie inside the bottle.  There were inflationary concerns last summer which didn't really materialise, but now I think that while the concerns seem to have subsided, the actual threat of rising inflation is starting to rear its head.
Title: Re: Commodities
Post by: bthewalls on February 09, 2021, 03:56:44 PM
Vand, was just checking my commodity etf this evening, it’s actually 10percent up since last few months....after been flat lining for ages.

Baz
Title: Re: Commodities
Post by: hodedofome on February 09, 2021, 09:16:46 PM
I got 7 USO January 2021 $50 calls at $1.39 recently. Let’s do this inflation.

Fun little trade.
Title: Re: Commodities
Post by: MustacheAndaHalf on February 10, 2021, 12:39:57 AM
hodedofome - Interesting, looks like something I would do - and you're early enough to profit.  An oil & gas ETF I hold is down -36% in 12 months, and the U.S. Oil fund is down -56% in 12 months.

It looks like ProShares Ultra Bloomberg Oil (UCO) has 2x leverage and gained 56% in 6 months.  The downside is the 0.95% annual fee and annoying K-1 tax form.
https://etfdb.com/etf/UCO/#performance
Title: Re: Commodities
Post by: daverobev on February 10, 2021, 07:20:02 AM
....winter (inflation)....is coming....

Last summer I said that I didn't see much evidence of inflation despite all the monetary stimulus.. however, now I see lots of signs that inflation is starting to ramp up.

Petrol prices
food prices
internet prices
gas prices
childcare prices

have all increased noticeably.  Crude oil has now regain its pre-pandemic level (hands up who thought when crude went negative that we'd be back around $60 a barrel this early?), copper and other raw materials are at multi-year highs.

Anecdotally, we are in the process of building a home extension, and all the builders we talk to have mentioned how lumber, concrete and other materials have rocketed in price and are in short supply.

All said, I am increasingly dubious that our overlords can keep the inflation genie inside the bottle.  There were inflationary concerns last summer which didn't really materialise, but now I think that while the concerns seem to have subsided, the actual threat of rising inflation is starting to rear its head.

But don't you think a lot of that is likely UK (Brexit) specific?
Title: Re: Commodities
Post by: vand on February 10, 2021, 07:49:58 AM
....winter (inflation)....is coming....

Last summer I said that I didn't see much evidence of inflation despite all the monetary stimulus.. however, now I see lots of signs that inflation is starting to ramp up.

Petrol prices
food prices
internet prices
gas prices
childcare prices

have all increased noticeably.  Crude oil has now regain its pre-pandemic level (hands up who thought when crude went negative that we'd be back around $60 a barrel this early?), copper and other raw materials are at multi-year highs.

Anecdotally, we are in the process of building a home extension, and all the builders we talk to have mentioned how lumber, concrete and other materials have rocketed in price and are in short supply.

All said, I am increasingly dubious that our overlords can keep the inflation genie inside the bottle.  There were inflationary concerns last summer which didn't really materialise, but now I think that while the concerns seem to have subsided, the actual threat of rising inflation is starting to rear its head.

But don't you think a lot of that is likely UK (Brexit) specific?

I don't think it's got anything to do with Brexit, when you consider that GBP has been strengthening since the summer, which should, other things being equal, act as a brake on inflation.

The real reason for rising inflation is, and always has been, more money chasing relatively fewer good with a pick up in the velocity of money.

The central banks have been able to continually loosen the monetary spigots for years decades now with very little pick up in consumer goods inflation largely because the velocity of money circulation has also been down trending, but perhaps the lockdown has marked the bottom of that secular trend. Any pickup in economic activity could also be causing the velocity of money to rise.
Title: Re: Commodities
Post by: vand on February 10, 2021, 08:06:43 AM
I think Moneyweek must be secretly watching me: https://moneyweek.com/economy/inflation/602748/prepare-for-inflation-and-financial-repression
Title: Re: Commodities
Post by: hodedofome on February 10, 2021, 09:08:02 AM
hodedofome - Interesting, looks like something I would do - and you're early enough to profit.  An oil & gas ETF I hold is down -36% in 12 months, and the U.S. Oil fund is down -56% in 12 months.

It looks like ProShares Ultra Bloomberg Oil (UCO) has 2x leverage and gained 56% in 6 months.  The downside is the 0.95% annual fee and annoying K-1 tax form.
https://etfdb.com/etf/UCO/#performance

Can’t take the credit for it, I got the idea from All Star Charts. I get more than a few option ideas from them.
Title: Re: Commodities
Post by: MustacheAndaHalf on February 10, 2021, 09:28:11 AM
hodedofome - All Star Charts... is that a subscription or reading their blog for free?

I assume your earlier post meant 2022 Jan calls.  If you bought them at $1.39, you made +40% already.  Since I prefer longer duration, I just bought calls expiring almost 2 years from now.

If you want another source for what's gaining fastest, etfdb tracks best/worst performing ETFs by various time periods.  It looks like cannabis stocks are gaining the most this week.  One of my holdings made the cut, too: XOP (oil/gas ETF)
https://etfdb.com/compare/highest-weekly-returns/no-leveraged/
Title: Re: Commodities
Post by: vand on February 16, 2021, 08:41:50 AM
Yeah, adding some UK:AGCP. Don't anticipate holding more than 2-3% of my total portfolio, and it's more as an inflation hedge should we get a rerun of the 1970s or worse. I think my PM holdings will do fine as an inflation hedge too, but as you know I love being well diversified with tilts towards value.

Also more aggressively accumulating Platinum which is an interesting play both as a PM and an industrial metal.  I consider by far the best play in the PM sector right now. I wouldn't put all my PM allocation into platinum though, but imo it's worth 10-20% of your PM allocation.

Well.. whaddayaknow.. commodities & platinum now deemed worth discussing...
https://www.youtube.com/watch?v=DMF7Qp3MHIU
Title: Re: Commodities
Post by: effigy98 on February 17, 2021, 11:16:55 PM
I like PHYS, PSLV, PICK, PDBC. No K1s on any of those.
Title: Re: Commodities
Post by: vand on June 09, 2021, 09:14:56 AM
WTI crude oil just hit $70

Triple digit oil within the next 12 months?
Title: Re: Commodities
Post by: MustacheAndaHalf on June 09, 2021, 10:35:48 AM
One way to invest in oil is United States Oil Fund (USO), which is up +44% YTD

For those scared of commodities, would you buy an energy sector ETF?
Vanguard Energy ETF (VDE) is up +52% YTD.

Another approach is oil companies.  I'm still holding calls on Occidental Petroleum (OXY), which has +67% YTD performance.  But Callon Petroleum (CPE) is blowing that away, with +280% YTD performance.

And if that's too focused, there's SPDR Oil & Gas ETF (XOP) with +69% YTD performance.
Title: Re: Commodities
Post by: PDXTabs on June 09, 2021, 11:58:57 AM
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 (https://www.direxion.com/product/auspice-broad-commodity-strategy-etf).
Title: Re: Commodities
Post by: BicycleB on June 27, 2021, 04:13:32 PM
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.
Title: Re: Commodities
Post by: vand on October 11, 2021, 03:54:35 AM
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
Title: Re: Commodities
Post by: MustacheAndaHalf on October 11, 2021, 05:23:09 AM
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.
Title: Re: Commodities
Post by: bthewalls on October 11, 2021, 03:38:18 PM
Checked my commodity etf recently, up over 30 percent now

Baz
Title: Re: Commodities
Post by: vand on January 18, 2022, 03:27:45 PM
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.
Title: Re: Commodities
Post by: bthewalls on January 18, 2022, 04:24:28 PM
My stuff up 50pc since last checked
Title: Re: Commodities
Post by: daverobev on January 19, 2022, 02:42:58 AM
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?
Title: Re: Commodities
Post by: vand on January 19, 2022, 10:18:49 AM
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

Quote
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.
Title: Re: Commodities
Post by: vand on February 11, 2022, 12:14:49 PM
I thought the world was going carbon neutral?!.....a 4.1% move in oil today takes it to new multi-year highs
Title: Re: Commodities
Post by: MustacheAndaHalf on February 13, 2022, 10:20:32 AM
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.
Title: Re: Commodities
Post by: ZaraThustra on February 13, 2022, 10:32:54 AM
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.
Title: Re: Commodities
Post by: ZaraThustra on February 13, 2022, 10:35:04 AM
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?
Title: Re: Commodities
Post by: BicycleB on February 13, 2022, 03:19:38 PM
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.
Title: Re: Commodities
Post by: vand on February 14, 2022, 07:45:31 AM
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.
Title: Re: Commodities
Post by: ZaraThustra on February 14, 2022, 09:23:48 AM
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
Title: Re: Commodities
Post by: vand on March 02, 2022, 02:36:16 AM
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?

Title: Re: Commodities
Post by: vand on March 02, 2022, 05:01:49 AM
I've sold half my holding in LSE:ACGP now.
Thinking of redeploying it into Russian equities..
Title: Re: Commodities
Post by: bthewalls on March 03, 2022, 02:42:21 PM
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
Title: Re: Commodities
Post by: vand on March 04, 2022, 04:42:13 AM
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.
Title: Re: Commodities
Post by: vand on March 04, 2022, 04:44:08 AM
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.
Title: Re: Commodities
Post by: MinorMiner on March 04, 2022, 01:27:02 PM
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.
Title: Re: Commodities
Post by: bthewalls on March 04, 2022, 03:23:06 PM
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?
Title: Re: Commodities
Post by: vand on March 04, 2022, 03:48:06 PM
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.

Title: Re: Commodities
Post by: bthewalls on March 05, 2022, 03:12:37 PM
Yeah that makes sense vand....