commodity

Inflation protection by raw materials

liked the post in FT Case for commodity futures is weak. i'm not really against raw materials, I am against naive arguments about

* all paper assets will die (futures are also a paper asset actually),
* any raw materials are limited therefore it will only rise in price (the likelihood of, that progress is always at a standstill 50% – or yes, or not, so this is not an argument), 
* demand will grow and grow, until developing countries reach levels of per capita consumption of developed countries (interesting, and China has a chance to catch up with Britain in the sixteenth century in terms of firewood consumption per person?)

I guess,
* that everything is not easy at all, you need to weigh a lot for answers. offhand for any plus there is a minus and total uncertainty)
* for longran, something that generates income only as an increase in value – unacceptably.
* Spring 2008 of the year forever and ever traumatized my psyche for a long time with enchanting arguments in the growth of raw materials, so I have a full-fledged baes and fad here))

just the same, my opinion should not interest anyone, so a short summary of the note.

There are three arguments in favor of including commodity futures in institutional portfolios:
1) diversification
2) limited resources
3) inflation

Diversification.2008 year should have taught that, that diversification only works within trends, when the trend changes – we all grow together, we all fall together. There is a general rule – the more people diversify, the stronger the correlations become. Plus, the commodity futures market itself is usually understood too simplistically by investors and is also largely insider.

Limited resources. (the broader problem of supply and demand – they say, no matter how you think about it, the demand exceeds the supply in Longran). Don't forget about progress. Easy position only in long – is more than risky. Perfect wording (A simple long-only commodities position is a risky way to gain exposure to this trend – and naïvely assumes future demand is not already priced in.)

Inflation. Alliance Bernstein counted, what with 1900 the best inflation hedge of the year was platinum – with 2% annual real income, the average result of raw materials in general is slightly below inflation, and cotton and aluminum are generally in the red. Although, a commodity hedge can also be viewed as insurance – we don’t lose much in good times, but in bad ones we earn more.

Yes, this is undoubtedly true, that real assets do better under high inflation, than financial. Though.. Futures – these are financial assets after all;))

But the main problem for longran – this is contango. For example, the next July contract for wheat is now 458, the same but on 2010 year – 636 (almost on 40% more expensive). The example is clear enough, but there is still. S&P Goldman Sachs Commodity Index nearly doubled since 2001 of the year, but all the same through futures did not bring the same profit, more precisely, it did not bring profit at all, more precisely caused losses.

Continuing the old wisdom – the more investors" hedged against inflation through futures – the less protection they get. In longran.

UBS on the steel market

nothing specific. they say prices will probably go down further, and from a typically weak summer, something more negative can turn out. but it's not that bad, but there are risks. meanwhile a couple of buy recommendations, for example, MT, Posco and Baostil.

but this – capacity utilization around the world.

but this is in Russia, Ukraine. UBS says, that in Russia everything is a little better due to the domestic market and a slightly different structure of contracts. maybe that's why the opinions of Russian and Ukrainian analysts differ somewhat?)

Goldman on raw materials

Goldman on raw materials:

Near term, we believe the sell-off in base metals provides a
buying opportunity; we are opening a long Dec-2010 copper
trade and closing our long Dec-2010/short Dec-2011 copper
timespread trade. In the longer term, resource taxation
reform could lend support to prices.

via

true idea about, that tax increases will support prices,
even if it seems logical, but it scares a lot.
usually, such arguments, this is a la Big Mac from Stelmakh.

By the way, about Stelmakh)
and you are still bulish on the hryvnia? and if the raw material is not buy, and buy-buy?)

about gold: optimistically

I think, what is noticeable on the blog, that I'm not a fan of 'investments" in gold. however, friends often overestimate my negative view. I just think, that there are more interesting ways to make money at all time intervals. and especially not a supporter: buy gold and all your problems will be solved, wine-wine-wines and other.

and very few people know, that when I was asked about my view before breaking 1000, I used to talk for a long time about how I don't like gold (quite sincerely) and added, that once punches, then the trade is obvious. but the funniest thing was later, when people were interested in targets. and it was so 1100 at the momentum, if you're lucky, then you can continue. 1500, if after a good rollback we will punch high. and if boring, then 2500 (here the eyes of the interlocutor usually expanded, pier, what about all the negativity??)). so, that not everything is so simple and it is not necessary to divide everything into black and white.

so a bit of positivity from which follows, that to implement the golden beetle scenario, you need to update the maximum in real terms. maximum 20 centuries of course. ol time high of the middle of the last millennium will forever remain so.



SG as always beautiful, with sad irony, about that, what: Oh, and gold is "cheap" …

sino-raw material

Fresh Rosenberg. The chart shows the Shanghai index and the Rogers commodity index.

Actually, correlation, it's all from the evil one, you can draw a parallel with almost any index.. Here's how not to twist it this Chinese market, but it will look like consolidation only in case of an upward breakout. Not by technique, but by higher powers on a whim. Oxide, buying raw materials. Top catching is really not worth it either. For they will trample and will not notice.

SG and MS rule – debt and tying.

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and an interesting entrance to the russell, almost on 20 points below the first.
looks too good to be true
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still would have passed yesterday's high for Vicks..

oil is more than just a physical product

 "Crude oil is (now) more than just a physical product", according to NPRA Chairman William Klesse. As he noted, "Today there is ample crude in the world, and crude is not at $80/bbl because of physical markets".

Last year, European pension funds alone "invested" €21bn ($29bn) into commodity funds, particularly oil. This was a 145% increase on the 2008 figure, with minimum 60% growth expected this year. This flood of money hiked oil prices 78%, even though demand growth was poor.

and so on and so forth.

from here

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