Time to pick up some commodities
Filed Under: Hot Fudge
TV anchors are often seen bashing Jim Rogers on the falling prices of commodities, and indeed this year has been a tragedy for commodity investors. The second quarter of 2007 saw a rapid rise in commodities, that made a lot of investors, both professional and novice, rich. Since peaking in July, commodity prices have fallen about 45%, tracking by the CRB Commodity Index.
In response however we hear Jim Rogers, citing that commodity bull markets run in cycles, for an average of 15 years and that since the beginning of this bull market in 1999, commodity prices have since then seen 4 crashes, and none of which signals the end of the bull run, so we are not seeing anything out of the ordinary.
Commodity prices have since then fallen to a low and seem to have bottomed out, trading flat for a few weeks, there haven’t been any fund liquidations that will send the prices of these commodities lower than their current levels. Most worrisome on the story of falling commodity prices is that the fundamentals are currently supportive for higher prices, farmers are experiencing difficulties in obtaining financing, due to the current economic turmoil that has caused a crunch in revolving bank credit and higher interest rates that make it unprofitable for farmers.
Current harvest and planting estimates are at five year lows, and certainly the world’s population is not at a five year low. Demand may have slowed down, but the choice in 2009 is going to be against starvation or high prices. Fundamentals for commodities are unimpaired, a moderate recovery is expected in 2009 and commodities will most likely be the favorable investment choice coming out of this economic turmoil.
Happy Trading,
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Alejandro Levy | Jan 5, 2009 | Reply
It is true that commodities had have ups and downs over the course of the years, however, we will see short term rallies on the CRX – CRB and the other futures in soft and hard commodities for the next month
Personally I believe that this is a place where investors could make up part of their losses for 2008 – even thou market timing is almost impossible, with stop loss and limit orders , there is a strong possible way to outperform the index and make a decent return.