Commodities in 2009

wombat42_2

Just getting my head around commodities in 2009. Currently commodities are getting hammered by demand destruction and deleveraging.

But next year there are several potentially very bullish factors for commodities:
1/ The dollar is widely expected to decline markedly over the long term
2/ Supply destruction should kick in - so many commodity projects have been
cancelled due to the low price of commodities, when the economy picks up and demand increases, there wont be the supply. Commodity prices will then spike and even then new investment will be lacking as many would be suspicious that the spike will collapse back to late 2008 prices
3/ The strong possibility of inflation or hyperinflation in about a years time because of the vast anount of new money being printed.
4. Population increases and higher demand eventually from BRIC countries.

steadysaver

wombat42 wrote: »

Just getting my head around commodities in 2009. Currently commodities are getting hammered by demand destruction and deleveraging.

But next year there are several potentially very bullish factors for commodities:
1/ The dollar is widely expected to decline markedly over the long term
2/ Supply destruction should kick in - so many commodity projects have been
cancelled due to the low price of commodities, when the economy picks up and demand increases, there wont be the supply. Commodity prices will then spike and even then new investment will be lacking as many would be suspicious that the spike will collapse back to late 2008 prices
3/ The strong possibility of inflation of hyperinflation in about a years time because of the vast anount of new money being printed.
4. Population increases and higher demand eventually from BRIC countries.

Personnally oil is the biggest commodity to invest in. We have had a sneak preview of peak oil, and to invest in an EFT now for the long term is one of my key stratergies for 2009.

Gold is still to highly priced to buy more for the time being, and I remain open-minded about anything else.

tradetime

I think commodities should be a good play for the next few years, how much downside is left first I don't know.

wombat42_2

I think that commodities have more or less bottomed out. Commodities may start to rise second half of 2009 or before if dollar falls in early 2009.

tradetime

wombat42 wrote: »

I think that commodities have more or less bottomed out. Commodities may start to rise second half of 2009 or before if dollar falls in early 2009.

Quite possibly, finding absolute bottoms and tops is really a fruitless task, I have started scaling in already.

dunstonh

It is unusual for the sector that led the previous boom to be the same one that leads the next one.

wombat42_2

dunstonh wrote: »

It is unusual for the sector that led the previous boom to be the same one that leads the next one.

The commodity supercycle argument is that next commodity boom is just a continuation of the previous commodity boom but with a short temporary sharp dip half way through.

tradetime

dunstonh wrote: »

It is unusual for the sector that led the previous boom to be the same one that leads the next one.

I agree with that, it represents conventional wisdom, but I do not believe we are in conventional times.

jon3001

I have a healthy allocation to commodity futures in my portfolio for the long haul, never mind just 2009.

Long-term returns and volatility have been on-par with stocks. And their low correlation with other asset-classes makes them a poweful diversifier in a rebalanced portfolio.

wombat42_2

jon3001 wrote: »

I have a healthy allocation to commodity futures in my portfolio for the long haul, never mind just 2009.

Long-term returns and volatility have been on-par with stocks. And their low correlation with other asset-classes makes them a poweful diversifier in a rebalanced portfolio.

Yes i am in for the long haul but it would p*ss me off if commodities werent healthier in 2009.

StevieJ

wombat42 wrote: »

I think that commodities have more or less bottomed out. Commodities may start to rise second half of 2009 or before if dollar falls in early 2009.

Willy, next year will be your year Best of luck but you won't need it :T