Investec questions commodity prices, urges caution on mining shares

cheerfulcat

whiteflag wrote:

Or am I being a little simplistic?

I don't think you are. After all, they're not making the stuff anymore.

al_yrpal

whiteflag wrote:

I think timeframe is important. Long term, as long as demand remains ( from far east etc) strong with limited supply, prices can only go one way. Or am I being a little simplistic?

Nope! Demand is from everywhere, resources are finite, the additional demand is from developing countries, and its increasing all the time. At some point easy mines and wells run out and this makes old mines economic again. Theres a long way to go but one day Cornwall's tin and S Wales coal will again be mined using advanced technology - at a much higher cost, and a consequently with a much higher profit just like $70 oil at present.
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Although its long winded this is interesting reading on one commodity, Oil. http://boards.fool.co.uk/Message.asp?mid=9785199

cloud_dog

To some degree I think people's view of commodities being good investments may lie with if you have been in for a while or of you are looking to ge in now. If I was looking now (and again bearing in mind short term timeframes) I would probably look for a bit of retracement befor jumping in or adding.

But for the much lomger term there is only one way. Having said that demand is the thing causing the prices to rocket, i.e. China & India, etc. The thing to bear in mind with the recent surge in oil proce is that it is really due to the availability of processed oil rather than the raw stuff (yes, I accept the raw stuff is only getting scarcer).

If you were looking to invest for 20 years, lets say (for example a CTF) I dont think you will go far wrong.

Al-yrpay, the content in the link is also being 'ramped' by one of those investment outfits that have identified July this year as THE EVENT and stocks that will make money out of it - we'll see.

dunstonh

I don't think you are. After all, they're not making the stuff anymore.

That made me chuckle. Thanks.

The way I see it and lets face it, none of us are expert enough but we all have opinions, is that there is heavy demand now but one day it is going to run out. There is a lot of debate as to when that will happen. Some say as soon as 20 years time. So, do they price in that future drop now or the near future?. Do they worry about that later or does some new commodity come along to replace it and we all make money on that instead.... cars powered on grass. Grass is the new oil and anyone with a back garden is an instant millionaire

cheerfulcat

dunstonh wrote:

Grass is the new oil and anyone with a back garden is an instant millionaire

Ooooh, I hope you're right, dh :rotfl:

al_yrpal

dunstonh wrote:

Some say as soon as 20 years time.

As an Engineer who spent half his lifetime in energy, the scary thing is that whether its 20 years or 40, I can assure you that no-one, even the engineers, has a clear view as to where the human race will get the energy to live our lives as we do right now. I can see the point, in the not too distant future, at which oil supplies will be prioritised for aircraft which cannot use any other fuel easily. The price will rocket exponentially, as supplies are restricted and the cost of extracing the last drop gets higher and higher. It will become black gold.

cloud_dog

For those of you who may still have an interest in silver, below are a couple of links to articles with some positive information. One on silver and one on a possible silver ETF (mentioning no specifics).

http://www.silverstrategies.com/story.aspx?local=1&id=2607

http://wallstreetexaminer.com/?itemid=2078

This is not by anyway a recommendation for an investment merely sharing information.

cloud_dog

EdInvestor

Demand is from everywhere, resources are finite, the additional demand is from developing countries, and its increasing all the time.

Resources aren't really finite though: it's all a matter of cost.

Remember the big fuss about Shell's reserves a year or two ago (before the oil price shot up)? The underlying situation here related to a load of oilfields in Southeast Asia which Shell has the right to develop.

There is lots of oil in these fields, but they are expensive to bring onstream. The corporate rules for oil companies say that this kind of oil can only be counted as reserves if its ecenomic to develop it: if it isn't it can't be counted.

So Shell got caught out by still counting these expensive fields when the oil price was too low for them to be developed economically.Fast forward a couple of years, the oil price rockets , suddenly the oilfields get economic, and guess what - the whole picture changes.It's been a good 12 months for UK Shell shareholders.

But the oil and mining business is pretty complex and driven by a lot more than simple questions of demand and supply. IMHO quite a lot of caution is needed, as it's quite easy to get caught out, espcially with speculative stocks.

blinko

some interesting points here there seems to be alot of bulls on mse regarding commodities. I was laughing when i heard Goldman sachs talking of $100 a barrell earlier in the year now im thinking it was probably about right especially with iran nigeria situation helping to boost the price's. are there any bears on here who think the brokers rec is right and prices are going intyo a bubble ?

blinko

http://news.bbc.co.uk/1/hi/world/middle_east/4653376.stm

Russia plan 'not enough' for Iran

further middle east mayhem