not the investment board BUT...

michaels

About 6 years ago there was much talk of a commodities super-cycle - they were right, it was a super-cycle, unfortunately for anyone who invsted then it was also the peak

cells

Generali wrote: »

Our commodities analyst at work is a very, very bright lad and he is very bearish on commodities.

Oil, gas, iron ore, gold, silver, copper and coal all expected to fall substantially from current prices. BHP, Rio Tinto, the US and Saudi have all said that they're going to dig up as much as they can as fast as they can. That is only going to have one impact on prices.

china is the worlds biggest user of almost everything

the idea was that she would gobble up all the supply and push prices up

the reality is that with 9,596,961 km² of land, the Chinese would only temporally be a net importer. That is enough land to find everything they need once they properly prospect their nation

Chinese citizens on $5k a year are not going to pay Australian citizens $200k a year to dig up some dirt called iron ore or pay qatar citizens $200k a year to ship them LNG if they can find the stuff in their own back yards and they will in time find almost all the resources they need at home

Physics

It almost certainly doesn't matter what you think that fund will do in the future, because nobody knows. What you do know is how much that fund charges (you do know, right?). I bet it's greater than 1.5%. I bet it's closer to 2%.

Even if natural resources do go up 6% a year, you're losing huge chunks of that to management fees. Get out; find something where the managers aren't skimming huge amounts of value for following a simple algorithm.

Generali

michaels wrote: »

About 6 years ago there was much talk of a commodities super-cycle - they were right, it was a super-cycle, unfortunately for anyone who invsted then it was also the peak

There is plenty of great research around showing that small investors are brilliant at buying at the top and selling at the bottom.

Our equine OP is going to be selling out of the fund an awful long way from the top.

Thrugelmir

TheBlueHorse wrote: »

So, I have an ISA and in that ISA I have some units from the JP Morgan Natural Resources. They have TANKED the last few years and don't seem to be improving much at all.

Didn't this fund hold a sizable investment in London Mining which went under. Also there was another Company which hit the fund hard though the name escapes me at the moment. As a result the fund has lost capital which can never be recovered. Unless the remaining parts of the portfolio outperform by some considerable margin. Given the general commodity markets unlikely to be any time soon. With China's appetite for raw materials curtailed. Along with the fact that the Chinese appear to be creating their own sources of supply.

mwpt

TheBlueHorse wrote: »

The question is - do I stick with them until they claw back the losses (if they ever do) or bin them and move on.

I can't advise you on this specific investment because I don't know about the fund or the industry. But I can tell you that the above type of thinking is very flawed. There is no such thing as clawing back your losses. The market has no memory of the price you bought the fund at, and hoping it gets back to that price so you can sell out and break even doesn't make logical sense. You can only examine the investment as it stands today and try to determine if you think it's going to go up or down. If you think the long term trend is down, sell and accept the loss before it gets bigger. If you think the long term trend is up, then decide if you can hold the investment over that long term and you think it will perform better than an alternative investment from today.

vivatifosi

mwpt wrote: »

I can't advise you on this specific investment because I don't know about the fund or the industry. But I can tell you that the above type of thinking is very flawed. There is no such thing as clawing back your losses. The market has no memory of the price you bought the fund at, and hoping it gets back to that price so you can sell out and break even doesn't make logical sense. You can only examine the investment as it stands today and try to determine if you think it's going to go up or down. If you think the long term trend is down, sell and accept the loss before it gets bigger. If you think the long term trend is up, then decide if you can hold the investment over that long term and you think it will perform better than an alternative investment from today.

I'm not sure whether its his theory or not, but behavioural economist Dan Ariely talks in one of his books about how people follow the market down always sure that they are going to get the money back when the investment comes back and as a result fail to cut their losses early enough.

Thrugelmir

vivatifosi wrote: »

I'm not sure whether its his theory or not, but behavioural economist Dan Ariely talks in one of his books about how people follow the market down always sure that they are going to get the money back when the investment comes back and as a result fail to cut their losses early enough.

It's a human trait not to bite the bullet and cut ones losses. Instead believing that values will rebound.

michaels

vivatifosi wrote: »

I'm not sure whether its his theory or not, but behavioural economist Dan Ariely talks in one of his books about how people follow the market down always sure that they are going to get the money back when the investment comes back and as a result fail to cut their losses early enough.

Then again hasn't Warren Buffet made his money as a 'value investor' - picking companies and sectors that are out of fashion and undervalued and shunning the red hot 'fashion' investments?

Generali

michaels wrote: »

Then again hasn't Warren Buffet made his money as a 'value investor' - picking companies and sectors that are out of fashion and undervalued and shunning the red hot 'fashion' investments?

Strictly speaking he's not a value investor IMHO as he's a LTBH man and a value investor would sell when the price was high.

He talks about buying companies that have a 'moat' like Coca Cola and Gillette: quality companies that are very difficult to compete with in any sort of a meaningful way.