Wots your current portfolio spread ?

cloud_dog

jon3001 wrote: »

Care to elaborate?

It is strange how commodities are viewed as higher risk than equities.

Commodities 'tend' to follow a trend and if something occurs then the bottom can fall out of a commodity market.

For example, there is a lot of talk about a slow down and recession in US, if this were to happen then the price of copper is likely to tumble big time. The reason in this example is that when an economy is growing lots of things are built, bought consumed, in a growing economy the populous tend to experience wealth and buy new things, houses, TVs, cars (you name it); these things consume huge amounts of copper wiring.

Having said this we are still unsure how much of this gap might be filled by the tiger economies (far east, China, India, Lat Am). Whilst the Chinese stockmarkets are storming ahead people need to realise that China's GDP has only recently (6 months or so) overtaken the UK - and were not a huge global consumer.

Its strange how commodities are viewed as higher risk especially when you consider stocks resource/commodity based ones or otherwise tend to use 'gearing' (borrow money to make more money) and anything geared will suffer much more than the resource it deals in if the price falls. In the good times this is reflected extremely well, take gold producers, their costs are fairly constant so if the price of gold goes up $10 Oz then that is pure profit; makes a big difference to their bottom line.

Having said that, there are a number of other factors that can affect commodity prices which are likely to have nothing to do with the commodity itself:

* Fiat currency inflation - results in commodity prices rising (to a greater or lesser degree)
* Political uncertainty - can affect supply, etc
* Simple processing capacity - plenty of supply but not enough plants to refine the base material

Sorry for the complex answer but there is a lot of cross over in the world between cause and effect. As I mentioned previously you need to look behind the stats and do the research.

cloud_dog

purch

You may jest but I have probably made more money from S&S than most of you guys last year

Now you are making yourself look utterly pathetic :rotfl: Bragging on an anonomous forum ( especially when some of the stuff you post continually, :eek: proves your total lack of knowledge ) is utterly pointless and proves nowt.

purch

the future success of commodities largely ties in with the success of Chindia or BRIC

There you go again..........:rotfl:

Just like your comment that the reason for the current Bull market in Gold is due to demand from China and India.........completely simplistic and without any knowledge of the way markets work

jon3001

To be fair, as asset classes, gold and commodities have shown above average correlation with emerging markets vs developed markets.
http://www.investors-routemap.co.uk/Guidebook_price_correlation.htm

And a new gold futures exchange has opened in Shanghai:
http://www.ft.com/cms/s/0/eb8bb37a-beef-11dc-8c61-0000779fd2ac,dwp_uuid=413b4c2e-b9f8-11dc-abcb-0000779fd2ac.html

Gold futures fly high in Shanghai market

The strong debut Wednesday for the Shanghai gold futures market boosted the price of spot bullion to a fresh record high as investors anticipate a wave of Chinese investment in the precious metal.
...
The new market traded contracts for about 350,000 ounces of gold on its first day, a level that traders considered extremely positive given the fact that the well-established Comex, the New York-based metals exch-ange, usually trades about 800,000-1m ounces a day.
...
The eight largest gold ETFs now hold about 840 tonnes of gold – more than the official bullion reserves of the European Central Bank.

In the absence of a China-based gold ETF, Suki Cooper at Barclays Capital said there would be strong investor support for the new futures market.
“We expect to see another strong increase in overall Chinese gold demand in 2008 from last year’s estimated 300 tonnes,” Ms Cooper said.

China is the world’s third-largest consumer of gold used for jewellery and investment after India and the US, according to the industry-backed World Gold Council.

cloud_dog

jon3001 wrote: »

To be fair, as asset classes, gold and commodities have shown above average correlation with emerging markets vs developed markets.

As always there are a number of factors that can affect a price.

In my opinion (and I am by no means an expert) the recent increase in commodities, gold especially, has also been significantly affected by the decrease in purchasing power of the $; thereby causing dollar based asset prices to increase. Obviously the surging economies mentioned have added to the demand and therefore price increases.

cloud_dog

cloud_dog

The below is a link to a reasonable article for economies / commodities going forward and as this thread has touched on a number of the points in the article I thought I wouldn't create a new thread:

http://www.moneyweek.com/file/40438/the-best-commodities-to-buy-in-2008.html

cloud_dog

purch

Interesting article, touching on a few of the aspects in what are becoming very complex and compelling markets

hyposmurf

Bump :-) This thread is just too interesting to fade into the distance.What are other peoples portfolio spreads?

Heres a few more articles:
http://www.marketoracle.co.uk/Article3238.html
http://www.smartmoney.com/cover/index.cfm?story=january2008

cloud_dog

hyposmurf wrote: »

Bump :-) This thread is just too interesting to fade into the distance.What are other peoples portfolio spreads?

You mean 'just too interesting to see what happens this week' :rotfl:

wombat42_2

cloud_dog wrote: »

You mean 'just too interesting to see what happens this week' :rotfl:

All in all, it's just another BRIC in the wall.