Over the next 10 years what do you think will do best, equities or commodities ?

munk

It feels like we are sitting on a time bomb.

Have been sitting on a timebomb for the last 10 years that's just gone off and now is covering us all with toxic fallout. I think we got too used to credit over the last 10 years and it became the norm to just max out your credit limit. Banks didn't blink at giving credit to those that really couldn't afford it.

Similarly the bond insurers became lax about rating the bundled debts from the US correctly, giving them the same AAA rating that they'd give sovereign debt/gilts. Absurd. Only a matter of time until things blew up.

Warnings were ignored about these parcels of debt - the collateralized debt obligations - mainly because during the good times who cares how the money is made as long as it's made (similar to the way rogue trader news only comes out when banks starting making losses, they don't complain when the rogue traders make a mint during the up times).

The upshot is now banks don't even trust each other let alone it's customers when they're assessing lending applications. I don't think that trust will ever return personally or at the very least hopefully lenders will be more responsible in handing money out.

That said, you could look at it in a positive light - in as much as it's given the lenders a good wake up call to be more responsible over whom they lend to in future. However that's not much help to those on low incomes with mortgages they can't afford right now let alone in another years time when their fixed rate deals end and they have to reapply.

In the context of this thread and on a simplistic analysis, this means equities will be sluggish for the foreseeable future (year or two at least?) because companies can't borrow the money they need to complete mergers & acquisitions. At the same time demand for commodities will go through the roof because supply will remain relatively low compared to demand, again on the back of the fact that mining companies etc can't afford to borrow the money to acquire new mines etc (sovereign funds are the exception to this though ala China) whilst demand for those goods will go up given the developing countries new taste for commodities that previously were only affordable in the West.

purch

Is this unique - or have we experienced and lived through this before?

Every Economic cycle is similar, but also very different.

The situation in 2008 is different because of the explosion of 'personal' debt, which didn't happen in previous era's, but history tells us that most economic cycles have collapsed, more often that not due to an unsustainable expansion of credit.

Every time a 'recession' looms there are doommongers and 'experts' telling us to expect another 'depression' and even the end of Capitalism as we know it.

There was supposed to have been a recession in 1991/1992......I don't remember it happening, everything seem fine to me, but then I wasn't one of those unemployed or having their home reposessed.

Again, the way people look back on the 1970's you would think all economic activity ground to a halt, and we all lived on bread and water. I was a teenager then, and yes the 3 day week was a terrible time, but the 70's was also the decade when the working class first went on Foreign Holidays, and bought Colour TV's.

I am sure that in 20-30 years time people will look back on the last few years of the first decade of the 21st century as a time when a few greedy idiots nearly brought the whole financial system crashing down, but in the end the world economy carried on as if nothing had happened.

aztec21

purch wrote: »

Doesn't it really depend on which Equities or which Commodities you invest in ??


P.S. I voted Equities, mainly due to the performance of the stock of companies who benefit from the Commodity 'bubble'

A commodity bubble is actually bad news for the majority of companies so your logic does not make sense.

purch

If you want to selectively quote me, please have the common courtesy to seperate the two quotes, and don't put them together as if they were like that originally.

La Womble has put a 10 year time frame on his question, and over that timeframe I have chosen equities.

You can worry about the logic of it, and I'll get on with making money out of investing in the right places

jamesd

wombat42, commodity producing companies are part of the equities world and you can adjust the balance between each part of equities as appropriate over the next ten years.

lgyvnr, don't worry much about it but consider taking out unemployment insurance. High inflation will probably lead to high wage inflation and that will reduce the inflation-adjusted cost of your mortgage and portion of your income that is needed to pay for it. It's a good thing to happen for a few years just after buying a property. The likely decrease in property values isn't but that won't last as long as the benefit of the wage inflation.

The insurance is to cover the unemployment increase risk of a recession.

jon3001

jamesd wrote: »

wombat42, commodity producing companies are part of the equities world and you can adjust the balance between each part of equities as appropriate over the next ten years.

From previous threads I believe the commodities under discussion are either direct exposure to spot prices (e.g. precious metals or ETC) or exposure to commodity futures (via ETC or fund). Not resource stocks and the like.

wombat42_2

jon3001 wrote: »

From previous threads I believe the commodities under discussion are either direct exposure to spot prices (e.g. precious metals or ETC) or exposure to commodity futures (via ETC or fund). Not resource stocks and the like.

Yes indeed

jamesd

I didn't think that was a credible enough competitor to stocks to mention, since it has no leverage, while the producers do.

jon3001

jamesd wrote: »

I didn't think that was a credible enough competitor to stocks to mention, since it has no leverage, while the producers do.

Commodity futures have had similar long-term returns to equities with similar levels of volatilty.

Are you telling me that commodity futures don't have leverage?

jamesd

You can get leverage that way but I don't think that it compares well to the leverage of a company growing its business with share prices that reflect many years of expected profit.

Please do provide data that you think proves me wrong.