I think this is a very good article by Bill Miller from Legg Mason. http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/04-25-2006/0004347234&EDATE=
He has some good points but he never answers a few key questions. First how do you argue against the historical fact that commodities tend to rise in cycles that last 15-25 years?The bond market started bull market that lasted from 1980 -2000, should somebody have sold their bonds in 1985 because they went up 5 years? What about tech stocks, should I have sold in 1995 or 1997? Should someone have sold Microsoft after it doubled one time? Financial stocks make up a very large percentage of the SP 500, something like 30%, which is historically large for any one group. Isn't that the bubble, not raw materials. How many raw material stocks/mining are in the SP500, very few I think. Do you guys have any neighbors that talk to you about next months soybeans usda report, or is you mother telling "you that you can't lose" in live cattle next month. Were still not in the final bubble.
I agree with that Johnny. I just think that we are nearer the end than the start, which doesnt mean there is no money to be made being long..it just means you should start watching your backside a lot more closely imo. Brandon
IMHO, I think this bull market started in 2000-2001 and will end around 2015 based on historical averages unless we come up with some crazy technology. In the meantime though there will be vicious down turns, in the next year or two we could see most commodities get cut down by half and scare everyone to death. Then resume there uptrend until a later date, this probably would be the best time to purchase again. The author also did not write that corn, soybeans, and wheat have not done anything crazy recently, still undervalued by historical standard. Especially compared to inflation adjusted numbers.
Good point Johnny I think it was about 1974 or so that I had one wheat farmer customer out in Montana trying to grow some soybeans the year after beans spiked to $12/bu or so. (No-way was that area fit for soybeans but lots of $$ can change ones mind) Corn is cheap compared to early WW2 years when 1500 bu would buy a nice new average size rowcrop tractor. Now the sales tax alone in some states would be $1500. If there was a supply demand change on food like there is now on gas you would really see people take notice. This gas price rise isn't too bad compared to what it could be... agpilot
Speaking of which, suppose I wanted to invest in the following markets: cotton, soybeans, wheat, corn, coffee If I were to scorn futures/commodities contracts, what securities would best capture any moves in these commodities?
Bunge, ADM, and caterpillar are popular ways among other stocks. Investing in these stocks is not the greatest way to capitalize on rising grain prices because the cost of fertilizers and other inputs will destroy profit margins of these stocks as grain prices rocket. I strongly recommend you jump into the futures, you don't necessarily have to use tons of leverage or a short time frame. I currently am waiting for Dec Corn to ease a bit before I purchase this contract which I will hold until the end of the year.
U can buy a basket of called the Rogers Raw Materials index on the CME. It is a trakker that trades like a stock but is listed like a futures. It is long dated---expiration is October 2010. Also the etf DBC is a commodity play. Of course these are not pure commodity futures but commodity baskets based on commodity pricing. I have been fond of them personally. More so than the stocks although on the charts they look like stocks. If you think commodities are going to keep booming. I prefer to put the money in the Commodities directly with one of the new baskets. Management can get it wrong ---were as Mother Nature is never wrong. Just my opinion