I dont think the commodity price drop / demand crush will likely to subside short term -a lot of noise but noone knows how bad/deep this mess will drag on. That said, commodity is still the safest place to be if you are trying to invest in something, for a couple of reasons: 1) It's raw physical goods, not some company stock. I can safely say metals / oil etc..will still worth money a year from now, it wont go "bankrupt". I cannot say that for any company. If we really head into a great depression breadline type environment(not that far fetched), how many large "safe" companies will file for bankruptcy or shareholders wiped out. 2) The commodity prices has literally crashed in the last few months, so you are buying in at a historical low 3) Look how fast we reverted from inflationary fear to complete deflation, it can revert back just as fast and even worse, as things stablize and global investors pull out of usd treasury, on top of piles of trillion dollar supplies the government printed. Commodity is a good hedge against it, follow the UUP. 4) A lot of stimulus packages across the globe, mostly infrastructure projects. And the supply has been unwinding since the price crash, as companies shutdown mines etc in response to demand crash. So short term i dont think anyone can predict what will happen, but longer term 5-10 years it's a good entry point for commodities i think. The only exception to that is gold, gold is not "pure" it's a market safety. So IF the stock market does come back and starts a bull run next year, gold will be affected much more so than the rest. For that reason, i will not invest in gold. Now to talk specifics, i dont have the stomach to invest in commodity dependent companies, as i dont know how bad this thing will get and they are still too risky to me. I am building my position on the following etf in my IRA, currently 40% complete. I will add 20% if it drops another 20%, until my position is complete or i feel the commodity market is hitting a bottom. 1) USO - just crude oil 2) DBA - agriculture index-sugar, corn, wheat, soy beans 3) DBB - base metal index- copper, zinc, aluminum (still doing some research on this one, but seems with the slight exception of copper for large producers, the current price are at breakeven now) welcome any negative feedback, and also interested to see your commodity plays and reasoning behind it.
I agree and you make good points Newguy. I think it might still be early for metals, agree on gold. I bought DXO in size today for a retirement account even though I think it is early for energy too. I like the ag complex but am buying into select futures as opportunity allows (am in sugar and cotton and a small position in beans). I also like the KOL etf. I want to get back in DRYS but need it to pull back a bit 1st.
Another pundit who thinks that trying to guess the level of the S&P in 3 month is how you make money in this game.