Point is that if the SP doubles and you get your four bagger in the SSO, those in DXO, leveraged commodity plays (not gold) will be enjoying ten baggers. Even if earnings come back, which they won't in 5 years (you do realize that last year earnings were at a record high), the leverage that drove stock prices so high will not be back in 5 years. Demand for commodities though was a function of a richer world and a weak USD. Population growth,a weakening USD, trade flowing again, demand from infrastructure projects world wide, and decreased production (happening now) will also feed the next commodity bull. On the equity side you have the headwind of bommers starting to pull money from 401Ks to retire. Again I say that if the stock market doubles in the next 5 years (and I don't think it will, at least not currency adjusted) commodities will out pace substantially. If we crash then commodities will also fare better than equities. Better risk, better reward.
This is all very interesting. I am already long DXO (not many shares though) What would be another nice leveraged ETF (long term play) that would acted like a basket of commodities ?
Nah, you're just echoing the whole of Wall Street. Financials and commodities are a problem. They brought us down single handedly by 35%. Just by themselves. The paltry amounts we're down beyond that is a perception that if those stocks are down, others should be down, too. Analysts have overshot significantly to the downside. Most S&P companies by sheer size will start their earnings growth soon enough. As I said in the blog, earnings forecasts were already cut in half. Cut them some more and you are pricing in zero to negative growth for the next 10-20 years. Not likely. That's not going to happen.
I don't think so. Historically commodities have performed terrible. I don't expect a big tear to the highs for any major commodities, including gold, oil, or any of the grains. It's really retarded to talk about gold. It's lifetime APR since the futures were created is about 3-4%.
Which part of the cycle am I missing? The fact that we are in a recession doesn't really matter to me, mainly because we'll eventually be out of it. The trough has been formed.
truthfully I think your better bet would be to buy S&P future contracts and leverage yourself w/ the leverage you want. The real cost of the S&P future contracts is an interest rate of like 1.5%. I wonder what cost you are paying with your ETF and don't forget about management fees
For commodities, etc. I like UYM. I think it will do very good in any all out recovery, especially with all the talk about infrustucture programs, etc and I like some of the range of companies it has in the top 10 holdings.