Articles filed under 'Commodities'
I wanted to provide a counterpoint to some recent articles posted on Investorgeeks that have suggested commodities are not a good place to invest. More specifically, that the commodities boom is a high risk area of investing and potentially a giant bubble.
I have a different opinion. I personally feel that investing in commodities is the only way to ensure in the coming years that your portfolio is not decimated by hyper inflation.
The Present State of the US Economy
Before we discuss this further, we need to do a quick summary of the present state of the US (world) economy:
The PPI report came out today. While we are doing better than Zimbabwe, things are still a little scary.
I was having dinner with Chris last weekend, and I expressed concern over US inflation. He asked me what the numbers were, and I didn’t have them handy. Here are the numbers from a MarketWatch article on the January 2008 PPI report.
First, the most concerning number of all:
Year over year, the PPI is up 7.4% — the fastest pace since 1981. Also on an annualized basis, the core PPI is up 2.3%.
And here are some more details found at the end of the article: (after the jump)
Bill (CEO of WineLog) did a quick little post on Wine Investing over at the WineLog blog and introduced me to a site called WineInvestor.com.
A good site to learn about wine investing is wineinvestor.com. Wine Investor is collecting (in one place) all the types of information I would need to explore investing in wine. The guy that runs Wine Investor is from the financial services field, works with technology, and loves wine. What a killer resume.
Investing in wine could be a great way to diversify your portfolio. Especially if, like me, you already have a passion for wine. WineInvestor calls it an alternative investment, specifically a “collectible”, and suggests about 5% allocation in collectibles in this article on asset allocation and diversification. (Let’s see, that means I need to go shopping for about $1500 in wine. Nice!)
Here are some other great articles from WineInvestor. New posts are added about once a week or so.
Friday, Jul. 6, 2007
by Jason
Energy prices are here, there and everywhere. Oil was trading at around 55, then went to 59, USD, March 07 futures are trading at 61 USD, and May 07 Futures are trading at 69 USD. Between now and May oil would have to increase 25%, which is a hefty premium.
A reader of my previous energy update said what I was thinking:
Oil closed on Nov 3 at 59.14 USD per barrel. These days there are some jittery news that could cause the price of oil to increase. Cramer in his 24-10-2006 podcast said that oil futures were driven up by the hedge funds. I agree and said so in July and Fortune said the same in May of this year. History is that, history, and the question is, where is oil headed in the future?
Let’s start with the basics and see where oil futures are trading. At the NYMEX the oil futures are trading as follows:
- Dec 2006: 59.15
- Jan 2007: 60.88
- Feb 2007: 62.10
- Mar 2007: 63.08
- April 2007: 63.87
- May 2007: 64.51
The various contracts are indicating a higher price as time goes. The increments are moderate, but they exist. I want to focus on the Mar 2007 contracts. Looking at the call options, combing the strike and price of the option the price of oil is hovering for the most part under 70. Looking at the put options they are hovering below 65 for the most part. The traders seem to think that oil will probably trade in the 55 to 75 USD window, with the median probably being around 65.
I think we are headed for very quick knee jerk of increasing oil prices. First it seems hedge funds are slowly moving back into energy. Second, we are headed into the winter season and typically there is more demand for oil and more volatility. Third, Iran is making subtle hints sanctions might hurt others as well. Working against increasing oil prices is the prediction of Environment Canada for a warm dry winter. If sanctions are weak, and the winter is warm it means lower oil prices.
I think there is going to be a quick oil price run-up because of a conversation I had at doggy school. My wife and I regularly attend doggy school with our two English Bulldogs. At the school Louys our male Bulldog has a friend call Xena a Doberman mixture. The owner of Xena is a farmer and we were talking about the weather. I explicitly asked her about the winter. Her reply was, “Yeah it seems like a warm winter, but oddly our horses have an extremely thick fur indicating a cold winter.” We live in Switzerland and her comment was that we would have a cold winter in Switzerland.
In the referenced Environment Canada article prediction wise they are saying warm, but the farmers alamanc is saying cold. What do you believe? I am tempted to think that the farmers might have a nugget of truth that will be exaggerated by the market due to other “factors” such as Iran, Iraq, you name it. So if you have some money to burn on a risk that could pay off, again this is REALLY risky money, buy a March call option at 64.50 for 2.75 or 65.00 for 2.55. If a knee jerk reaction happens I am tempted to believe oil will go over 70, maybe 80 for a short period of time before falling again.
For the near to medium term the trading range of oil should be 55 to 65. My earlier prediction that oil will touch 45 I am stepping back from
Monday, Nov. 6, 2006
by Christian
In a previous blog entry I talked about the price of oil. A couple of days ago I was watching Boone Pickens on CNBC. He was commenting on what direction oil will take, and in his words, “I think you’ll see $70 before you see $50.” This was the same individual that said, “80 before 60.” History has shown that oil did not reach 80, even though it was only a few dimes away from 80. I am going to cut Boone some slack in that oil did reach 80 before 60, but I will take Boone to task in that he was also saying oil would reach 100 USD.
In a previous blog entry, about a month and a half ago, I commented on how oil will not reach 100 USD per barrel. I posed the argument that to reach a doubling of the oil price would require the price to reach 160USD, which would have devasted the economies of the world. Now oil is dropping and some have commented that the price of oil will jump back up next year. I am skeptical that oil will jump up again, and I will share with you why I think oil or gas will have hard time edging back up again.
