The Commodity Rout

[william the wie]

The bankruptcy of mines, wells and farms is underway. That in turn means:

Deflation is taking off.

Credit is getting tight

That means the bear side of the market is the right side in virtually every capital market led by the relative decline of China.

But since the US has the least exposure to world markets the US will see less economic decline and more volatility than the rest of the world. How Is the best way to operate with hot money flowing in and out of mostly the US?

 

[DarkFury]

By commodity I assume you are talking food/coal and such. Two branches but NOT the steady investment. There is a commodity branch which is extremely stable with little to no risk and smaller but regular profits.

I am talking personal care products like say Lever Bros. Soap/shampoo/dish soap and laundry detergent. If you look at ANY first or even second world nation its defined by three things.
1, Energy, the ability to power itself.
2, Food, the ability to feed itself.
3, Sanitation, the ability to clean itself.

I myself also find Lever Bros. an excellent place to "park" money with NO risk and it pays. Colgate/Palmolive is another but I think Lever Bros. has a better track record of dividends to its investors.

 

[Fueri]

Ask Jim Rogers or find out what he thinks the play is right now. Man knows what he's talking about wrt to commodities.

They're low so if you're a buy and holder it might be time to buy in lightly, although the 2016 outlook is not good, so it might be early. I haven't actually looked or analyzed these markets, sooo

See what Rogers is doing/thinking.

 

[MarathonMike]

I've never invested directly in commodities, but I've been watching crude oil for a long time. If it breaks below 30 a barrel I will start buying in and continue if it goes lower. I don't see a lot of risk with buy and hold at those prices.

 

[william the wie]

Ask Jim Rogers or find out what he thinks the play is right now. Man knows what he's talking about wrt to commodities.

They're low so if you're a buy and holder it might be time to buy in lightly, although the 2016 outlook is not good, so it might be early. I haven't actually looked or analyzed these markets, sooo

See what Rogers is doing/thinking.

Rogers is good at two things:

Researching everything

Market discipline

Unless you have that second skill set the margin of safety in following his lead is not good. He is not trying to screw his fans, he is trying to avoid investigations by the multitude of security bureaucracies in the markets he is involved with. China is threatening short sellers for being right. The hedge fund "Muddy Waters" does nothing but short Chinese related issues with some of their best moves based on "that sounds like what Rogers said" miscalls. Take his recent call on copper the first question to ask is what Mine's ore or smelter has the lowest FOB price to China, not who has the lowest cost of production. The second question is what is the burn rate of the mine or smelter if copper goes lower. Rogers figured that out before he made the call.

 

[william the wie]

I've never invested directly in commodities, but I've been watching crude oil for a long time. If it breaks below 30 a barrel I will start buying in and continue if it goes lower. I don't see a lot of risk with buy and hold at those prices.

Check on finances for the issues you select but not only do I agree I'm already in that whole field and waiting for the yield whores to show up. Try AOL stock screener to get a list of candidates and then double check with your broker to make sure on beta and yield are still what you want.

 

[HaShev]

I've never invested directly in commodities, but I've been watching crude oil for a long time. If it breaks below 30 a barrel I will start buying in and continue if it goes lower. I don't see a lot of risk with buy and hold at those prices.

Specific etf that follows accurately to oil yes, but most companies will have trouble and earnings will destroy stock prices.
We all thought Natural gas couldn't go any lower and boy were we wrong. EVERYONE is over producing and trying to maintain their share of the market while the world is striving to he more efficient and find alternative energy and technologies. Maybe Opec is rushing to sell everything while they can, because they know of such new energy source technology in the wings like Algae , trash, or some other molecular tweeked source. Is there anything that might be spooking Saudis into this illogical behavior?

 

[DarkFury]

I've never invested directly in commodities, but I've been watching crude oil for a long time. If it breaks below 30 a barrel I will start buying in and continue if it goes lower. I don't see a lot of risk with buy and hold at those prices.

Specific etf that follows accurately to oil yes, but most companies will have trouble and earnings will destroy stock prices.
We all thought Natural gas couldn't go any lower and boy were we wrong. EVERYONE is over producing and trying to maintain their share of the market while the world is striving to he more efficient and find alternative energy and technologies. Maybe Opec is rushing to sell everything while they can, because they know of such new energy source technology in the wings like Algae , trash, or some other molecular tweeked source. Is there anything that might be spooking Saudis into this illogical behavior?

I think so and you answered your own question. Propane and Natural gas have been powering autos for years. NO new tech needed as it already exists and it meets current AND future emissions tests and standards.

Propane powered cars as a whole last longer as well and their power CAN be equal to a fossil fuel power plant. Existing gas engines CAN be converted to propane quickly and cheaply.

 

[william the wie]

The questions about substitution are answered about as well as they can get for now. Two other questions are not:

Is the speed and size of the China crash being estimated correctly?

Is the paying off of debt due to lower energy costs simply maintaining US status as best of the worst or is it a more lasting change of behavior?

Any reads on those two?

 

[DarkFury]

The questions about substitution are answered about as well as they can get for now. Two other questions are not:

Is the speed and size of the China crash being estimated correctly?

Is the paying off of debt due to lower energy costs simply maintaining US status as best of the worst or is it a more lasting change of behavior?

Any reads on those two?

The Chinese question is rather open at this point. They re-build using the interest payments the world gives them from borrowing money.

So they depend on the world over spending their budgets. They have tons of money to loan but have already flooded the markets with goods. They are no longer competing with RCA or American countries. Its Chinese companies VS Chinese companies.

Paying off debt is NEVER a good idea but paying DOWN debt controls interest rates and can hold inflation in check. The Saudi's are learning this now as they enter a "no debt" inflation market of abundance of money and nothing to do with it.

They paid off the majority of their debt invested heavy into social projects counting on firm oil prices. So the Saudi's are LOSING money on oil futures by the barrel. The Chinese and the Saudi's are tied tighter together then they know.

IF a country does not need to borrow money FROM the Chinese to pay its energy costs to the Saudis then they are BOTH out. So the Saudis sneeze and the Chinese get the flu.

 

[freedombecki2]

The bankruptcy of mines, wells and farms is underway. That in turn means:

Deflation is taking off.

Credit is getting tight

That means the bear side of the market is the right side in virtually every capital market led by the relative decline of China.

But since the US has the least exposure to world markets the US will see less economic decline and more volatility than the rest of the world. How Is the best way to operate with hot money flowing in and out of mostly the US?

I will pray for those farmers, miners, and drillers whose welfare is threatened by the downturn, that people will have jobs in which they can pay their debts, that the Chinese can cope with the misfortunes brought on by decline, and that the world becomes a more responsible place in which each of its citizens is considered worthy of food, shelter, care, dignity, and the love of friends and family.

 

[william the wie]

The questions about substitution are answered about as well as they can get for now. Two other questions are not:

Is the speed and size of the China crash being estimated correctly?

Is the paying off of debt due to lower energy costs simply maintaining US status as best of the worst or is it a more lasting change of behavior?

Any reads on those two?

The Chinese question is rather open at this point. They re-build using the interest payments the world gives them from borrowing money.

So they depend on the world over spending their budgets. They have tons of money to loan but have already flooded the markets with goods. They are no longer competing with RCA or American countries. Its Chinese companies VS Chinese companies.

Paying off debt is NEVER a good idea but paying DOWN debt controls interest rates and can hold inflation in check. The Saudi's are learning this now as they enter a "no debt" inflation market of abundance of money and nothing to do with it.

They paid off the majority of their debt invested heavy into social projects counting on firm oil prices. So the Saudi's are LOSING money on oil futures by the barrel. The Chinese and the Saudi's are tied tighter together then they know.

IF a country does not need to borrow money FROM the Chinese to pay its energy costs to the Saudis then they are BOTH out. So the Saudis sneeze and the Chinese get the flu.

One correction China is bleeding foreign reserves as their people smuggle out money to just about everywhere else in the world.