No one likes commodities anymore

A prime example of why I don’t favour long-commodities in the portfolio: I don’t understand how/why they can fall, seemingly forever, on well-known economic themes.

Grains had it bad for most the year, but oil caught up.  Here are 2 long-only ETF/ETNs showing the issue: USO follows the oil price, and CORN follows the corn price.

Screen Shot 2014-11-04 at 13.30.48

One characteristic that has been nice is sustained trends.  That means medium-term momentum funds have made a killing on these products this year.  A small pat on the back for inclusion of the managed futures mutual fund.

In other news, the equity markets seem to be rattled again – just a couple days after the JCB adding a ton of stimulus, and GPIF buying a new $180bn in equities.  Maybe back to proper two-sided markets??


One thought on “No one likes commodities anymore

  1. Brian Stevenson says:

    The Commodity Markets, in my opinion, have been the Classic case of “High Prices Cure High Prices”. The definition of a Commodity business is that it only returns Variable cost with a small return to Fixed Cost over the long pull. If in a commodity business, one better be the least cost producer. In most commodities, certainly Ag Related commodities, the Players have seen margins never before experienced for several years. That is not sustainable over the long term. Frankly, we do not know today where Production Capacity actually falls out, but Mr. Market will find that level, me thinks.


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