Commodities

what do yee all think of commodites in general at the moment? Where do you think they are going to go?

I have bought quite a few shares in the mining companies, the energy companies and gold miners recently. Ok they are all having a battering this week, due to lots of external economic factors...and lots of panic selling.

After reading and following different analysts comments it all gets rather confusing after a while, particularly when a lot of the so called experts contradict each other.

My view is that oil...is getting more scarce, we are still using lots of it and thats going to last for the forseeable future...therefore shares in these companies should go up, as the companies should make big profits.

The mining companies also are going to make big profits due to the consumption of..iron ore, base metals etc etc..by everybody and in partic countries like China...so there is going to be money on stocks in these companies....and in a lot of cases the share price has not caught up with the actual commodity price....so there room for loads of earnings for the companies.

I also have money in gold mining companies, but am more nervous of this sort of market...so not putting much that way..thats just me.


what do yee think??....why is there such hysteria and panic selling of commodity stocks this week?...theres a falling knife at the moment...i think there may be a perfect opportunity to buy more of these commodity stocks when knife finishes falling and the dust settles.

smiley said:

My view is that oil...is getting more scarce, we are still using lots of it and thats going to last for the forseeable future...therefore shares in these companies should go up, as the companies should make big profits.

The mining companies also are going to make big profits due to the consumption of..iron ore, base metals etc etc..by everybody and in partic countries like China...so there is going to be money on stocks in these companies....and in a lot of cases the share price has not caught up with the actual commodity price....so there room for loads of earnings for the companies.

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How do you know that all these assumptions (assuming that they are valid) are not already priced into those stock prices?

i think there may be a perfect opportunity to buy more of these commodity stocks when knife finishes falling and the dust settles.

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Why do you think that you can time the market? Just because an asset falls in value doesn't mean that it's necessarily better value. In fact, the opposite could be the case.

How do you know that all these assumptions (assuming that they are valid) are not already priced into those stock prices?

I dont.....but according to some analysts/experts whatever u like to call them...the earnings potential is not tied into the stock price..there is a time lag....but of course they could be totally wrong.

i cannot time the market....nobody can...i know that i could buy those shares when the market plummets and the blood settles, but it could also plummet again..or go up.

Was watching Marc Faber ( http://www.gloomboomdoom.com/ ) on Bloomberg today.
He's of the opinion commodities will fall back 20 - 30%.

When asked were his wealth was currently, it was something like 35% liquid cash and 50% linked to Asian property.

If I had money to invest for the long term, I'd be leaning towards value investing (contrarian) given there's a lot of uncertainty in the dollar, oil, other commodities, property etc.

http://money.cnn.com/2006/05/05/news/newsmakers/buffett_050606/?cnn=yes

See Warren Buffet is also warning of a commodities bubble. Many people now think they have overshot their true value at the moment. I think there has been more panic buying than panic selling in the last few months. Marc Faber was advising people to invest in commodities back in 2002/2003. He has been pretty on the ball on alot of things.

What do you think are the best commodities funds to be investing in now. Looking for fairly solid funds that have good exposure to agricultural commodities.

joe sod said:

http://money.cnn.com/2006/05/05/news/newsmakers/buffett_050606/?cnn=yes

See Warren Buffet is also warning of a commodities bubble. Many people now think they have overshot their true value at the moment. I think there has been more panic buying than panic selling in the last few months. Marc Faber was advising people to invest in commodities back in 2002/2003. He has been pretty on the ball on alot of things.

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That warning from Warren Buffett was in May! Many commodities have taken a battering since then.

To answer your question smiley, commodity stocks have fallen recently because of slowing economic growth in the U.S. and recession fears. In such a scenario, demand for commodities will fall with obvious knock-on effects for the price.

Personally I think commodities will be fine through until the end of next year at least because of Chinese demand. This demand should last through until the Olympics at least after which their shoddy lending practices and unsustainable growth may catch up with them.

All IMHO of course

"That warning from Warren Buffett was in May! Many commodities have taken a battering since then."

That warning by both Faber and Buffet was given within days of the actual big fall in prices. However Buffet also said then that the only commodities that were not overbought were agricultural commodities. In fact wheat prices and stear prices are now starting to rise alot.

joe sod said:

That warning by both Faber and Buffet was given within days of the actual big fall in prices.

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Buffet says commodities will fall.
Everybody listens to Buffet.
Everybody sells.
Surprise, surprise, commodities fall.

Sarsfield said:

Buffet says commodities will fall.
Everybody listens to Buffet.
Everybody sells.
Surprise, surprise, commodities fall.

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I imagine there may have been an element of that but Buffet doesn't control the Bank of Japan ...

Sarsfield said:

Buffet says commodities will fall.
Everybody listens to Buffet.
Everybody sells.
Surprise, surprise, commodities fall.

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No actually the trigger was caused by Bernanke and the Feds willingness to keep interest rates rising when in May analysts had been expecting an easing in interest rate rises. Buffets comments definitely did not trigger it and less so Faber who would not be too widely followed by the masses.

Im reluctant to invest in oil companies or mining companies as alot of them seem to be very expensive now. They have very high P/E ratios and very high price/book value ratios. Even though oil is likely to go higher does anyone else agree that the companies themselves are too expensive and people should be wary of putting more money into them even after the recent corrections.

Does anyone know of a good commodities fund to invest in which is fairly stable with good exposure to all commodities including agricultural.

hi evan...2 funds i have read about

oppenheimer real asset fund....there is a approx a 70% weighting towards the energy sector though.

Pimco commodity real return fund...it tracks the performance of the Dow Jones- AIG Commodity Index.

i am sure there are other funds about also..

evan said:

Does anyone know of a good commodities fund to invest in which is fairly stable with good exposure to all commodities including agricultural.

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I know discussion of individual stocks/funds is out but linking to a non energy commodity ETF CRB is ok? or one based on the GSNE

The miners are doing very well of late. They are on a nice long term upward trend...surprise, surprise

Anybody else catch the wave?