Why we should be investing in commodities?
16-Sep-2010
I like this.
By Liu-Yue Lam
An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.
Browse other articles
Browse in Commodities Investment Wisdom Oxstone Investment Commentary
Translate this page:
-
Categories
-
Archives
- July 2023
- June 2023
- April 2023
- March 2023
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- July 2021
- June 2021
- April 2021
- July 2020
- June 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
-
Why we should be investing in commodities?
The most important reason is not only diversification of asset classes in a total return portfolio, but also the uncorrelated nature of the asset classes. Commodities tend to be less correlated with other traditional asset classes such as equities and bonds. Gold has positively outperformed the equity markets over the past 10 years while the US stock market has achieved only negative returns.
But be careful, some commodities may have a higher correlation than other commodities and are not influenced by different factors. Precious metals tend to be a play on the crisis of confidence in the fiat currencies due to global competitive debasing of currencies and high government budget deficits. Industrial metals will be more closely correlated with global trade and manufacturing activity. Keep a close eye on the Baltic Index or the China PMI.
In terms of energy commodities, it is driven more by industrial activity and consumer consumption as well as other built in risk premiums for war, supply disruption, and political risks. China as the world’s largest energy consumer will also impact energy commodity prices.
In addition, some commodities have higher return potential relative to other commodities. Silver appears to have more room to run than Gold. If historic Gold/Silver ratios return to historic averages silver should outperform Gold as the Gold/Silver ratio reverts to the 50’s from the current 60’s.
Also, current agriculture prices when compared to its historic highs appear to favor soft commodities. With many key long term catalysts such as global warming, change in emerging market consumer tastes and preferences on diets, urbanization, lack of arable farm land, population growth, diversion for alternative energy use, and lower water supplies all point favorably to much higher soft commodity prices long term.
A simple and efficient way to invest in commodities rather than pick individual commodity companies, etc. is to buy ETFs. Please review our free ETF Lists which will provide a list of ETFs by asset classes. Commodity ETFs can be played either individual commodities or baskets of commodities.
Best Wishes,
Liu-Yue (Louie) Lam
Co-founder and CEO, Oxstone Capital Management
You might also like