Commodities
If you have been following this blog at all or have talked to me about investing this past year you know how bullish I have been on Commodities. They are more than just a weak dollar play or a China play they are a world play. Demand for the actual products are growing daily as is the demand for investment products to take advantage of this long term cycle all over the world. China has been circling the world looking for any commodities they can purchase as they know how important they will be for future growth in the country.
China's Growth
At it's current pace China will overtake the U.S. as the world's largest economy within the next ten to fifteen years. What this means is that China's economy will roughly double in size compared to today. This in turn will mean their consumption of commodities will roughly double as well. Can the world support this demand? Can their growing population just consume less? The answer to both questions is no. this leaves us with an environment in which all commodities they need for their countries growth will become more and more scarce the world over. We all know what happens when food, oil, or raw materials become more scarce, that's right, prices go up.
How to Play
I own various commodity plays and find that the easiest way to play is through the ETF: GSG. It is a commodity index ETF that everyone should have in their portfolio to take advantage of this global play. If you want to look at specific areas try RJA for agriculture, USO for oil, GLD for gold, SLV for silver, and one that I think might do better than oil percentage wise is UNG for natural gas.
Question?
Does anyone know who was the world's largest economy before the U.S. took over the #1 spot sometime around 1875?
Full disclosure: I own or am currently trading GSG, GLD, SLV, RJA
1 comment:
Sounds advice. My sources advise investors to keep 5 to 10 percent of their portfolio in commodities.
Energy related stock (oil, gas, solar, etc.) especially appear to be a strong hedge against most other blue chip stocks (energy prices tend to go up with everything else is suffering).
GLD was flat for many years, but has spiked like crazy in the last couple of years. I have no idea if it will go back to slow-growth status, or have another surge.
As for me, my largest commodity-based holding (outside of property) is in Exxon. While I shaved off a chunk to buy the Garfield place, it's still my largest holding (I can't afford the taxes I'd have to pay next year if I sold much more).
Exxon has treated me well, and I plan to hold on to most of it for many years (shaving off a little here and there to further diversify). But I still have to wonder at what point will oil prices drastically decrease demand.
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