Are Commodities Recession Proof?
Gold, oil, most of the other precious metals, and the agricultural commodities continue to make new highs. Is this a bubble? I wish I knew the answer to that. I continue to remain bullish on commodities. There are two main scenarios for why commodities will trade higher regardless of how the U.S. economy proceeds.
Scenario #1
U.S. Economy enters a recession. The Fed continues to cut rates, further eroding the value of the US dollar. This means it takes fewer Euro's, Yen, and just about every other major currency to purchase more commodities that are denominated in dollars. This will lead to an increase in demand for commodities.
Scenario#2
U.S. Economy has "bottomed," interest rates remain constant or move higher, and the U.S. GDP picks up. An increase in GDP will further increase demand for commodities. The dollar should strengthen, but demand will remain robust due to economic growth.
Stocks to Own
Note: I have positions in CHK, MOS, TRA, & RIO
Scenario #1
U.S. Economy enters a recession. The Fed continues to cut rates, further eroding the value of the US dollar. This means it takes fewer Euro's, Yen, and just about every other major currency to purchase more commodities that are denominated in dollars. This will lead to an increase in demand for commodities.
Scenario#2
U.S. Economy has "bottomed," interest rates remain constant or move higher, and the U.S. GDP picks up. An increase in GDP will further increase demand for commodities. The dollar should strengthen, but demand will remain robust due to economic growth.
Stocks to Own
- Natural Gas: Chesapeake Energy (CHK)
- Contract Drilling: Diamond Offshore Drilling (DO)
- Crude Oil: Petrobras (PBR)
- Fertilizer: Mosaic (MOS) & Terra Industries (TRA)
- Metals: Vale (RIO) & Rio Tinto Alcan (RTP)
- Uranium: Cameco (CCJ)
- Solar: Sunpower (SPWR) & MEMC (WFR)
Note: I have positions in CHK, MOS, TRA, & RIO
posted by Big Ben at Sunday, March 02, 2008
9 Comments:
I believe at least the precious metals will continue to surge because of the inflationary policy of the US. I recommend this article:
Recipe for hyperinflation
while we may be entering a period of inflation, i fear that the recent run up in commodities has gotten ahead of the fundamentals and that there is more downside than upside. Chasing last year's hot investements is usually a formula for loss and i sense that much of the "smart money" that did well with gold, oil and other commodities is moving onto the next sector.
wayne cooper
WealthManagementExchange.com
I'm invested in and marketing the the opportunity to purchase/invest in fractional shares of life settlement insurance policies. I'm curious what your thoughts are on this type of investing. Obviously there are some crooks out there but it was the credibility of Warren Buffett that got me really going with it. Your thoughts?...
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everything is tied to the US dollar. Despite the recent run up in commodities, i believe that there will be more upside to it than otherwise. If money escapes from capital markets, the global economy would crash. Financial engineers would have to work something out to stash the supply of the USD from circulating. They were able to partially do this in the credit market, but it created an imbalance somewhere along the way. this is exactly what is plaguing the financial markets, but it can be considered as growth pains in our step towards financial globalization.
I'm invested in and marketing the the opportunity to purchase/invest in fractional shares of life settlement insurance policies.
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Good post! To that I may add, The future of the U.S economy:
http://bakerthebrand.blogspot.com/
Gratitude,
+Baker
Commodities may not be recession proof but Forex is being called the Recession Proof Business of 21st Century.
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