Hot To Yield Spectacular Gains From The Commodity Investment Boom
What?s your take on unfashionable investments? Investments and markets that are so hated that they are rarely talked about ? that have little or no mention in the financial media and near the bottom of their trend graphs??
I like them...sometimes. They are the ones with ten bagger potential ? gains of 1000% and more within a reasonable space of time. I say ?sometimes? because all too often, investments are hated due to good reason ? there?s a lot of wisdom in the price of any given market.
But the market does get it wrong sometimes. At any given time there are investments that should be far higher than their market price ? a correction will happen at some time and that?s why I love looking at hated investments. Listing them. Waiting for the tide to turn. And getting in well before the crowd when the indicators are right.
That?s exactly why the commodities market has been on my radar for some time now ? here?s a terrible performer that has performed sickly over the past two decades - adjusted for inflation the value of commodities investments during this period has declined significantly. And let me ask you something ? aside from small pockets (such as gold & oil) how much attention do you see general commodities getting? Do you see books about them when you peruse the investment section at your local bookshop? Do you hear your friends boasting about their most recent commodities investment? No ? because at the moment, despite the fact that prices are now moving north with some conviction, commodities are still unloved?and if as I believe they will continue to rise, this could be the start of a longer term commodities bull run and a very good time to invest.
Did you know that commodities prices have been heading upwards, almost un-noticed for some time now? Coffee, copper, wood and sugar are just a handful of the commodities that have enjoyed between 40% to 80% price growth per year in recent times. The exciting thing is that this could be just the start of a long commodities bull run ? and when you think that the majority of the investment world still avoids commodities like the plague, there could be exciting times when the world finally wakes up to smell the coffee?quite literally.
The Case For Commodities Investment ? A simple Question Of Growing Demand & Falling Supply.
The sophisticated investor understands one thing ? whatever the current price of a product, it?s price will ultimately correct to reflect the basic demand versus supply equation. Yes, we get bubbles ? anyone that invested money in ?Useless Dot Com PLC? around 2000 at a PE of about 967 will vouch for that. But ultimately, the market corrects itself ? overvalued markets and companies come crashing down with an almighty thud. And undervalued markets and companies get re-rated.
Why do they get re-rated? Because the market understands that there is an imbalance. In the case of Useless Dot Com PLC the market realized that the company (which by the way is fictitious) was just sitting on some cash with some far fetched business model with no underlying demand for it?s core business activity or product. The result is that the market valuation for Useless Dot Com PLC was trashed.
In the case of commodities, the market has no choice but to re-rate the market upwards because (as we?ll see) there is a significant imbalance in the demand versus supply equation. Global demand is far higher than global supply ? and ultimately this will push prices up and up.
Why There Is Increasing Global Demand For Many Commodities, And Dwindling Supply.
The two rising super-powers ? China and India are developing rapidly at the moment and consequently are consuming more and more commodities to fuel this stunning growth. China (and it?s relatively youthful population) is already among the biggest global consumer for commodities including platinum, steel, copper, iron and several other metals. The country is experiencing a construction boom and this has resulted in an incredible thirst for raw and processed metals. India imports more gold and silver than any other nation, is investing heavily into it?s infrastructure and is the fourth largest global consumer of crude oil in the world.
Both India and China are developing into global super-powers ? and in order to do this, their level of consumption of commodities will be fierce and almost unsustainable over the next two decades.
Now is the right time to get involved with the commodities boom.
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