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Over the last 3 months we have seen commodities plunge to multi-year lows. The DJ-AIG Commodity Index is currently trading at levels not seen since 2004. The rationale for the historical decline is said to be from a slowing world economy, wide-scale deleveraging and government intervention. One thing investors must understand is that these plunging commodity prices have presented an opportunity for a historical rally as commodities are likely to soar to new highs in the coming years.
History also shows us that we are in the fourth major inflationary period since 1870. These inflationary periods have lasted an average of 18 years, which leaves plenty of room for the current cycle to continue.
If you cannot view the U.S. Stocks Relative to Commodities Market chart, go here.
Source: NBER, Standard & Poor's Corporation, U.S. Dept. of Commerce, Legg Mason
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Washington's bailout of the financial sector will cost American taxpayer trillions of dollars through the "cruelest tax of all"- INFLATION. The Federal Reserve has already geared up its balance sheet for a massive re-inflationary effort.
If you cannot view the Total Federal Reserve Bank Assets chart,
go here.
Source: Federal Reserve & Chris Puplava of Financial Sense
Investors might as well take the government's un-ethical practices and turn them into profitable trading opportunities. Sometime over the next several months we will begin to see the re-emergence of inflation which will be reflected in commodity prices world-wide. |
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One area investors should consider is platinum. Platinum has tumbled from an all time high of $2200 to its recent low of $790 over the past several months. This is a 4 year low partially caused by fears that the global economic slowdown may reduce demand for their use in the auto industry for catalytic converters.
If you cannot view the Platinum chart,
go here.
Chart provided by APEX
However, I believe that this market is currently beyond oversold. The rate of growth in demand is slowing, but investors are forgetting that the demand is still growing. Demand in China and India are of particular importance when analyzing this market.
China's demand for automobiles in 2020 is expected to reach 20.74 million units, including 20.43 million sedans and the total number of cars in China by then will top 156 million, as reported in China Automobile News.
Investors should be on the lookout for signs that the platinum market has bottomed. After we see the market turmoil settling, this will be an excellent buying opportunity with potential for a rebound to the $1600 level.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS.
Copyright © ADM Investor Services, Inc. | |
About the Author
| Jared Irish
graduated with a B.S. in Finance with major course work completed at the Carlson School of Management and his undergraduate studies at Metropolitan State University. After working for a bank and a small hedge fund, he joined Archer Financial Services in 2006. He was led to the commodity markets in 2001 through his study of Austrian Economics and the Daily Reckoning newsletter. He believes commodities as an investment offer the potential to protect and profit from inflation, war, natural disaster, and famine. Jared is currently a member of the Agora Wealth Reserve, Chicago Coin Club, Chicago Rotary Club, CAIA, and Sovereign Society. He is also an avid drummer. |
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