INVESTING IN COMMODITIES
All are drivers for commodities,
providing healthy and diversifying returns for investors (in old and new theory), but only if played-out with the appropriate investment strategy. “A structural increase in raw
materials prices is in fact an inevitable consequence of chronic resource insufficiencies, whether we’re talking about industrial, energy or agricultural resources,” say the report’s authors. “It is fair to say that shorter economic cycles, rising raw materials prices, the return of
inflation and soaring interest rates undermine the medium-term outlook for the equity markets. Such conditions will no doubt cause continued uncertainty which will probably prevent the developed markets from finding their way for several more years to come.” These changes have already altered the balance in many
markets, by creating a context that has favoured significant shifts in the relative prices of manufactured goods versus services, and commodities versus goods – trends which are ultimately likely to dictate general price levels. “However, this is just a beginning,” say SocGen ... “we believe that as these changes play out they will bring new characteristics to the world that are in many ways diametrically opposed to those of the past.”
Commodity Bubbles? ... I Don’t Think So Energy, metals and agricultural markets have all enticed
(and in good measure) much sound money to this complex. Admittedly, there is ‘speculative froth’ from time to time, especially in the precious metals sector. But isn’t that what free markets are supposed to engender and encourage? If housewives in Tokyo, Beijing and Delhi want to buy and hoard physical gold, why shouldn’t they? [although we would certainly not recommend this investment approach]. However, (and with respect to the gold bugs) it’s the more
useful stuff that concerns us here. Nowhere is this supply phenomenon being felt more prosaically than in the agricultural sector. After decades of chronic surpluses – in large part resulting
32 September 2011
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