Saturday, December 27, 2008

Commodity Performance 2008

Quite a staggering table via Bespoke Investment's blog on the performance of commodities in 2008. What is so amazing is halfway through the year so many of these commodities were enjoying the performance of a lifetime; and within a few months many "enjoyed" the downfall of a lifetime. We caught much of the ride up, and 6-8 very painful weeks on the way down as the hedge fund delevering game began in earnest. The "round trip" when you calculate start of year to 52 week high and then drop from 52 week high is simply awe inspiring.

Lesson's learned here
  1. Don't ever believe hedge funds are not impacting markets to a huge degree
  2. "Group think" is alive and well in the institutional investment community
  3. When thesis ends, be ready to run for the door and try to squeeze out before the rest of the rats
Again, I'll point to a copper rebound as the most telling tale for any true global economic recovery. I still like the agriculture commodities the most from a long term perspective. Gold and silver has pulled back from a recent surge and a few names look interesting. (please note silver is relatively economically sensitive versus gold due to industrial use)

I always liked Silver Wheaton (SLW) over the years because it benefits from metal prices but without the mining risk - I never knew there was a parallel on the gold side but I have been reading about Royal Gold (RGLD) the past few weeks which seems to be a similar business model - the chart is hot hot hot.

As long as Silver Wheaton holds $5 it should be in good shape....

This is about as good of a chart as you can ask for... once RGLD broke $40 (October and December double top) it was off to the races.... I'd like to get some on a pullback to the 20 day moving average

No positions

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