Monday, July 9, 2012

Time to Buy Commodities Again?

Commodities have gone down by nearly 30% (CRB Index) since Q2 2011. If you are a believer that money printing by central banks will eventually increase commodity prices despite the poor economy, it may be a good time to buy again.

Let's have a look at the CRB index chart (Source: since 1994 and draw a trend line.

This is a "dumb" method to time your investments, but it can be terribly efficient. Since the start of the bull market in 1998, the CRB index has rebounded 3 times on this trend line, and we are now very close to hitting it again. We have about the same buy signal has we have on Gold and Silver. So it might be a really good time to increase exposure to commodities (or get back into commodities).  Although the bull market is getting old (14-year), many projects have been cancelled or delayed in 2008 which should give more legs to the bull market on top of money printing by central banks.

For individual investors, the easiest way to get exposure is to buy commodities ETFs such as RJI, or funds composed of commodity stocks such as Carmignac Portf Commodities A. As usual check the chart of the ETF or mutual fund against the index tracked over at least 2 or 3 years to make sure you are not scammed into paying high fees and that the financial product you plan to buy suffer from excessive decay.

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