Commodity Boom…OVER?

The Dow has been an irrelevant index for the last 10 plus years.

The Nasdaq has been irrelevant for the last 5 years.

Who is next…China?

China likely popped in January. The price is starting to truly confirm it. I bought the China Inverse ETF just yesterday (blogged and twittered) morning and am up 10 percent. TEN more days and I will have doubled my money :) , but I digress….

Commodities?

The CME or ‘Da Merc’ may be signalling an end to the commodity boom with today’s price crash (down 15 percent just today and 30 plus percent on the year).

Hear me out.

Price rarely lies. I was sitting with a friend today chatting about the foreclosure boom in Phoneix and discussing his S&P ETF investment of 2001. He is underwater.

As we all know, buy and hold is a lie. Trading for a living is almost impossible, unless you are the house, and despite the fact that 33 percent of stocks end up delisted, there is not a shortseller on the Forbes 500 list.

Investing in yourself – being an entrepreneur – and money management are the keys to wealth. The truly wealthy invest in themselves and that’s why this blog focuses on the market AND entrepreneurial activities.

For those resting on the China is unstoppable, oil is going to $150, commodity argument…welcome to the business cycle. No matter how steroid induced the FED gets with money supply and intervention activities, they can only extend or the inevitable nature of the business cycle.

‘Fear and Greed’ can’t be stopped. We have Prozac, Ambien, Monster Energy Drinks and Speed..which work, but again, they just suspend reality and that’s just for the lucky few :) .

The collective mass, which is the market, is not drugged. They will always FEAR and GREED us into cycles no matter what the FED does and Cramer says.

I continue to do less and focus on building businesses with smart people. There are deals out there. They will even start springing up in the stock market. If it was my investing style, I would be licking my chops, but I am a momentum guy in the market and it’s gone. If I could flick a switch and go short, I would have done it in January. That’s when my stops were getting pummeled. Only FLY has done it well in my blogroll and I have continued linking. The perma bears are also right, but they will miss the first 500 percent of the next up cycle so I don’t count them.

Instead, I do less, preserve capital and jab occasionally from a position of cash strength (SKF, FXP). I am not bearish, but concerned. I have been bearish and all that did was get me miserable and looking down when I was born wired to look up.

I continue to urge those that ask that preservation of capital is key. It is a nasty investing environment and you better not underestimate the power of the downside momentum.

11 comments

  1. manish jain says:

    “Investing in yourself – being an entrepreneur – and money management are the keys to wealth. The truly wealthy invest in themselves and that’s why this blog focuses on the market AND entrepreneurial activities.”

    Amen…to that. But that advice is similar to the key to losing weight – eat less, exercise more.

    So simple, but so rarely followed.

  2. Paulson.. what a year 2007. Not sure how much pain he took on the way up, but it’s simply awesome how fast they made their killing in the mortgage fiasco.

    Agree 100% on capital preservation, Howard. That’s exactly what I’m doing with client accounts.

    Always enjoy your blog.. thanks for sharing everything that you do.

  3. Forgot to mention:

    CME mini-crash does not portend commodity bear in my opinion (even if they correlate price-wise over time I’d chalk it up to pure chance). That decline was all about the antitrust/clearinghouse talk.

    Commodity futures volumes are unlikely to decrease with lower price levels IMHO. CME in particular lists mostly financial contracts anyway.

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