Is It Time To Invest In Commodities?

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 5 December 2018

⏱️ 36 minutes

🔗️ Recording | iTunes | RSS

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Summary

#232 Why investing in commodities such as oil and gold is challenging. What you need to know before you invest. Thanks to New Retirement Planner for sponsoring the episode.

For show notes and more information on this episode click here.

[0:18] Where do commodities help us in the economic cycle?
[2:00] How to interpret the apparent statistical decline in commodities.
[5:40] Are master limited partnerships (MLPs) helpful to your portfolio?
[8:19] How the energy transition will affect the future of commodity investment.
[11:43] Contango and how it affects the performance of your futures contract.
[16:20] Looking back at the history of commodities may help in determining their future.
[24:29] The benefits of investing in gold as a commodity.
[28:11] Traders and psychology are really what determine commodity prices.
[30:08] Cash flow should still be the foundation of your portfolio.

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Transcript

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0:00.0	Walk on the money for the rest of us. This is the personal finance show on money. How it works, how to invest it and how to live without worrying about it.
0:10.0	I'm your host David Stein. Today is episode 232. It's titled,
0:14.4	Is it Time to Invest in Commodities?
0:17.2	About a year ago in December 2017,
0:21.0	Jeffrey Gunlack is the founder of Double Line Capital, excellent bond manager.
0:26.8	I invest with him in terms of my personal investing.
0:31.3	He said on CMBC about his best investment idea of 2018, quote, I think investors should
0:41.0	add commodities to their portfolios. You go into these massive
0:45.0	cycles. The reputation of this is almost eerie. And so if you look at that chart, the
0:52.2	value in commodities is historically exactly where you want
0:56.2	it to be a buy.
0:58.6	Then in February 2018, also on CMBC, he said, I still like commodities. I think in the late cycle
1:07.4	commodities always rally. In the interview, Gunlack noted that in previous commodity cycles prices surged higher by 100%, 200% and 400% during the latter stages of an economic cycle.
1:25.0	He went on and said, most investors are underweighted.
1:29.0	We're completely not invested in commodities because they've been so quiet, so sleepy.
1:34.9	Commodities is my choice investment for investors to get diversified at low prices now. I was tempted after hearing his comments, but I didn't invest in commodities,
1:50.7	except I continue to hold investments in gold, but in terms of commodity futures I haven't invested.
2:00.0	So what's happened? Oil prices have fallen over 30% since early October and
2:07.2	commodities overall as measured by the Goldman Sachs Commodity Index are down 5% year to date and down 15% since September 30th.
2:20.4	What's happened?
2:21.4	Well, Neil Shearing, he's the group chief economist at Capital Economics, he wrote,
2:29.0	it's worth noting that the recent drop in prices is relatively small compared to past falls.
	...

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