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Old 08-23-2008, 07:51 AM   #41
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we can banter this back and forth forever... all i can say is if anyone feels we are not destined for higher and higher prices over time or you feel you can do better elsewhere do it..... i tend to like the price protection insurance having a commodities fund adds to my mix.....
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Old 08-23-2008, 09:04 AM   #42
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we can banter this back and forth forever... all i can say is if anyone feels we are not destined for higher and higher prices over time or you feel you can do better elsewhere do it..... i tend to like the price protection insurance having a commodities fund adds to my mix.....

I second that position.
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Old 08-23-2008, 01:15 PM   #43
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only thing ill add is that years ago there was no easy way for the common guy to buy commodities or even gold. it made it very difficult for it to be something that was added to a portfolio and at least on everyones radar.... i remember buying gold eagles from fidelity in the 80's and having to pay a certain amount of money a month for insurance and storage for them to be stored by fidelity in the bank of delaware,

i remember actually taking delivery on some and getting nailed with new york city sales tax... then trying to sell them was tooooo much work. today with etf's its a piece of cake and so as i say all the time these things went from being fringe investments and estoric specialty investments to where they are now where they are sooooooo on the radar that they can move 5-6% in a session.... i think the fact that they are utilized now soooo much will make a big difference in their behavior both up and down.....
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Old 09-10-2008, 08:59 PM   #44
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Right now gold and oil are pretty high due to speculative pressures
Study links oil prices to investor speculation - Yahoo! News

Ta da!
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Old 09-11-2008, 07:29 AM   #45
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we can banter this back and forth forever... all i can say is if anyone feels we are not destined for higher and higher prices over time or you feel you can do better elsewhere do it..... i tend to like the price protection insurance having a commodities fund adds to my mix.....

historically commodities will go through a decade of nice price gains and then 20-30 years of deflation or single digit gains for the entire decade. the current commodity bull market started in 1997
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Old 09-11-2008, 11:40 PM   #46
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Years ago, I read a study on inflation that Scott Burns mentioned. Different types of inflation have different causes and different buffers. Unexpected inflation is often caused by spikes in commodity prices that CCFs can buffer. I've seen that twice now. A different inflation was buffered by a higher allocation to equities. Inflation protected bonds fit in there somewhere, too. With a no-COLA pension, inflation buffers are important to me.

I like broad diversification, even with the potential of lost opportunity costs, so I own CCFs. I will live with the consequences of that decision.
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Old 09-12-2008, 02:01 PM   #47
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Another way to look at energy commodities is as a hedge against commodity led inflation for heating, vehicle fuel, and oil inflated products like food.

Personally, I only include energy commodities as part of my portfolio.
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Old 09-12-2008, 02:38 PM   #48
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Why are commodities good or not good to have as a part of someones long term asset allocation plan?

Some background: My problem is, my parents are constantly asking me financial questions these days. I do not work in the financial industry, it is just a hobby I have recently picked up because I believe it is important to know in order to FIRE as quickly as possible.

My parents are fairly near to retirement, so they struggle constantly with balancing risk vs. reward. Beyond just attempting to stay within a certain stock/bond allocation, they seem to be pretty unsure on what sort of allocation to use beyond that, and more importantly, have problems sticking with it. They get very scared when the market does badly and very confident when the market is doing well.

So at the beggining of the year they bought a natural resources mutual fund (oil/natural gas), in order to have commodities. Now they are asking me if they should sell it after it when from a fairly positive return to a small negative return in a short period. I ask them if commodities are part of their long term portfolio (as opposed to being just their high risk play money) and why they want commodities, and they just stare at me blankly...


I could really use some insight. Thanks all.
I tend to phrase things as 5 phases of investing:

1) starting out- the deposits are more than the account balance
2) accumulation- the deposits are a considerable percentage of the account balance- generally greater than 5% and possibly closer to 10%. Drops in the portfolio amplify this.
3) growth- the deposits are a smaller percentage of the balance and even a 2-5% increase in portfolio value is more than a normal yearly deposit.
4) stability- the goal is to see the portfolio maintain its value and generate a passive income which is less than the portfolio's annual gain
5) selling of assets to generate income

IMO commodities fit #4 but do not fit into 1-2-3 or 5. Meaning if the goal is to have a portfolio maintain it's value, commodities do that well.

In general when growing the portfolio (1-2-3) it makes sense to stick with asset classes which have high return percentages and consistent returns tested over signifcant time (stocks and bonds).

In general when maintaining a portfolio's value, adding many asset classes will help- meaning add commodities, add a cash position (or make it larger), add a bond position (or make it larger), add a real estate position (or make it larger) so that the losses in any one portion are offset by the gains in the others. Sell the winners to generate income.
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Old 09-12-2008, 04:52 PM   #49
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Considering that general commodities funds such as PCRIX are down almost 25% over the last couple of months, I'm not sure I'd want to qualify commodities as a way to 'maintain a portfolios value'.

I might say that they're more appropriate as a highly volatile, high risk/reward, plausible tracker for unexpected inflation.

I'd also say that just owning the oil component probably nets you 90% of the benefit at about 25% of the risk.
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Old 09-13-2008, 03:23 PM   #50
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I might say that they're more appropriate as a highly volatile, high risk/reward, plausible tracker for unexpected inflation.
... and currency depreciation...
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Old 09-14-2008, 02:50 AM   #51
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Considering that general commodities funds such as PCRIX are down almost 25% over the last couple of months, I'm not sure I'd want to qualify commodities as a way to 'maintain a portfolios value'.

I might say that they're more appropriate as a highly volatile, high risk/reward, plausible tracker for unexpected inflation.

I'd also say that just owning the oil component probably nets you 90% of the benefit at about 25% of the risk.
i guess you can say the same for the indexes, emerging markets , and foreign funds. when its not that classes time it dosnt matter what it is.
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Old 09-14-2008, 03:56 AM   #52
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Whewww. Man I was afraid the stuff was in short supply.

Good to hear that is was nothing serious... just the affects of the consumer/investor/taxpayer being ripped off again.

We better hurry up and help everyone that was hurt by it. Consumers at the back of the line. Perpetrators to the front.

Surely the oil companies are expecting a govt bailout?

How about that poor hedge fund that scr3wed themself... Uca Sammy shouldn't forget them.
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Old 09-14-2008, 08:27 AM   #53
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i guess you can say the same for the indexes, emerging markets , and foreign funds. when its not that classes time it dosnt matter what it is.
If you actually read my post and what it replied to, you'd see that I didnt contest commodities as a potentially beneficial asset class, I contested its character as a 'value stabilizer' in a portfolio. I'm not even sure of their benefit as an inflation offset.

Given a sharp run up when inflation was tame and a sharp run down when inflation was high...I think it just struck out on both counts.
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Old 09-14-2008, 08:58 AM   #54
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If you actually read my post and what it replied to, you'd see that I didnt contest commodities as a potentially beneficial asset class, I contested its character as a 'value stabilizer' in a portfolio. I'm not even sure of their benefit as an inflation offset.

Given a sharp run up when inflation was tame and a sharp run down when inflation was high...I think it just struck out on both counts.
Like everything in the markets things trade more on the perception of things off in the future than reality. all our biggest stock drops happened when things couldnt have looked better at that moment. all our biggest gains started when the word stock market made you vomit. with oill now dropping and the dollar headed up and things looking slower on the horizon the future prception seems to be lower inflation. and soooooo down we go..... just wait until the future looks better for a recovery, we will most likely take off again although it will probley happen before indicators point that way in reality yet...
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