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Old 04-28-2006, 02:40 PM   #1
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Bill Miller, Legg Mason Value:

"The time to own commodities is (or at least has been) when they are down, when everybody has lost money in them, and when they trade below the cost of production. That time is not now. The data showing the returns of commodities will look very different if you start measuring just after prices have tripled."


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Re: commodities?
Old 04-28-2006, 04:15 PM   #2
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Re: commodities?

I agree with Miller in the following sense:

If you are attempting to capture expected returns to improve overall portfolio performance then you have possibly lost some of the gain after the recent runup.

However - slice and dice wise - if you are trying to damp SD and take advantage of correlation - then

Norwegian widow: if the divs/current yield are acceptable from the get go - true grit allows one to hold thru cycles and take the return. aka if you could buy PCRIX or similar ilk and live with/or without rebalancing - taking only current yield to fund your ER then you are home free - right?

HEH HEH HEH HEH - just a little here - don't really have a strong opinion.

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Re: commodities?
Old 04-29-2006, 04:03 AM   #3
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Re: commodities?

i view my commodity holdings (5%) as my rebate commodities have sky rocketed at least i make some back as energy prices go thru the roof....i hope i loose money in that area ,kind of like paying insurance because if the commodities stop rising the 95% rest of my portfolio should do well...... so far i made enough in profits in the commodity section to pay the extra difference in my gas for the next 3 years figuring 4 bucks a gallon......
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Re: commodities?
Old 04-30-2006, 05:24 PM   #4
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Re: commodities?

Commodity booms run in cycles, usually at least 20 year cycles. Prices typically become low enough that it's barely economic to produce the commodity, which depresses production. When production dwindles to the point that demand overcomes supply, prices start rising again, until new production is economically viable and ultimately very profitable. Many commodities have several years lag time till they are operating at a capacity adequate to meet demand, so the "boom" period of price appreciation extends for years, until over-supply starts the downward cycle again. Bottom line: the commodity boom has many more years to go, particularly as long as China, India, and other developing countries need energy, and natural resources.
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Re: commodities?
Old 04-30-2006, 10:39 PM   #5
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Re: commodities?

I agree with both mathjak107 and Focu$ed. Small percentage of portfolio, it is insurance, and like everything else ... they cycle. It's another asset class, IMHO. It is also a class that many investors like to scorn, for some reason, so expect odd looks if you mention you own some precious metals or oil, or ...

Having said all this ... obviously there has been quite a runup. I also think we have further to go. Just realize when we enter at this point on the curve, the risks are a bit higher.

Wish we could find a depressed asset class, other than cash ...
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