investing in the stalk market

[TexasHusker]

A fellow who plunked down $10K on soybeans 6 months ago would be much richer today!

[scfr]

Time to dust off the Flux Capacitor.

[Fishindude77]

This is the reason farmers need to have some on the farm storage capacity, so they can hold and sell grain when the market is best.
Grain prices are much better now than they were at harvest time last fall. Predicting when prices will be best is a mystery many would like to understand.

[TexasHusker]

This is the reason farmers need to have some on the farm storage capacity, so they can hold and sell grain when the market is best.
Grain prices are much better now than they were at harvest time last fall. Predicting when prices will be best is a mystery many would like to understand.

Good idea! But they can do the same thing a lot cheaper just buy buying some grain futures options. A lot of them do.

[james.hendrickson]

A fellow who plunked down $10K on soybeans 6 months ago would be much richer today!

Texas - are you speculating in commodities? I'd be interested in your thoughts whether commodities investing makes sense.

[TexasHusker]

Texas - are you speculating in commodities? I'd be interested in your thoughts whether commodities investing makes sense.

This is a very important question, and few investors ever stop to take a look at the answer, when the answer could not only save them substantial losses, but provide new avenues of significant wealth-building.

In my opinion, we are entering a long-term bull market in commodities and natural resources that will run at least several years. The commodities markets tend to have an inverse relationship with the equities markets. That is, a commodities bull market almost always signals an equities bear, and vice versa. In the first decade of this century, we have an almost decade-long commodities bull market, running alongside "the lost decade" for equities. While equities investors were crying the blues for 10 years, they very easily could have ridden the commodities bull market and made a killing. But a lot of folks never stop to consider that there are many other bull markets out there besides just a bull stock market.

Then in the second decade, we had a spectacular equities bull market, running alongside a decade-long commodities bear. Now, we see a commodities bull emerging - it started a year ago - and while the equities markets are still near their all-time highs, the momentum is clearly petering out, and inflation is going to spoil the market.

Welcome to the party, commodities, it's your turn!

I am going begin looking for strategic entry points in commodities and natural resources, yes.

[disneysteve]

I am going begin looking for strategic entry points in commodities and natural resources, yes.

How does one go about getting into the commodities market? I honestly have no idea. Do you have to trade futures? Are there equities that are tied to commodities, in the way that REITs are tied to real estate or a Gold fund is tied to the gold market?

[james.hendrickson]

How does one go about getting into the commodities market? I honestly have no idea. Do you have to trade futures? Are there equities that are tied to commodities, in the way that REITs are tied to real estate or a Gold fund is tied to the gold market?

For real, how does one start buying commodities?

[TexasHusker]

You can buy mutual funds that are commodities-focused.

https://www.morningstar.com/commodity-funds

[JBinKC]

If you are an international investor there are 1000s of equities and ETFs tied to specific commodity classes. You can also trade futures contracts specific to the underlying commodity.

A word of caution if you want to be effective in making money in the commodity sector equities with the least amount of risk you really need to deploy a Graham Dodd type value investor approach given it is a very cyclical business. Chasing the shiny object will burn you all the time if you intend to hold them as a long term investment. The time to buy commodities was when the fed started to print money and production restrictions tied to covid has led to inventory shortages (those conditions were apparent a year ago). The fact that consumer inflation historically has been very bad for secular growth equities has highlighted the continued uptrend in the group.

[TexasHusker]

This is an old chart that I have in my files. It's 7 years old now, but the story is the same and always will be: stocks and commodities have an inverse relationship.

[corn18]

You could end up like the morons that held oil futures when the price went negative. They were on the hook for receiving thousands of barrels of oil and had to pay someone to take it off their hands.

[james.hendrickson]

You could end up like the morons that held oil futures when the price went negative. They were on the hook for receiving thousands of barrels of oil and had to pay someone to take it off their hands.

That's true Corn, its not risk free.

[TexasHusker]

You could end up like the morons that held oil futures when the price went negative. They were on the hook for receiving thousands of barrels of oil and had to pay someone to take it off their hands.

While agree with you, that's not really an example of investing in commodities: Buying oil futures with an expiration date of 60 days or less, is just like buying a bunch of Tesla calls with an expiration date of 60 days or less. The only reason you buy these instruments is as a hedge to offset another transaction. It's a tool. You don't ever go and buy USO naked and think you're going to make any money on it. That's not the purpose. Sure, I can drive a nail with the end of a screwdriver, but that's not the tool's intended purpose.

[corn18]

While agree with you, that's not really an example of investing in commodities: Buying oil futures with an expiration date of 60 days or less, is just like buying a bunch of Tesla calls with an expiration date of 60 days or less. The only reason you buy these instruments is as a hedge to offset another transaction. It's a tool. You don't ever go and buy USO naked and think you're going to make any money on it. That's not the purpose. Sure, I can drive a nail with the end of a screwdriver, but that's not the tool's intended purpose.

You think commodity prices will go up. Maybe they will, maybe they won't.