Tracking which commodities have performed the best over the past decade and why?
We don’t normally discuss our views on the stock market except in relative terms vis-a-vis bonds or commodities, but in this edition we take a direct look and conclude that the stock market is now not only fundamentally overvalued but at risk of a major correction. In all probability, should that occur, commodity prices are likely to correct in tandem, yet also outperform on the downside. Why?
With oil prices within spitting distance of triple-digit levels (Brent traded over $99 per barrel last week, while West Texas Intermediate was north of $90 per barrel), it may be time to reconsider just how long this recovery will run.
One expert he interviewed was Frank Holmes, head of U.S. Global Investors, which manages 13 no-load mutual funds, many of them recognized for consistently high performance by Lipper Fund Awards. Last year, Frank’s Gold & Precious Metals fund returned 36.8% – more than triple the Dow – and the World Precious Minerals fund gained 45.4%, outgunning the S&P almost four-fold.
In case anyone missed it, the Chinese raised reserve requirements over the weekend yet again, and that market was pummeled for about 3% on Sunday night, with no bounce last night. The rest of the world was essentially unperturbed by the action in China, however, and today Europe was higher, led by Spain, as once again folks continue to act like the problems with the PIIGS are in the past (color me skeptical).
While it may stimulate US exports and help to create conditions for renewed economic growth in the US (rather than relying mainly on the stimulation of consumer spending), QE2 represents a debasement of the US dollar and suggests that demand for US debt may be weakening.
Social Development & Energy Use
To measure the degree of social development Morris examined four factors: (1) energy use per capita, (2) urbanization, (3) military capacity, and (4) information technology. Investors in the energy sector have long been aware of the first factor and its influence on economic activity and social development - the capture of energy is a necessary condition for existence.
Unconventional Oil in the Middle East
For many who aren’t familiar with the region, the Middle East comes across as an updated version of Lawrence’s Arabia, only with lots of oil. But this mosaic of cultures isn’t made up of only Arabs or Muslims, and most Middle East countries are neither awash with heavily armed, rather excitable citizenry… nor with black gold, which is what we’re interested in. Twenty-three countries comprise the Arab League, but only Saudi Arabia, Iraq, Kuwait, the United Arab Emirates (UAE), and Iran are major oil producers.