Wednesday, March 18, 2015

Long Forgotten Asset Class


When's the last time you heard anyone speak of the "asset-class-that-shall-not-be-named"?

Tiho from ASSOL has written a very compelling post regarding commodities. Unlike property or dividend counters, I know none of you have any interest in this investment at all, which is why I'm so happily openly talking about it. None of y'all are gonna front run me. Like seriously.


With price as our main guide, we can see that at the current prices, we can go a long long way back. Think about this ridiculous fact. In 1982 at the commodities bottom of the year, prices of commodities were more expensive than it is today.

Yes, that's right. Travel back in time 33 years ago, commodities were more expensive than it is today. After adjusting for inflation, the number doesn't even make sense anymore.

Anyway, as a contrarian, sentiment is a very important tool and indicator.


Sentiments are down in the dumps, levels last seen in 2002 and 2009 which....

Omg, coincides with a market bottom? Must be a rare coincidence I guess.

I don't think that history repeats itself so obviously, but it does tend to rhyme. Tiho's preferential play is through Silver, which I think is a good suggestion. I have plenty of Silver myself and surprisingly, bought at an average price which is only slightly higher than market prices today.

To people that think commodities like gold are "barbaric relics" that produce no income streams, might I throw up some statistics to back up my case so I don't look so crazy?

Since 2001, gold has returned 11% returns annualised.

But most people only remember the 40% losses since 2011.

I think the long run paints the most accurate picture. It's hard to disupute that since 1970 the annualised return is 7%.

It's very easy to manipulate statistics to support your case, all you have to do is shift goal posts. Are you looking too near? Or am I looking too far?

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