Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Will Drive Commodities Higher for Years?

Commodities / Investing 2011 Sep 02, 2011 - 02:53 AM GMT

By: Eric_McWhinnie


Intelligent Commodity Indexing is a new book that explains how investors can intelligently use commodities in a portfolio in order to diversify risk and protect against inflation.  Readers will find the book filled with decades of experience from its authors.

The authors include PIMCO executive vice president and real return manager Robert Greer.  Prior to joining PIMCO in 2002, he was with JP Morgan Chase (NYSE:JPM) and Daiwa Securities as a developer and product manager of commodity indexes.  Mr. Greer has more than 28 years of investment experience and invented the first commodity index in 1978.  Mihir Worah and Nicholas Johnson are also authors on the book as well.  Mr Worah and Mr Johnson co manage all of PIMCO’s commodity funds including the $26 billion Pimco Commodity Real Return Strategy Fund. Mr. Worah is a managing director, a portfolio manager, and head of Real Return portfolio management team for PIMCO.  He has nine years of investment experience and holds a Ph.D in theoretical physics from the University of Chicago.  Mr. Johnson, is a senior vice president and a portfolio manager focusing on commodities for PIMCO.  Prior to joining PIMCO in 2004, he worked with NASA’s Jet Propulsion Laboratory, developing Mars missions.  He has seven years of investment experience and holds a master’s degree in financial mathematics from the University of Chicago and an undergraduate degree from California Polytechnic State University.

I recently had the pleasure to speak with Mr. Greer and Worah about the new book and the current economic outlook regarding commodities.

Eric McWhinnie:  Could you please explain your book and how it relates to commodities?

Mr. Greer:  Sure, commodities are moving more into the mainstream as an asset class.  With the recent volatility in the financial markets, investors are beginning to realize the benefits of using commodities in a portfolio to hedge against risk and inflation.  The new book provides knowledge and a more intelligent way of getting value.  It also explains the structure of indexes to readers and investors and how to invest in commodities.

Mr. Worah:  I agree with Robert on his statement that commodities are a good way to hedge against inflation, and would like to add that commodities also diversify an investors portfolio. What we are trying to accomplish is share with readers our decade of experience in managing commodity index portfolio in an ‘intelligent’ rather than in a purely ‘passive’ way. Passively investing in a commodity index has several drawbacks, and we point these out, as well as suggest ways to add value without taking a lot of additional risk.

Eric McWhinnie:  What are the current trends taking place in commodities?

Mr. Worah:  Commodities (NYSE:RJI) have two prevailing trends.  First, central banks in developed markets are using policies to fight deflation.  For example, the Federal Reserve just announced the continuance of low interest rates until 2013.  This makes all real assets look very attractive.  The second trend, which is a crosswind for commodities, is a slowing global economy.  For example, Eurozone issues, fiscal unemployment in the U.S., and countries such as China are trying to slow their economy.

Eric McWhinnie:  What is your outlook for commodities?

Mr. Worah:  Demand is still going to be the driving force behind commodities.  However, in the next six months, we expect to see volatility continue.  Over the next 3-6 months, we are bias towards a slowdown and expect to see easing in prices.  In the long term, 3-5 years, China (NYSE:FXI) and India (NYSE:INP) will be growing markets that will be dealing with decreasing supply.  We expect developed market central banks to continue easing, which will provide support and higher prices for commodities.

Mr. Greer:  We are also expecting volatility to be seen with bonds and stocks.  One of the benefits investors will find with commodity indexing investing, is that when bonds or stocks zig, commodities will often zag the other way.  Commodities are a good way to diversify a portfolio.

Eric McWhinnie:  What are you expecting from the Federal Reserve?

Mr. Worah:  With the highly unconventional low interest rates for another two years, the hurdle for QE3 is high.  Instead, we expect to see a playbook laid out from the Fed with specific steps to stimulate the economy.  These steps may include: Selling short-term instruments and buying long-term maturity bonds (Operation Twist), a broader purchase of bonds amounting to $1 trillion, reducing mortgage rates by mandate, or buying other risky assets.  Nothing will happen fast in regards to the next steps from the Fed.

Mr. Greer:  Long-term, the story is unchanged.  We don’t expect to see QE3 in the near future, but we expect to see a playbook as Mihir described.  The Fed is determined to fight deflation, and more steps will come from the Fed.

Robert Greer and Mihir Worah are authors of the new book Intelligent Commodity Indexing: A Profitable Guide to Investing in Commodities.

Disclosure: Long AGQ.

By Eric_McWhinnie

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


17 Sep 11, 19:00
Gold with Yield

Farmland prices have a high positive correlation to inflation. So much so that farmland has been described as “gold with yield”. Some direct farmland investment funds:

Agrifirma - Brazil (Jim Rogers backed)

Agcapita Farmland Fund - Canada

Chess Partners - US

Emergent Partners - Africa

Landkom - Ukraine

Hancock Agriculture Investment Group - US

Post Comment

Only logged in users are allowed to post comments. Register/ Log in