E.D. Hart

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  • Which Inflation Is It Anyway?
    Globalization makes things different this time.

    With China, Japan, Middle East countries increasingly taking their dollars and putting them to use in other asset classes, including commodities, we will see inflation here in the US, while wages fall and unemployment rise.

    It will be the worst of all possible worlds for the US. A weaker dollar, and higher unemployment, as well as stagnant wages.

    The experts will tell us that inflation should be falling because wages aren't rising--so don't worry.


    Foreign governments and individuals control HALF of the total dollars in circulation, a little more than 7 trillion.

    These dollars are starting to come home to roost--driving up inflation here. It is the unwinding of the exporting of inflation that we have been so successful at the last three decades.

    Credit will continue to contract, and inflation will continue to accelerate--and people will shake their heads and wonder "why?"
    Aug 01 15:12 pm |Rating: 0 0 |Link to Comment |View article
  • Craig Israelsen: Commodities Provide Good Diversification
    A timely and important article. By the time that this information becomes widely known, believed, and practiced, the commodity bull will be over.

    Studies show that investors are slow to adapt to changing environments and new paradigms that conflict with what they think they know.

    People that include a percentage of their portfolio to commodities will be better off on average over the next decade. Great article, thanks.
    Apr 23 15:30 pm |Rating: 0 0 |Link to Comment |View article
  • Who's to Blame for the Commodities Boom?
    The authors article is dead on. People are protecting their wealth by buying the commodities boom.

    What is a speculating anyway?

    Someone who thinks they know where the price is going to be at a point of time in the future. It has always been thus.

    I own 80% of my portfolio in long commodity based equities, and I'm outperforming the market, plus a few ETF's that are long silver and gold.

    Is this specualtion? Of course it is.

    Do I contribute to the problem? Incrementally, yes.

    Is it rational, right, and legitimate to do so? Well according to some yes, others no.

    The US government, and the current neoconservative cabal is anticonservative in the cpaital markets in ways that no other group has been in American history.

    Without commodities in my portfolio, I believe strongly that great wave of inflation currently hitting our economy would prevent me from ever retiring, or preserving my wealth.

    If the worlds average Joe is the one bearing the cost, well, diversify your portfolio friend.

    Unhappy about the price of gas? Buy oil/gas stocks with good growth profiles: DVN, CNQ, and PWE are a few of my favorites.
    Apr 16 15:09 pm |Rating: 0 0 |Link to Comment |View article
  • Fed Easing: No Free Lunch for Dollar, Oil and Commodities
    Bravo John Egan. To a certain extent you get the government you deserve...but the current government is acting above the law, above the constitution, and certainly above the wishes of the people.
    Apr 13 17:56 pm |Rating: 0 0 |Link to Comment |View article
  • Hard Assets Investing: An Interview With Brad Zigler
    This seems to be a balanced article. I have read Swenson's book and the Ibbotson study and they are well researched, lucid documents.

    One problem--I don't agree with Swenson about one little item. As a small investor (non-institutional) an individual can participate although not replicate what Swenson does in the real asset space.

    It is through ETF's that the average retail investor has unprecedented access.

    Sure, you cant replicate the complicated trades of the big traders, but so what?

    If there is a major commodity bull market destined to last 5-10 more years--which seems very likely--it makes sense to buy and hold commodity ETFs (CUT, SLV, DBA for example) until money supply growth and inflation moderate.

    Silver, for example likely has significant upside from here, as does natural gas--two undervalued commodities right now.

    After 25 years of falling inflation and interest rates, it appears likely we are headed to a stagflationary environment. Such an environment favors commodities.

    It is wise to allocate a portion of your overall portfolio to some commodity base, as bonds and stocks trade sideways.
    Apr 07 16:32 pm |Rating: 0 0 |Link to Comment |View article
  • Barron's Misses the Other Side of the Commodities Story
    SEE: www.financialpost.com/...
    Apr 01 22:05 pm |Rating: 0 0 |Link to Comment |View article
  • Barron's Misses the Other Side of the Commodities Story
    According to the FTarticle: " Its new index of non-exchange traded metals rose by 598 per cent from January 2002 to early this year. During the same time, an index of exchange traded metals rose by 246 per cent." Non exchange traded metals are still hitting highs.
    Looks like more than speculation to me.
    Apr 01 13:26 pm |Rating: 0 0 |Link to Comment |View article
  • Why I Don't Own Commodities
    Oh, I cant help myself, but I have to comment:

    "The hubris of rich liberals who..." can only be outdone by the hubris of even richer neo-conservatives who wage wars for "freedom" and "democracy" based not on facts, or the wisdom of generals with a lifetime experience in the arts of war, but on faith, ideology, and gut instincts...and send 4000 Americans to their undeserved deaths.

    (Please don't remind me they volunteered to serve--they didn't volunteer to serve under false pretenses, lies, manufactured evidence, and propaganda/misinformat... campaign).

    But its just a thought, probably has nothing to do with commodities or inflation...or oil, or future wars that will effect these same trends....
    Mar 27 16:50 pm |Rating: 0 0 |Link to Comment |View article
  • Why I Don't Own Commodities
    Subtract emotion and you have three pillars of the commodity investing hypothesis. Commodities will have ups and downs, but continue to move in an upward trend because:

    1) ETF's globally are taking larger and larger share of commodities out of the spot market--in some cases ETF demand is the largest open long category in the COT reports. This is institutional money, buy and hold, hedge funds that don't want exposure to futures, sovereign wealth funds, and managed institutional accounts. In contrast to the sub-prime fiasco, where leverage made the bubble, most of these ETF commodity investments are unleveraged, and not subject to interest rates, margin calls, or collapse in panic selling.

    I hate to say it, but I'm going to: "this time it its different" because it really is different--we've never had a commodity market with the new demand made available by ETF's. see: www.investmentrarities...
    Ted Butler archives "Still A Great Trade" March 11, 2008 Letter.


    2) Rising demand from BRIC's, and consequent supply/demand imbalance. Saudi oil is not going to raise spare capacity going forward, neither is Canadian Oil sands. Supply technically isn't the problem but daily production growth. Petrpobras discovered a big feild that is a 7-8 years away from production, same with Venez. Oil sands, same with Devons big find with deep Water Gulf fields...
    many years away, and not enough to keep pace with consumption.
    It is different this time (thats twice) because we have lost meaningful spare capacity in oil especially, but other commodities as well.

    Moreover, higher prices are not necessarily in feedback with lower demand. China subsidizes gasoline prices, keeping them artificially low, at loss of billions to PTR.

    3) Inflation, inflation, inflation---by definition the growth in the money supply at a rate that surpasses the economic growth and trade growth. Thats why you see commodities rising in all currencies--because all countries (some worse than others) are engaged in competitive currency devaluation. In commodities and currencies as in Physics, there is no non-arbitrary frame of reference (with the exception of the speed of light) and so, there is no standard currency. The closest we get to a non-arbitrary currency is a basket of commodities. The markets are telling us a strong message that all currencies are being inflated and losing value--that is the message of commodities.
    Mar 27 16:40 pm |Rating: 0 0 |Link to Comment |View article
  • Why I Don't Own Commodities
    Why not invest in commodities...I didn't understand the authors reasons...did he state any?

    Two relatives of mine, in their 50s and 60s sent me savings bonds (series ee) when my daughter was born three years ago. This is well meaning but foolish. I am planning on taking the bonds, cashing them, and buying Apache oil.

    Which would you rather fund your son or daughters education with--paper debt of a bloated and undisciplined nation---or the single most actively traded commodity on earth?

    After the depression and into the 50s, people stayed invested with bonds because stocks were "too risky". This in spite of the recovery in the markets. There was no doubt in their minds that bonds were safe, and less risky.

    They wrote articles like, "Why I dont invest in Stocks"--everyone knew that bonds were the way to go and protect your wealth in the deflationary times, and next depression.

    Now, on the heels of the worst bear market in commodities possibly ever (1980 to 2002) the commodity market has been on fire.

    But old beliefs die hard. Stocks must be the way to go, and every year people express amazement that the commodity bull still has legs. Surprise of what great heights gold, oil has achieved, and utter skepticism that commodities will go higher. There is always supreme confidence in those that fight the last war, that they know the way.

    "There must be a bubble. It must be hot money chasing too few goods. It cant last because it doesn't fit my mental model. My confidence tells me so." Ranks right up there with "I'm the decider".
    Mar 27 01:00 am |Rating: 0 0 |Link to Comment |View article
  • Commodities: Is It All Over?
    A few ideas to consider:
    1) Most major industrial countries are growing their money supply at between 12-21% per year. This is not only a US dollar story.

    2) Growth in money supply at a higher rate than productivity and economic growth is inflationary.

    3) We are in a rising inflationary environment that is global in scale, and likely to continue for ten to fifteen years.

    4) Commodities are a proven asset class in a rising inflationary environment. (but tend to do poorly in a stable or falling inflationary environment)

    5) The average of assets allocated to commodities in major accounts of high net worth individuals (according to a recent survey) was 3%.

    6) The asset allocation recommendation by a recent (2006) PIMCO study (analysis done by Ibbotson and Associates) recommends between 12-29% of assets in a portfolio should be allocated to commodities for minimizing risk, and maximizing return.

    7) Assets allocated to commodities in portfolios invested globally are likely far from 12%, and much closer to 3%. Most people I talk to have 0% allocated to commodities.

    8) The past is not the future. The future is not the past. We are over and through the tipping point and a tectonic change has occurred that has changed the economic landscape. People worldwide will be experiencing higher inflation going forward--and they will seek protection with commodities. 1980-2002 was a bad time to be a gold investor, in general due to stable or falling inflation. Going forward, its a different story for commodities.

    9) The popular press has the story wrong--they report "the bursting of the commodity bubble", but completely ignore the change in economic fundamentals--which drive the investment returns. The story should be: "Correction in commodities presents investment opportunity"

    10) Think for yourself.
    Mar 21 14:12 pm |Rating: 0 0 |Link to Comment |View article

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