Commodities Made a Round Trip in 2008

Quite a staggering table via Bespoke Investment's blog on the performance of commodities in 2008. What is so amazing is halfway through the year, so many of these commodities were enjoying the performance of a lifetime, and within a few months many "enjoyed" the downfall of a lifetime. We caught much of the ride up, and 6-8 very painful weeks on the way down as the hedge fund delevering game began in earnest. The "round trip" when you calculate start of year to 52 week high and then drop from 52 week high is simply awe inspiring.


Lesson's learned here

1. Don't ever believe hedge funds are not impacting markets to a huge degree
2. "Group think" is alive and well in the institutional investment community
3. When thesis ends, be ready to run for the door and try to squeeze out before the rest of the rats

Again, I'll point to a copper rebound as the most telling tale for any true global economic recovery. I still like the agriculture commodities the most from a long term perspective. Gold and silver has pulled back from a recent surge and a few names look interesting. (please note silver is relatively economically sensitive versus gold due to industrial use)

I always liked

Silver Wheaton (SLW)

over the years because it benefits from metal prices but without the mining risk; I never knew there was a parallel on the gold side, but I have been reading about

Royal Gold (RGLD)

the past few weeks which seems to be a similar business model - the chart is hot hot hot.

As long as Silver Wheaton holds $5 it should be in good shape....

This is about as good of a chart as you can ask for... once RGLD broke $40 (October and December double top) it was off to the races.... I'd like to get some on a pullback to the 20 day moving average

Disclosure: No positions

Comments

[Tom Konrad:]

Another parallel for Silver wheaton on the Gold side used to be Vista Gold (VGZ)... they may still be, but I have not followed them for a few years. Their strategy was to own projects, and sell them on to other companies as prices rose.

2008 Dec 28 11:55 PM

[Liverdiefree:]

And you could look at Gold Wheaton, GLWGF on the OTC market or GLW on Toronto.

2008 Dec 29 09:53 PM

[Greg Pinelli:]

SLW..unique structure..great longer term hold. VERY tiny overhead because it buys its product from miners for upfront cash and reaps rewards when the silver price advances.....
CDE is risky..but has enormous upside potential and a substantial NAV to price....

2008 Dec 30 09:44 PM

[NOWHEREMAN:]

That's not what you said about CDE in your Article dated March 2nd, 2008: "The only-and by far- the best equity I would suggest is Coeur D'Alene(CDE)".

You go on to say "My minimum take on CDE's Net Asset Value (NAV) is $7.00 -and that is conservative.

How did the Best go to risky?

2008 Dec 30 10:38 PM

[NOWHEREMAN:]

At that time you also mentioned that you owned CDE. But you talk as if you do not "CDE is risky.

Did you sell it before it lost over 90% of its value.

2008 Dec 30 10:45 PM