E.D. Hart

Ag Stocks Still Outdoing Ags

I agree with you Mr. Ziglar about the fatal flaw.

Ag Stocks Still Outdoing Ags

If the NAV of a business is $45 per share, and the shares trade at NAV, and the shares lose 10%, who cares if the market has to claw back 11%?

Over time the market is a weighing machine...so that 11% is not greater than 10% as hard as that is to comprehend, its a return to a NAV. It doesn't matter.

Commodities are volatile, and Treasuries are less so. Nevertheless, treasuries are much more risky than commodities.(assuming no leverage is used) because of the environment of quantitative easing.

If you had to invest all of your net worth for ten years, and lock it away, and you could only choose T-bills, or gold--what would you choose?

I'm going with gold, and I'm not a gold bug, I'm a dollar bear. What do I care if gold is highly volatile?

Risk is about 100% that you will lose money after inflation in t-bills, in spite of their so called "safety", and low volatility. I'm guaranteed to lose my money slowly with low volatility. What a deal.

Also, what do I care if oil prices are volatile if the supply/demand fundamentals are highly favorable to higher oil prices? The risk is almost nil that oil will be cheaper in ten years, but the volatility will be all over the map. Again, volatility is not risk of loss of capital.

Ag Stocks Still Outdoing Ags

Volatility isn't risk. Unless you lock in a loss. If you take the long view you get paid a premium to own more volatile assets.

Why pay the frictional transaction costs of long/short when you could just own MOO for five years? I know, this is so last century.

There are bonds that aren't very volatile, that are virtually guaranteed to lose money after inflation. US Treasuries is what some call them. Standard deviation is fairly low, and risk is virtually 100% of losing money after inflation in say--five years.

You are almost guranteed to lose a percentage of your capital after five years in treasuries, but you have the benefit of less volatility that equites.

What a trade off!

Or you could buy JNJ or XOM and find them more volatile, but less risky at the five year time frame.

If you are willing to accept volatility, you often find greater returns--given the time arbitrage employed--at long enough time frames.