How And Why I Am Breaking My Rules For Commodity Trading

John Overstreet profile picture
John Overstreet
1.9K Followers

Summary

  • I present five principles for commodity trading rooted in 300 years' worth of data.
  • The long-term principles point to depressed commodity returns throughout the remainder of the decade.
  • Most of the short-term principles point to negative returns over one- to three-year periods.
  • But this momentum within this context of late-stage equity supercycles and systemic risk suggests taking out insurance against extreme inflationary outcomes.
  • Because commodity prices are likely to see extreme reversals, commodity positions should be small and be overweight gold.

Oil storage fire. The tank farm is burning, black smoke is combu

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When an asset class is moving 5-10% a day in a single direction and the terminal point is demand destruction - and "demand destruction" is likely a euphemism for "general market implosion" - what rating ought one give that class? Buy, sell, or hold?

This article was written by

John Overstreet profile picture
1.9K Followers
I study markets from a long-term historical view, especially the interaction between yields and inflation across all major asset classes. I have a bachelor's degree in political science, history, and intelligence analysis, and a master's in political theory. My Seeking Alpha articles have been mentioned in Marketwatch and Real Clear Markets. I have lived in Asia for twenty years.

Disclosure: I/we have a beneficial long position in the shares of CMDY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long QID, SSG, and SH.

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