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Darren and Ruth Johnston (Semi-retired entrepreneurs) (N Wales) (2011)

Commodity prices and Russia

Posted by jdavis on December 24, 2014

Commodities are the things we grow or extract from nature eg corn, oil, gold, copper etc

In an inflationary world, obviously, rising commodity prices indicate inflation and falling prices, deflation.

In the prior entry of deflation here we showed how the Oil price has collapsed this year.

The following is the index of commodity prices:

Commodity prices are back to 2008/09 levels - when, you will recall, we were in the throes of the biggest economic and financial collapse in history.

It seems to us the prices are ridiculously cheap and isn't it curious how nowhere in the media is ANYONE talking about the investment opporunities, deriving.

The price of oil may have gone from too high (supported by OPEC and by Saudi Arabia in particular) to too low (depressed by negative market psychology).  It seems to us with regard to the latter that the price fell too far for some market participants to maintain their equanimity.   At $120, I picture them saying, “I’ll buy like mad if it ever gets back to $100.”  Because of the way investor psychology works, at $90 they may say, “If it falls to $70, I’ll give serious thought to buying.” But at $60 the tendency is to say, “It’s a falling knife and there’s no way to know where it’ll stop; I wouldn’t touch it at any price.”

It feels much better to buy assets while they’re rising.  But it’s usually smarter to buy after they’ve fallen for a while.

Baron Rothschild, an 18th century member of the Rothschild banking family, is credited with saying that "The time to buy is when there's blood in the streets."

Well, there's blood in the rivers of oil and in Russia, whose stock market is oil and gas, largely.

As you see Russian share prices (in the 8th or 9th largest economy in the World) have absolutely collapsed.

They, like Oil, are back to 2009 levels - which were extremely low, then.  So why not now?

Why is no-one talking about Russian stocks as buys?  Because investors seem to only want to buy expensive assets.  Too funny.

And detrimental to wealth creation/preservation.

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