Forgotten Commodities

This is the result of a weekend project. My goal was to take an unbiased look at commodities to determine what, if anything, is underpriced. The method was to remove the U.S. dollar as the basis for these prices by looking at ratios with respect to many other commodities, the Dow Jones, and a nominal U.S. real estate index. Data was compiled from the CRB Commodity Yearbook, Wikinvest, and a Shiller home price study found here:
http://www.econ.yale.edu/~shiller/data.htm

Link to the charts shown in this study:
http://ivandq.com/CommodityStudy.pptx
(old powerpoint... change URL to CommoditiesStudy.ppt)

Data is through August 2011. Earliest data available for each commodity (sorry the years don't show up in the video too well, it's the later of the two for each pairing):
Wheat, Corn, Sugar, Gold: 1901
Cattle: 1904
Silver, Copper: 1910
Soybeans: 1913
Cotton: 1915
Petroleum: 1945
Coffee: 1948
Real Estate: 1953


No, I'm not a business student, never was, and probably never will be, but I do acknowledge the effect markets have on much of our lives.

My blog:
http://caps.fool.com/Blogs/ViewBlog.aspx?t=01005656611803141124

One potential investment vehicle for buying into agricultural commodities is ticker RJA, but note that bank insolvency risk is involved.

Category:

News & Politics

Tags:

• commodities
• agriculture
• underpriced
• bargain
• invest
• market
• futures
• jim
• rogers
• peter
• schiff
• marc
• faber
• mike
• maloney
• economy
• global
• crisis
• shortage
• inflation
• hyperinflation

[tcorourke2007]

Thanks for your effort, this scratches an itch I've had for awhile.

BTW I tracked you from your comment regarding the Black Swan of Cairo on wepollock's vid. I had just read it today myself, (thanks Mr. Bass).

[ILLct]

@tcorourke2007 I also watched that hour long Kyle Bass video. I had to stop it several times to calculate the meaning of what he was saying about interest rates and revenues, but it was worth the time spent watching.

[kileer7]

Wow! Great job.

[ILLct]

@kileer7 Thanks. 

[wepollock]

Cost of producing agricultural commodities is above the price of producing them. Its part of the government program subsidizing farmers. They used to be paid not to grow. Now (circa a change in 1973) they are being paid to produce as much as possible.

[ILLct]

@wepollock I wonder, does the expense of war cause the subsidies to be discontinued, which leads to the abrupt agriculture shortage, and rising prices even in terms of gold? Or does the shortage and starvation happen first and cause the war? I'm thinking the former happens more often than the latter.

[rai1stein]

Thanks for sharing - good view - interesting ....