The price of a commodity will never go to zero. When you invest in commodities futures, you're not buying a piece of paper that says you own an intangible piece of company that can go bankrupt.
Sentiment: NEGATIVE
When you look at a commodities market you need hedgers and speculators. If you don't have one, you don't have a market. That's how it works.
You can no longer buy commodities at Merrill Lynch. My guess is many analysts and even executives are too young to know how profitable a hot commodities market can be. They will soon.
Any commodity that sees its price going higher will see new mines opening up. When the supply increases, the prices soften. When prices fall, some mines with higher production costs will shut down as they become unviable.
Historically, there has been a bull market in commodities every 20 or 30 years.
If I'm a commodity, it wouldn't be a wise idea to buy stock in me - although, in the long run, maybe I'm a slow growth investment.
Life can be lived at a remove. You trade in futures, and then you trade in derivatives of futures. Banks make more money trading derivatives than they do trading actual commodities.
If global oil prices or commodity prices are high, then it is bound to create inflation. So, we should not be too worried if the inflation is created by global commodity prices. When they come down, inflation will automatically come down.
A commodity producer should be comfortable being exposed to prices.
Oil futures were originally created to give heating oil dealers, gas retailers, aviation companies and other businesses a method of hedging against adverse price changes. Instead, they've become just another Wall Street plaything.
Although oil is a commodity, it's still not a commodity like coffee, which, thank God, we will have with us always. At some point the oil will run out.
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