Wednesday, June 3, 2009
Commodity Producer Shares
"Walker Todd has a sobering message for you: A tidal wave of money is headed your way, and it's going to soak the global economy in a sea of rising prices. Since last summer the US government has committed $8.1 trillion to domestic bailouts, figures Todd's American Institute for Economic Research in Great Barrington, Mass. Part of that commitment is through loan guarantees that might not be needed. ...The danger is that after the economy hits bottom, all the money sitting on the sidelines--inclduing $3.9 trillion that households have in money market mutual fund accounts and the $7.5 trillion held in interest-bearing bank accounts--will come rushing out. ... Here's a concept: Consider commodity producers with significant foreign sales as an alternative [to owning foreign stocks] that offers something of a double hedge", Richard Morais (RM) at Forbes, 25 May 2009.
I agree with RM. Disclosure: While not owning any of the instruments RM mentions in the article, I own shares in a mutual fund which uses a similar strategy.