Our attention as of late has been drawn to the advance of forestry and rubber stocks in particular International Paper (IP) and Goodyear (GT). IP and GT are up just on 100% this year so far (and by in excess of 400% since the low in March. OK we are not so consumed by the price performance of IP and GT but rather are more interested in the implications of the powerful advances. Note the performance of the “underlying” commodity of each stock. Pulp and Rubber futures have advanced dramatically over the last 8 months and are essentially trading at multi-week highs. Pulp and rubber futures are not exactly the easiest things to trade and players in this market are essentially professional hedgers rather than high school speculators…..so we take the behavior of these commodities somewhat more seriously than those commodities which can be traded via ETFs. As far as we are concerned rising rubber and pulp prices are inflationary. It is a brave man who doubts the advance in the CRB index when three of the biggest commodities in the world which are not constituents are advancing with gay abandon!
Pulp Futures (CME)
Rubber Futures (Osaka)
But wait there is more…….take a look at another commodity which is part of everyday life but rarely talked about – wool. Greasy wool futures (from the Sydney Futures exchange) are also advancing even in Aussie dollar terms!
Greasy Wool Futures (Sydney)
As far as we are concerned rising industrial commodity prices like rubber, pulp and wool prices are inflationary in nature. It is a brave man who doubts the advance in the CRB index when three of the biggest commodities in the world which are not constituents are advancing with gay abandon! And still there are folk around who figure that the world is in a deflationary environment, clearly they have not looked hard enough!
We think that everything is in place for higher commodity prices over the coming weeks (including natural gas).
Our wealth creation portfolio is up 16% since the beginning of the year with approximately 40% of the volatility of the S&P 500. This portfolio is not leveraged.
Subscribers to our paid service are privy to our portfolio, sector weightings, and trade history.
