By Andrew Abraham • Jul 8th, 2009 • Category: Commodities
July 8, 2009
With all the money printed last year by governments all over the world, Is it possible that commodity trading can be a source of hedge against inflation or even hyperinflation? As I have repeatedly stated, Inflation is a wealth destroyer. Instead of being a victim of inflation which stands the definite chance of occurring with all the stimulas money floating around ( or evaporated) one could potentially ride the wave of inflation and potentially make money. Richard Rainwater made a fortune with the increase of price of crude. He was not the only one. Commodity trading advisors made tons of money buying crude because the trend was up. They simply followed the trend. Compare this to the common Joe who would complain every time he would fill up his car with gas. Look at it very simply, commodity futures traders profited by trend following and the average person lost purchasing parity. The same can be said last year with the price of wheat. Commodity trading advisors made money by buying wheat and the average Joe saw his pizza cost him more money and was somewhat of a wealth destroyer.
What would happen if the US dollar devalues? It would seem to be commodities that are based in US dollars ( which are most of them) would go up. Guess who stands to make money…and guess who stands to lose money. It is pretty clear. You have a choice to be a victim with inflation and let it destroy your net worth… or you can ride the potential trends.
Lets face it..at the end of the day…commodities are real…they can be traded. Currencies are a piece of paper ( toilet paper)…without backing of gold or silver… but a promise of value to back it and commodities are real. I would prefer the real stuff as a pose to a promise especially with all the money printed.
However , Commodities can be extremely volatile and risky. Commodities are leverage and investors can lose alot of money. There is nothing simple nor absolute.
Andy Abraham
www.myinvestorsplace.com
Futures and commodity trading involve substantial risk.People can and do lose money trading.
