Commodity markets may seem like a safe bet during a recession, but history tells a different story.
Transcript:
CARLEY GARNER: If there truly is going to be a recession, we’re probably in a situation where there’s nowhere to hide. And unfortunately, that’s just how it works. Commodities have had a magnificent run over the last three years. Commodities are boom and bust markets. Most people don’t like to hear this, but the reality about commodities is they go up faster than they go down, but they go down more than they go up. They’re kind of in perpetual bear markets most of the time, particularly if you’re looking at renewable commodities like agricultural commodities, corn, soybeans, wheat. And the reality is, because we become more efficient at producing these goods over time. And that’s because of technology.
We’ve seen it with crude oil as well, if you remember, crude oil in 2007, 2008 was in the $150 a barrel range. And we haven’t seen those prices again. And that’s because we started fracking and that kind of changed the landscape. So anytime you see boom prices like we’ve seen in a few commodities over the last couple of years, supply comes to the market, usually through technology. And I think that it’ll continue to put Downward pressure. So if you’re going to play in the commodity space, it’s going to be hard to find something to play on the upside. But the goal is to it’s a traders market, not necessarily an investment market. So the biggest mistake people make in commodities is they look at it as an investment. They want to put money there and park it for several years. That’s not how commodities work. Look for markets that have been beaten up and maybe four to six month time horizon, not three to four years.
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