The inflation data being released by the government is not worth the paper its written own. All one needs to do is look at how gold and the dollar are reacting to rumors that the fed may halt its rate hikes. These two indicators are telling us that real inflation is alive and well.
If you don't believe gold and the dollar, take a look at the stock of the Chicago Mercantile Exchange Holdings Inc.,(CME). Today, the CME reported a 24% increase in Q4 revenues. The stock is up +$15.35 or +3.8% at $419.35 per share. So, tell me, whose lying, commodity prices or the inflation numbers?
In past years, higher commodity prices have always been cyclical. Not now. The movement in commodity prices are now secular being lead by demand in China and around the world.
Since the economies of the U.S. and China are ripe for a pullback in the months ahead, one cannot ignore the longer term trend in demand, and the poor response to suppy.
Jim Rogers (Book: Hot Commodities) believes we are in a 20 year bull market in commodities. For investors looking for a way to gain exposure to the group, I would look at the Rydex Commodities Fund (RYMBX).
The best way to buy this fund is in thirds. Buy one third now, and add to your position on pullbacks of 5-10%.
The Rydex Commodities Fund seeks to track the Goldman Sachs Commodity Index. As of December 31, 2005, the fund had a 75.68% weighting in energy, 7.16% in industrial metals, 1.95% in precious metals, 10.25% in agriculture, and 4.95% in livestock.
Comments (1)
The Rydex commodities fund is RYMBX. They aren't dealing in commodities directly, of course or even stocks of commodity companies. They use swap contracts that subject the fund to "Refco risk" or counterparty risk. My ten foot pole is at the cleaners.
Posted by Max | January 31, 2006 5:58 PM
Posted on January 31, 2006 17:58