Why Commodities Could Stabalize Your Returns

"The stock market is a device for transferring money from the impatient to the patient." – Warren Buffett

Remember to like, share and subscribe so you don’t miss any of our posts. Lets get in to it!

While everyone was losing their minds being 321312312% long equities… I would like to take a look at what the hell was going on in the commodity, bond and currency space.

I was sharing my portfolio with a friend and they said wow, you were barely hit by this mess. It is a drawdown, but it did not hit my portfolio for double digits or even 5%.

How?

I tell people all the time, if you are picking traders based on individual trades, you are missing the point.

This guy is long, he killed it! This guy shorted the pullback, he killed it!

It does not work that way. What does your portfolio look like? How big are your drawdowns? What does your portfolio look like year after year?

How do you rotate between market regimes?

Getting long currencies, bonds and precious metals was the separator.

Long Vix calls helped.

It is the reason why we look at our models and “say well bonds could be a buy?'“

As I keep saying, the most important thing that I do here is show the the economic regime on Mondays. We have been between regimes for months. Reflation, Stagflation and Disinflation.

Now we are between stagflation and disinflation. The top sectors today were utilities and energy the last time I looked at it.

Plug in.

News last night-

Summary-we will wait on the Fed to signal if it is safe to cut rates. LOL

"The stock market is never obvious. It is designed to fool most of the people, most of the time." – Jesse Livermore

The USD against the dollar is trying to hold. This is not the only thing that is going on with the market.

A weaker yen can impact commodity prices in several ways.

Increased Cost for Japanese Importers: Japan, a major importer of commodities like oil, gas, and metals, would face higher costs when the yen weakens. This is because these commodities are usually priced in U.S. dollars. As the yen's value decreases, Japanese companies have to spend more yen to purchase the same amount of commodities. (Japan does pay using Yen for certain countries)

Higher Domestic Prices in Japan: The increased cost of imported commodities can lead to higher prices for goods and services in Japan. This can contribute to inflation within the country, affecting everything from energy costs to consumer goods.

Global Demand Shifts: If the weaker yen leads to decreased demand for commodities from Japan due to higher costs, global demand dynamics might shift. This could potentially lower the global prices of certain commodities, assuming Japan's reduced consumption significantly impacts overall demand.

Competitive Advantage for Japanese Exporters: On the flip side, a weaker yen makes Japanese exports cheaper for foreign buyers. If Japanese manufacturers can lower their production costs by using cheaper domestic commodities or substitute materials, they might increase their exports. This could indirectly support the global prices of commodities if the increased production leads to higher raw material consumption.

Currency Hedging and Speculation: Investors and companies might engage in currency hedging or speculative activities to mitigate or take advantage of the yen's fluctuations. These financial activities can influence commodity prices through changes in market sentiment and investment flows.

A weaker yen generally leads to higher commodity prices in Japan, potential shifts in global demand, and various economic adjustments by businesses and investors.

The Fed was a major factor in this correction even though no one wants to talk about it.