Here's which commodities offer the most potential for growth and how to invest in them.
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00:00So given your outlook and from what you're hearing the screaming that you're hearing from the commodity market
00:07Where should?
00:09Investors put their money to work in the commodity space
00:13So based on our view we actually have a very sanguine view about what commodities will do because the Fed is gonna cut rates
00:17I think the housing market us consumers are strapped when the Fed lowers rates by where there's 50 or 100 basis points
00:23The dollar is gonna fall eventually and then commodity will get a bit of a boost but not all commodities are gonna go up
00:27So now where'd you invest?
00:28We like copper because I think copper has the tightest demand supply fundamentals where demand is weak from Chinese property model
00:35But there's a lot of strength coming from the EV market power global data centers the electrification that we talked about and supplies quite tight
00:43So we like prices here, right because you get a bit of a snapback in demand in China
00:46Boom, you know copper can rally really hard. So copper we like a lot
00:50You just got to get on the right time oil
00:51You're not a big fan of forgetting the fact that we are talking about geopolitical headlines right now and assuming no
00:57Infrastructure is taken out. There is no shortage of oil and that's been my mantra for all of this year
01:01In fact, I write in all my notes. So there's pockets of value then you have iron ore you have steel you have like
01:06Let me know aluminum
01:07So we sort of break each market down by demand supply factors and only the ones that on our very conservative demand estimates
01:14Have a tight market like supply demand balance. Those are the ones you buy and not buy all so going back to the consumer
01:19Going back to the investor. How do you know what to do? Because it's so confusing
01:23But that's that's what I find us that's what we try to do
01:25And so what is the best way to go about investing in commodities?
01:30Are you a fan of the ETF route in a you know, 6040 model?
01:36What should our portfolios look like? That's a great question
01:39So the markets love doing the 6040 because that's it bonds and equities. It's what's really one the last few years 10 years
01:45So if we have inflation coming back with Avengers
01:47Which it will at some point because if it's gonna cut rates you need to allocate a percentage
01:51Maybe 10 or 20 percent to commodities today. We had a five-year underweight of commodities
01:55So nobody knows what to do or nobody wants to look at it
01:58But in the last two weeks people are now sort of like saying how do we invest?
02:01Going back to your investment vehicles ETFs have been the only way to invest but ETFs have a massive negative carry
02:06This is what we've been saying like many years ago
02:09We had this chart on our one of our presentations night gas is up a hundred percent
02:12But the ETFs down 20% because of the negative roll index
02:15So this is why commodity markets are very complex because based on the cost of carry every month
02:19You could be losing on one and a half percent every month, even though the commodity is going up
02:23So ETFs are not the best way of doing it unless you know what you're doing
02:26You have to get the timing exactly right and part of our fund does that right?
02:29We look at the physical markets if we think the contango is in our favor. We'll go short it or the backwardation
02:34so we try to leverage that alpha for our
02:36Investors and play that but if you just like a retail investor and just buy and hold you won't always make money
02:41So ETFs are probably not the best way to really make money in commodities
02:45You have to trade the actual futures in the actual companies like we analyze the back end the front end the spreads and based on
02:51The physical arbitrage will take positions actually to get that benefit for investors
02:55Right or the equities and equities are very interesting because you can have an equity company like a gold mining stock
03:00That basically sees gold rally 30% but they don't make money because they have really high costs
03:04So if you get the equity wrong, you would still lose out right? So it's very very complicated