How Commodity Investments Can Prevent a Personal Financial Crisis

Here’s an important point to remember about any financial crisis you should happen to encounter between now and your retirement: it’s a financial crisis, not a personal crisis. Life goes on even when money dies.

We were reminded of this point after reading a recent interview with fund manager Simon Mikhailovich of Eidesis Capital. He was asked about the ability of financial weapons of mass destruction (derivatives) to destroy the financial system. ‘They destroy money, not lives’, he replied.

‘Human history’, he adds, ‘is ultimately the history of ebbs and flows of wealth, and the ability to preserve wealth over time requires a very proactive approach. Secular changes that disrupt technologies are traditionally very, very difficult and many will lose. But some people will win.’

Conventional Commodity Investments

The conventional investment approach would be to simply buy BHP and Rio Tinto and assume that the next ten years will be like the last (as good as it gets). But that would be a mistake. Why?

The future of bulk commodity exports is higher volumes and lower prices. This doesn’t necessarily mean that ‘peak profits’ have been reached for the big resource firms. But it does mean the biggest share price gains (if not the safest) in the commodity sector probably won’t come from coal and iron ore companies.

The Daily Reckoning
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