- Historically, the commodity complex was viewed as the Wild West of trading, where long-term positions might last a matter of minutes.
- In reality, the complex has changed as algorithms have taken over from pit traders, with more emphasis on long-term technical and fundamental reads.
- Given many key commodity markets can be viewed as weather derivatives, and the world needs food, energy, etc., long-term investors are taking a new look at the complex.
Last weekend I read a piece on Barron’s website written by Jack Hough. Mr. Hough talked about how complicated it would be to own and run a commodity fund, due in large part to understanding all the fundamentals that come into play (his example being needing “night classes in metallurgical engineering and daily NATO briefings just to form an opinion on zinc”). I understand, as it goes back to something another long-time investor, Peter Lynch, used to always talk about, “Trade what you know”. I’ve said it before and I’ll say it again, if I had a commodity fund it would focus on corn, for the same reason.
