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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (57535)7/13/2016 9:12:21 PM
From: Graham Osborn  Read Replies (1) of 78940
 
Hi Spekulatius, I don't do long-short, only directional. Oftentimes there are different ways to view a given portfolio, and if I happen to hold a portfolio that is dollar-neutral, it will be because I am bullish on the commodity position (I'm looking at Brent again) for its own distinct set of reasons. If a position doesn't make sense directionally I won't consider it. So the convolution you cite really doesn't trouble my thinking. As you probably realize I haven't bought commodities yet and when/ if I do it will be using the same type of pan-analysis that I always use.

When you speak of a strong USD you are speaking relatively - this is conventional. When I speak of the strength of a currency I speak of YoY cost of living. If you were to adjust CPI to a truly comparable YoY basis you would find most currencies have lost a large amount (with gold as the metric) of real purchasing power over the past 15 years.

You are right to have concerns about China. Their stock market has crashed and their corporate and mortgage markets are highly leveraged. However, the Brent/ Gold index is at its lowest level since the 1970s and only touched that level once or twice in the 1900s. Whatever China's troubles may be, they will still be the world's largest contributor to new energy demand for many years to come. In 2015 China had less than 150 vehicles per 1000 people vs 800+ in the US. There is still tremendous capacity for new energy consumption in the automotive industry alone. So no, as far as China goes I don't share your pessimism. The oversupply is an issue but the producers are already getting clobbered. In gold-adjusted terms oil prices began to collapse much earlier than is generally believed.
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