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Strategies & Market Trends : The Art of Investing

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Dec 5 4:00 PM EST

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To: George Castilarin who wrote (39)	9/3/1998 2:24:00 PM
From: Sun Tzu	Read Replies (1) of 10659

You may be right, but I tend to disagree. As I've said, 40% of the world is in depression. Unfortunately for the commodity guys, that 40% is responsible for both production and consumption of most of the base material as well as gold. This means that in order to survive they will do the only logical thing; produce as much as they can and consume as little as they can. This should put tremendous pressure on the commodities for some time to come. When commodities go into a bear market, their price always falls below their production cost. This continues until either demand picks up (unlikely at the moment) or until enough producers disappear to bring the production capacity in line with the demand. There is some evidence of this in the shut down of a few mines in Latin America and the credit crunch in Asia has forced some shut downs as well. But I have not seen the L shape in commodity prices which signals the bottom. As for gold, I don't personally subscribe to "Gold is store house of value" thesis. At the moment the world seems to be set on the belief that the U.S. Dollar and the German DMark are the new store houses of value. That South Africa and Russia are both serious economic termoil (which should push them to sell gold agressivly) and that the central banks (even the Swiss) are expected to sell even more gold, makes me think gold is not going to rebound any time soon. When the dust settles down, I think ABX is the place to be in gold. Now can we hear from someone on oil service sector. Since I can't play the oil futures (which I think may the most rewarding commodity) I'd like to hear about which companies will come out winners in the oil sector. Thanks Sun Tzu

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