Category Archives: Commodities

Trade keeps inflation lower

Posted on October 18, 2005 | Leave a comment

My latest quarterly investment commentary discusses how trade is effectively importing low inflation.

“Prices are only stable for imports.”

“The US imports a low inflation rate.”

Download: 2005 Q4 Investment Commentary

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Posted in Bonds, Commodities, Economics, Investment, Public Policy, Stocks, The FED

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Inflation: Labor, Commodities and Energy

Posted on August 17, 2005 | Leave a comment

There has been a lot of talk about the impact of rising energy prices on corporate profit margins. This is over-rated.

Corporate costs in America are much more heavily weighted toward labor. And it is labor cost inflation that hurts corporate profit margins most. Corporate costs are, on average, 70% labor, 5% commodities, and 3% energy. Energy and commodity prices could continue to rise – even double from here – without changing the cost structure of American businesses in a drastic way. The same dynamic is not true in many other countries, including emerging markets, where labor costs represent a smaller proportion of corporate costs. As energy and commodity prices rise, those companies may encounter much more pressure on their profit margins.

So what’s the bottom line? Energy and commodities can continue to rally without significantly damaging corporate profit margins. Furthermore, rising energy and commodity prices will give a relative advantage to the most efficient producers.

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Posted in Bonds, Commodities, Economics, Investment, Public Policy, Stocks

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Population, Productivity, and Commodities

Posted on July 1, 2005 | Leave a comment

My latest quarterly investment commentary discusses some longer term global demographic trends, and implications for investors.

Download: 2005 Q3 Investment Commentary

Recent global growth rates are unprecedented in economic history.

Economic growth at this pace will put predictable strains on resources.

Population, productivity, economic growth, and production capacity point to long-term commodity gains.

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Chinese currency policy

Posted on January 27, 2005 | Leave a comment

The import textile quota expiration may be a catalyst for political pressure on Chinese currency policy. Non-Chinese emerging markets will threaten to devalue or peg their currencies as long as the US is not punishing that type of behavior.

See also: Renminbi Valuation

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Buffet: "I don’t see how the dollar avoids going down"

Posted on January 23, 2005 | Leave a comment

Forbes reports on Warren Buffet’s currency perspective:

Heed the Sage of Omaha. Warren Buffett, whose investment acumen seems unerring, had a caveat for America: Barring “a major change” in policies, the trade deficit will further undermine the U.S. dollar.

The billionaire spoke in a Wednesday interview with CNBC, the cable TV news channel owned by General Electric (nyse: GE – news – people).

Without shifting current trade policy, “I don’t see how the dollar avoids going down,” he mused, warning of inflation risks posed by an anemic Yankee currency.

The prairie-born genius also confessed he’s having a “hard time” identifying stocks to buy, and isn’t purchasing commodities. His cash swelled to $43 billion in the third quarter, by one account, because he couldn’t find many investment opportunities.

Buffett, 74, is chairman of Berkshire Hathaway (nyse: BRKa –
news – people), the immensely successful investment vehicle that acquired a new–and immensely successful–board member in December: Microsoft (nasdaq: MSFT – news – people) Chairman Bill Gates.

The latter also enjoys a personal friendship with Buffett, and takes part in his bridge games. (see: “Gates: Buffett’s Pal Bill Elected To Berkshire’s Board“)

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Posted in Bonds, Commodities, Economics, Investment, Public Policy, The FED, The Future

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