Sunday, May 3, 2009

Agriculture Vs. Precious metals

Commodity bulls tend to unfold in two phases. Whatever under performs during the first phase tends to lead during the second phase.

During the commodity bull of the 70's agriculture led during the first part of the bull. In the second phase it was energy and precious metals.

This commodity bull was the opposite with energy and base metals leading during the first phase. Now it's agriculture and precious metals turn.

The question that many have asked is why I'm not invested heavily in agriculture if this sector should also outperform.

The reason I'm concentrating my investments in precious metals is because we are never going to see the public pile into the agriculture sector. It takes the public moving into a sector to create a bubble. That's what I'm looking for is to ride a bubble to it's top.

It's simply too hard for the average American to buy wheat futures. However it's very easy for anybody to buy gold and silver.

During the last bull market for precious metals gold rose by a factor of 24.28. A similar move this time would take gold to $6214.

To make that kind of bubble type move one needs to be in an asset that is easily acquired by the public. Gold and silver are that asset class.