As one watches the day to day advice on CNBC, you will notice that we are inundated with stock advice. Bank of America this, Goldman Sachs that, and of course Apple Computer will run the world shortly. But when it comes to commodities, they are rarely explored with the exception of gold, copper and oil.
Granted, there have been some great single stock performances over the last 12 months, but as a whole the S&P has grossly underperformed most commodities. The S&P for the 12 month look back is up 8.3%. Also worthwhile mentioning is that this brings us into territory where we are trading at 21.57 times earnings with a dividend yield of 1.87%. Although there is always room for more stock upside, this is not a “cheap” market as we are told daily on CNBC.
Now, let’s look at some commodities for that same period. Palladium is up 73% and Cotton is up 55%. In fact 21 different commodities have outperformed the S&P, and 17 of them are up 0ver 20% for the 12 month period. Natural gas and cocoa are the only commodities that are tracked here that are down over the last 12 months.
I don’t know what fools the Government takes us for, but they want us to believe that there is no inflation. The most recent inflation numbers posted by Robert Schiller reflect inflation running at 1.4%.
I have a question. Can we really expect a new cotton shirt to be up only 1.4% when cotton has gone up 55% in the last year? Will I still pay the same for breakfast when Pork bellies and OJ rose over 25%, and coffee over 38%? Can I expect my grocery bills to go up only 1.4% when wheat and oats went up over 30% and corn is up over 45%, Cattle up over 19% and hogs up over 29%? I doubt it.
I don’t think there is much question that commodities have been the place to be over the last year, and my guess is that they will be the place to be for some time to come. I think that if we are truly in a recovery then commodity prices will reflect the recovery and lead the way out. On the other hand, if this is a false alarm recovery boosted by the government QE1 and potential QE2 aid, then you will want to own “real things” and not paper or fiat currency.
So, wake up and smell the coffee as they say.