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John Makes the Case Again
on September 19, 2010
Just as John's first book, Shell Shocked, laid out a compelling case for "buying all the Canada you can get," this book lays out the case for commodities. "Commodities" and "commodity trading" are intimidating terms to many investors, as are "futures" and "futures contracts." That's largely because American consumers are raised on the DOW and a few of the ancillary indices. A perfect example of that myopia is how people are presently yelling about the "lost decade" that investors have had from 2000-2010, conveniently leaving out the benefits of dividend reinvestment and the possiblity that individual investors and equity fund managers could have overweighted on Apple Inc. stock during the decade. Regardless, many individual investors buy the hype, panic, and make emotional decisions like putting lots of money into a savings account earning .05%.
It is in this sort of a climate that John helpfully points out that commodities are:
* not intimidating
* easy to understand
* a smart investment for our times
Why are commodities not intimidating? Because they're all around us. They're the things we use every day, like the gasoline that goes into our cars or the wheat and flour that we find in our bread. Sure, the price of gold gets all the headlines--it's sort of like the DOW of commodities--but there are so many more places that investors can put their money to work in commodities.
Commodities are easy to understand because they're being used or consumed all the time. Check out the shipments coming into a restaurant or a supermarket on any given day and you'll see commodities coming in that have been purchased and are about to be put to use by the restaurant or supermarket.
Why are commodities a smart investment for our times? Because people need them now and will need them more as economies grow. As John mentioned during his CNBC appearance over the summer, only 30% of China's population participates in the nation's economy. It's going to take more roads, bridges, buildings, fuel, food and other commodity-based material to bring that remaining 70% into the fold. That increasing demand, of course, means rising prices for relavant commodities.
John's book touches on myriad ways that commodities can, should, and will be used in the future. The Little Book of Commodity Investing is an easy read that teaches the reader why natural gas prices are more volatile than oil prices, that Brazil is actually the orange juice capitol of the world and many other fun facts. For that reason alone, it's a wonderful read. But John also gives the reader a plenty of ammunition regarding WHY he or she should invest in a given commodity. I'm not saying this book alone will make Joe Investor cash out his brokerage account and buy a nickel mine in Sudbury, Ontario, and that's a good thing. But it will make Joe Investor a lot more comfortable thinking about commodity investing and want to learn more.