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Buzz & Banter



This morning Toddo mentioned the energy and metals sectors as places where long-term investors might want to do some extra homework. I wanted to throw out a couple of comments related to these areas as well, grouped under the larger raw materials banner.

Raw materials continues to be dismissed as a plausible alternative to stocks and bonds by many, many intelligent people. A cursory search on the Internet will reveal no shortage of opinions. The expectations that commodities and raw materials may outperform stocks over the long run are, in fact, ludicrous.

Also interesting is that over the past couple of years when gold dramatically outperformed equities, I noticed a tendency for widely accepted conventional beliefs to emerge that actually had very little basis in reality. These beliefs typically cite cursory statistics related to the performance of metals versus equities and bonds in inflationary times, deflationary times, and periods of stagflation, and contain small enough kernels of truth that they are accepted by most investors prima facie without further consideration.

Well, when anyone suggests that a particular investment is ludicrous I think that it merits further investigation. I also encourage you to avoid accepting conventionally held beliefs as they do not always hold up to deeper scrutiny.

Lately I've been doing some more substantial technical work on raw materials and hope to be able to share some of it with you later this year. In the meantime, let me share another Haruki Murakami quote with you that I think fits here. This one is from Norwegian Wood : "If you read what everyone else reads, you'll think what everyone else thinks."

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No positions in stocks mentioned.

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