A 2021 arbitrage
January 7th, 2020
1 minute read
2020
2020 was an arbitrage year. The markets declined, while growth was at zero. The markets were needlessly negative, so they quickly recovered, back to zero. That opportunity is over & growth is still at zero. But there is still an arbitrage available to investors. That arbitrage is commodities, nickel, tin & palm oil & it’s a bigger opportunity than 2020.
Ten years
Commodity prices have been in a more than ten years decline, not just zero growth, but negative growth. But now suddenly, the commodity prices are going back to & above where they were ten years ago. Just this week, the palm oil price has recovered back to USD1,000 which is the same as it was in 2008. It’s happened fast!
Rupiah inflation
Because the rupiah dollar exchange rate was below 10,000 in 2008, rupiah prices today at 14,000 are quite far above where they were in 2008. That’s just like the JCI index which was at 3,000 in 2008 & is now double that level at 6,000. The arbitrage is the commodity share prices are still below where they were in 2008.
The three stocks
We’ve indexed the performance of the JCI index & the three commodity benchmarks, INCO, TINS & AALI. Starting from 100 in January 2008. The three commodity stocks reached their lowest levels in March 2020, all down about -70% from the peak. The JCI is now at over 200. The commodity stocks are recovering, but are still only at about 80.
Catch up
Many are scratching their heads as to why commodity prices are doing so well. I would say it’s too simple to over analyze. The world is at zero growth, but commodity prices which lagged for a decade are simply catching back up. The equities are lagging more. Lagging commodity stock prices will now quickly catch back up with the JCI.
1 minute read
2020
2020 was an arbitrage year. The markets declined, while growth was at zero. The markets were needlessly negative, so they quickly recovered, back to zero. That opportunity is over & growth is still at zero. But there is still an arbitrage available to investors. That arbitrage is commodities, nickel, tin & palm oil & it’s a bigger opportunity than 2020.
Ten years
Commodity prices have been in a more than ten years decline, not just zero growth, but negative growth. But now suddenly, the commodity prices are going back to & above where they were ten years ago. Just this week, the palm oil price has recovered back to USD1,000 which is the same as it was in 2008. It’s happened fast!
Rupiah inflation
Because the rupiah dollar exchange rate was below 10,000 in 2008, rupiah prices today at 14,000 are quite far above where they were in 2008. That’s just like the JCI index which was at 3,000 in 2008 & is now double that level at 6,000. The arbitrage is the commodity share prices are still below where they were in 2008.
The three stocks
We’ve indexed the performance of the JCI index & the three commodity benchmarks, INCO, TINS & AALI. Starting from 100 in January 2008. The three commodity stocks reached their lowest levels in March 2020, all down about -70% from the peak. The JCI is now at over 200. The commodity stocks are recovering, but are still only at about 80.
Catch up
Many are scratching their heads as to why commodity prices are doing so well. I would say it’s too simple to over analyze. The world is at zero growth, but commodity prices which lagged for a decade are simply catching back up. The equities are lagging more. Lagging commodity stock prices will now quickly catch back up with the JCI.
