{"id":5845,"date":"2011-07-12T04:15:22","date_gmt":"2011-07-12T08:15:22","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=5845"},"modified":"2011-07-12T04:15:22","modified_gmt":"2011-07-12T08:15:22","slug":"profit-from-physical-assets-part2","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/07\/12\/profit-from-physical-assets-part2\/","title":{"rendered":"Profiting from Physical Assets in a Resource-Constrained World – Rules and Picks (Part 2 of 2)"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

{snip}<\/p>\n

This piece is a follow-up post to “Preparing for Profits in a Resource-Constrained World<\/a>” (Part 1) in which I discussed the implications of Jeremy Grantham’s fundamental thesis of a new world where resources are constrained<\/a> and commodity prices trend upward rather than downward as they have for the past 100 years…<\/p>\n

{snip}<\/p>\n

Here is my playbook for both the short-term (bearish positions) and the longer-term (bullish positions). {snip}<\/p>\n

Meta-rules<\/strong><\/p>\n

    \n
  1. Never short any stock or ETF that is of interest for the longer-term…{snip}\n<\/li>\n
  2. Accumulate investments directly related to “stuff in the ground”, that is, companies that own physical assets.<\/li>\n
  3. Make any short-term, bearish bets on stocks on companies whose well-being depend on the health of asset-owning companies, like mining equipment or rapid growth in China.<\/li>\n
  4. Besides fertilizer, DBA may serve as a good proxy for all agricultural plays…{snip}…<\/li>\n<\/ol>\n

    Short-term<\/strong><\/p>\n

      \n
    1. All rallies get sold\/faded…{snip}<\/li>\n
    2. Keep any (optional) downside hedges simple and limited:
      \n{snip}\n<\/ol>\n

      {snip}<\/p>\n

      Medium-term<\/strong><\/p>\n

        \n
      1. Weather is so unpredictable that it provides the least actionable part of the strategy..{snip}…<\/li>\n<\/ol>\n

        Longer-term<\/strong><\/p>\n

          \n
        1. Always<\/strong> have something<\/strong> in a core basket of commodity plays given the long-term bullish context.\n<\/li>\n
        2. Concentrate expertise and invest in what you know best…{snip}\n<\/li>\n<\/ol>\n

          With these meta-rules in mind, I constructed a commodities wish list based on Grantham’s table of commodity prices and trends…{snip}… and other commodity-based and energy plays that did not get mentioned by Grantham… {snip}<\/p>\n

          Special notes<\/strong><\/p>\n