Hi Lilianne,
First of all, I like your blog. But I have to disagree with your opinions that commodity futures and options are superior investment and speculation choice compared to stocks. Here is why I think so.
In response to your article by the title "5 reasons why commodity futures are better than stocks", I will give my 5 thoughts to your reasons.
- Stocks also have connections to business fundamentals and its traded prices on the stock exchange likewise are direct indication of demand and supply of ownership equities.
- It is true that company share price can go down to zero. That does not make commodities futures and options any better than stocks. I don’t think why should anyone "hold on" to the futures and options contracts forever. Beside the point, they can’t do that as futures and options contracts have expiry dates.
- Stocks can’t be moved by just any stock analyst. Maybe market movers like Fed’s Bernanke or Barack Obama or Warren Buffett can say something and influence the stock markets as a whole but remember that commodities are influenced by many other factors such as weather for plantation which is even harder to predict than the Fed rates. Oh, companies CEOs can also influence the commodities prices when they announced a new discovery of mines. How about war and terrorists attack on the crude oil pipelines? I am sure that also affects the crude oil prices. On top of that, business economies itself affect the commodities prices greatly. What would happen to the crude oil prices when economy is in recession? What happen to the palm oil prices when the biodiesel industry ramping up? What happen to steel’s prices when China is no longer expanding like she was before the Olympic 2008 in Beijing?
- If individual stock picking is not the cup and tea of the trader, he or she might be more suitable to trade in index futures. Anyhow, the knowledge is still based on the technical analysis and chart patterns. Both of them are the same.
- Leveraging as in futures and options contracts work both ways. Either make you rich fast or rob you of your underpants. The proper approach is to use wise money management techniques. I don’t see why that this make commodity trading any better than stocks equity.
Lilianne, I like your Elliott Wave analysis. Keep up the good job. I am not against commodities and in fact I love them. They do really give decent profits and can be rewarding if we know how to dig out the gold from these wonderful investment vehicles.
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I think both market has its merit, it’s depends the market volatility and how much risk that investors can bear with. Current market is too volatile and for those speculators like Liliance (maybe) will think commodity futures market able to bring profit back in a more stable way. no? =)
Happy New Year Ben =D
Happy New Year!! I believe 2009 will be good.
@Rex: Happy New Year. Hope that 2009 will be better than ever for you and family.