David Kotok on the Difference Between Precious Metals and Commodities

Market players hear about central bank activity and immediately draw a mental line to inflation.  They next make the almost-automatic leap to commodities.

But David Kotok, in his latest investor letter from Cumberland Advisors, has a thing or two to say on the subject of precious metals and other commodities in the current environment…

The United States is not in recession. It is in a very slow-growth environment. Uncertainties are very high and uncertainty premiums are large, but decisions about US portfolios are based upon whether you are betting on recession, or slow growth.

If it is slow growth, stocks are inexpensive and markets are headed higher. That is the position of Cumberland Advisors. If a double-dip recession is coming, then stocks are headed lower and you should not own them.

The course of action to take in global portfolios is a different matter. In our global multi-asset class, we have taken our precious metal positions to 6% of the total deployment. That is very, very high and it is a considerable overweight for us. Precious metals are a tiny weight in global asset allocation under normal circumstances. We use several ETFs to reach that position, and they reflect an amalgamation of precious metal exposure.

We have this precious metal weight very high because, we are able to see a monetary policy transmission effect that reaches into precious metals. That supports our view that precious metals are likely to be priced higher in US dollar terms in the future. There is a considerable time lag between central bank actions and monetary effects and resultant higher precious metal prices; we measure that somewhere between nine and eighteen months.

We do not find the same relationship with commodities. Commodities are driven by other extensive factors in addition to liquidity flows from the creation of credit. Central bank balance sheet expansion has a weak link to commodities in this current environment, where central banks are attempting to provide as much liquidity as possible to avoid systemic meltdown.

David’s letter can be found in its entirety at The Big Picture as always…

Source:

CDS, Market Turmoil, Asset Allocation (TBP)

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. click here commented on Sep 14

    … [Trackback]

    […] Read More Information here on that Topic: thereformedbroker.com/2011/11/13/david-kotok-on-the-difference-between-precious-metals-and-commodities/ […]

  2. eatverts commented on Sep 22

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2011/11/13/david-kotok-on-the-difference-between-precious-metals-and-commodities/ […]

  3. 먹튀검증 commented on Dec 27

    … [Trackback]

    […] Read More Information here on that Topic: thereformedbroker.com/2011/11/13/david-kotok-on-the-difference-between-precious-metals-and-commodities/ […]

  4. Buy kimber 1911 commented on Jan 12

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2011/11/13/david-kotok-on-the-difference-between-precious-metals-and-commodities/ […]