November 2021 Commodity Derivatives Report

In this month’s Commodity Report, Ashley Boolell, Partner at Shard Capital and Head of Commodity Derivatives covers 11 commodities, which includes: oil, natural gas, precious metals, forex and base metals.

You can download the full report on the Shard Capital website here: https://www.shardcapital.com/capital-markets/commodities/#report

Executive Summary:

John Templeton, the American-born British investor, banker, fund manager, and philanthropist once said: “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die of euphoria.” It is probably his most famous quote and one which has been heard many times even by those who only have a remote interest in financial markets.

However, despite the straightforward wisdom of this statement, it is absolutely amazing to see how easily it gets ignored once market participants have made up their minds that this time is different. In fact, this behaviour is so predictable that it might as well be qualified as herd silliness.

At this point, some readers might shout back that there are exceptions. Of course there are, but the harsh truth is that, over long periods of time, the rules always override the exceptions. It is like being a lonely voice shouting in a hysterical crowd of a million people. Some will hear you but most will not even notice your existence. Right now, it does not matter how many warnings are issued about markets overheating. The fear of missing out is just too strong. This fear is not going away anytime soon since there are currently bull markets everywhere: equities, commodities, cryptocurrencies, non-fungible tokens, vintage collectibles…It has rarely been so easy to randomly throw money around and be almost guaranteed that something will work out.

Common sense investing dictates that capital preservation should be the foremost consideration before entering the markets but what’s to preserve if that capital is expected to triple in value in less than two months? Crypto billionaires will laugh at the Buy and Hold evangelists. Well, maybe they have every right to do so. After all, it is hard to argue against the trading positions that have been converted to cash which now sits in their accounts.

Can cryptocurrency logic be applied to commodities? Perhaps. There are surely commodities, some known and some that are yet to enter mainstream news, that can rival and even beat cryptos in terms of power to generate returns. The Old asset class will not be easily defeated by the New.

Please note: This report is intended for Professional Investors only. By inputting your details, you are confirming that you are a Professional Investor.