Tuesday, 22 July 2008

Commodities run coming to an end?

I havent been updating this blog for a while and to be honest, i am plain lazy. In addition, with the stock market in a bearish mood, I have no buy trades to share as well except perhaps to take a short position in the market occassionally. Frankly i really admire those who have the discipline and passion to share their lives to the world. I have no wish to let the world know who i am, that i had crab bee hoon for lunch today and who i had lunch with....

Anyway back to my topic for today, is the commodities bull run coming to an end soon? Let me share with you my experience with the 'tech bubble' back in year 2000. I remember in 2000, the technology sector in US was extremely hot and everyone is talking about how much money they made from the tech stocks on NASDAQ. Suddenly all the banks start to offer unit trust that invest in the US technology sector and these funds were in great demand and oversubcribed. I remember putting a few thousand in the United Global Internet Fund at its launch but I sold off the unit trust at >50% loss after a few years. These are some of the initial school fees which i pay to the market and luckily, they came at a point when I dont have much cash to lose. I will share my views on unit trust another day (when i have the mood to write) but dont expect me to say anything nice about it. :) I am not saying that unit trust is totally that bad but you will need to know its advantages and disadvantages and the mechanism of it.

Anyway, back to my story of unit trust, usually they will be launched only when there is demand for it. As such, you dont see new unit trusts being launched when the market is 'cold' and you will also see a certain 'themed' unit trust launched only when there is demand for it. With such a background understanding, you will understand why the Global Internet Unit Trust was very hot when it was launched back in year 2000 and it was just one of the many unit trusts relating to the tech sector launched by Asset management firms that year. You can see what happened after that, the market went down and was in doldrums for many years. As of todate, many of the funds are still barely above water since its inception.

I can see a uncanny similarity in the commodities market right now (versus the tech bubble in year 2000). Many special themed commodities funds are being launched by asset management firms this year and frankly, while i am not sure about the global dynamics of demand and supply of commodities, it just gives me some strong vibes that the commodities bull run cycle may be coming to an end soon. Of course, i may be wrong so just take it as one of the indicators that is flashing red right now. As in all bubbles, the masses must rush in before the bubble will pop and you will see the same things happening in property bubble, stock market bubble...

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