Author: Edouard Chazal

Why Are Commodity Prices Falling ?

In fact, there are four channels through which the real interest rate affects real commodity prices (aside from whatever effect it has via the level of economic activity).

First, high interest rates reduce the price of storable commodities by increasing the incentive for extraction today rather than tomorrow, thereby boosting the pace at which oil is pumped, gold is mined, or forests are logged.

Second, high rates also decrease firms’ desire to carry inventories (think of oil held in tanks).
Third, portfolio managers respond to a rise in interest rates by shifting out of commodity contracts (which are now an “asset class”) and into treasury bills.

Finally, high interest rates strengthen the domestic currency, thereby reducing the price of internationally traded commodities in domestic terms (even if the price has not fallen in foreign-currency terms).

→ Project Syndicate

The Art Of Investing In Art

Only recently has art investing been viewed through the lens of modern portfolio theory and considered as a potential alternative investment in a portfolio of assets. Though research continues to shed more light on what has been historically an opaque market, studies show that art can offer long-term return potential that is uncorrelated with other asset classes.

→ J.P. Morgan

A Man in the Mirror

Bill Gross on our relationship to success, the heydays of investing and Michael Jackson :

Since the early 1970s when the dollar was released from gold and credit began its incredible, liquefying, total return journey to the present day, an investor that took marginal risk, levered it wisely and was conveniently sheltered from periodic bouts of deleveraging or asset withdrawals could, and in some cases, was rewarded with the crown of “greatness.” Perhaps, however, it was the epoch that made the man as opposed to the man that made the epoch.

→ PIMCO