Dmitriy G


gas oil as we have come to know is a precious natural commodity. Like all precious commodities (gold,rubidium,iodine,zinc,chromium and platinum) a petrochemical plant can withstand market surges even when the market plummets. I like PANTERA PETROLEUM (Ticker:PTPE) because you can purchase shares in a rich and growing oil and natural gas company with a high forecast. If you are looking to invest money I recommend buying it now. Just recently the 47 c stock was seen at a whopping 71 c. With every intent on going all the way up past the 8 s mark. I am not against those analytical predictions but I have already ordered an investors package and spoke to a few people on the inside who are confident about the price per share. Still in its early stages PTPE is a rare buy with a strong growth potential, because they also own some oil rich half of paraguay. so tell me what you think

nothing


socialism is more popular in america than ever. and i’m not just alluding to our new president. rather, i’ve seen a dynamic change in political thinking of the general population over the past several years. and the shift has taken many people over to the far left. how can i profit from this? should i invest in socialist countries? are there any socialist stocks? commodities? BOTTOM LINE: Are there any investments that have exposure to socialist or democratic (as defined in modern american politics) ideals? i understand that the point of socialism is not profit. however, i also understand that there is profit opportunity in any environment. i don’t like socialism. but i’m not going to try to buck it. rather, i want to profit from it.

Gerald Greene


The physical demand for commodities continues to be strong as world demand for all sorts of commodities, from metals to oil to grains remains high. While demand in the US seems to be declining due to a soft US economy what takes place in the US market is not as important now as it was a decade ago. The rapid growth of the economies in places like China, India, Brazil, and Russia, are keeping the upward pressure on commodity demand.

While we are probably less than half way along in a commodity bull market trading commodity futures and options trading is not suitable for everyone. Commodity futures are highly speculative. If you decide to go after the high returns available from trading commodities you should only use investment capital that you can afford to expose to such investment activity. That is trade only with capital that you can afford to lose. Commodity futures are derivative, short-maturity claims on real assets. Many commodities have pronounced price/volatility seasonality as well as being subject to rapid fluuations in daily prices. If you have a heart condition do not attempt to trade commodities.

Commodity futures spread trading offers an exciting path for potential profits often overlooked by futures traders. However, if you think you are going to make a fast fortune trading spreads or any other futures product in the commodity casino, why not just donate your money to your favorite charity instead of handing it over to the “pit vipers” on the trading floor? When you trade commodities you are up against some of the smartest, most ruthless traders in the world. You need to be well prepared to trade commodities at a profit.

While the Commodity Futures Trading Commission ( CFTC ) is responsible for insuring market integrity and protecting market participants against manipulation, abusive trade practices, and fraud the CFTC will not protect you from sudden and at times drastic changes in price levels. Your favorite commodity may still be in a roaring bull market but if you are over leveraged a sharp correction within the trend could still wipe you out.

Traders are often unprepared to deal with a string of losses in spite of the fact that this is part of every trading system. They often begin with less trading capital than is realistically required in order to survive a period of draw down. To attempt to improve their trading systems commodity traders can test their skills going back to past periods and stepping through daily and weekly price charts one day at a time. Each day forward charts update and the trader can see how well they did and how well their tools and strategies did in anticipating market movement.

Investing in the futures market and or stock market is risky and with futures you can lose more then your initial investment. Skilled investment management professionals have been using managed futures for more than 20 years with positive results. With practically a zero correlation with stocks, one of the most attractive features of managed futures is its ability to add profound diversification to an overall investment portfolio. Still it remains a risky business that requires a lot of skill and self discipline if one is to trade at a profit.

The oil market has been the big mover over the past year or so. Oil traders and hedge funds began to purchase extra oil at current prices. The surge in demand, linked to perceived trends in the futures market, generated an upward pressure on current prices. Oil is priced in dollars, which makes it more affordable for foreigners paying with stronger currencies. While oil speculators may have played some role in pushing oil prices higher the US government and its policies that lead to a weak US Dollar is much more responsible for high oil prices than the speculators who are merely following the bull market trend.

Since most oil market transactions are priced in US Dollars as the Dollar falls it supports higher prices for oil and all other Dollar denominated commodities as well as finished imported goods. Unfortunately, most US congressmen and the executive branch of the US government would rather point fingers at oil company executives and at oil market traders than take a realistic view that it is their own misguided policies that have unleashed the inflation monster on the world’s commodity markets.

It is a highly interesting although dangerous time to be trading commodity markets. That is not to say that the skilled, well capitalized trader will shy away from commodity markets under present highly volatile market conditions. They will not. Experienced successful traders will probably do very well in markets that have a bullish basis that will likely last for many years. They will use the sharp corrections within the trend to reestablish positions or to put on additional positions at better prices and ride out the mega trend to outstanding profits.

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Investment plan 5 year plan
Begin with stock, commodities, or forex
Begin with 5,000 dollars let investment grow for a year hope fully x4 to 20,000 about profit $1250/month 20,000
Year 1 take 20 percent of - 4,000 4,000 safe
16,000
Put away in a safe build of interest rate in a CD, mutal fund or tax lien 4,000
16 x 4
Years 2 grow and diversify trades a little more 64,000
Take 20 percent -12,000 16,000 safe interest
x4 52,000
Year 3 grow and diversify more trades 208,000
Take 20 percent -41,600 57,600 in safe interest
x4 166,400
Year 4 grow and diversify 665,600
- 133,120 190,720 safe interest
Year x4 532,480
Take 20 percent 2,129,920 616,704 safe interest

After 5 year take 50 percent of trades in invest in rental Real-estate cash money
About 1,000,000 keep other half in stock

Reward myself take 500,000 down
On a house
Keep under 100,000 cash on a car
Keep 16,000 safe interests
actutally ten year plan but same info is possible
im only 16 i want come up with the perfect plan and begin when im twenty

Craig Thornburrow


One of the best decisions that you can make when expanding your investment portfolio is to put thought into commodity trading. Commodity trading is capable of providing asset allocation that is truly ideal, and is also capable of giving you a bit of an extra hedge against inflation because you are buying into something that has a great amount of global demand. Commodity trading is not one of the investment vehicles that people consider right away, so there is a decent amount of nervousness and apprehension associated with when to invest, where to invest and how to invest. While commodity trading is known for providing rather volatile price fluctuations, the high returns are well worth the effort and the investment in most cases.

Commodity trading allows for an investment portfolio to be overall improved in terms of return without having a negative impact on risk. Are you wondering who will best benefit from investing in Commodities? If you are looking to take advantage of movements of price or are willing to make an effort to diversify your portfolio then you can and should invest in the commodities market. It is important however that small investors and retail investors be careful when initially entering into this market, because a lack of knowledge and understanding of the volatile swings that the market experiences can result in a significant loss of wealth.

In order for an investor to be successful in the commodities market, savvy investors need to have a thorough understanding of the demand cycles that the market goes through. These savvy investors must also have a decent view on the different types of factors that may have an effect.

One of the ideal avenues for you to pursue is to invest in specific, select commodities that can be analyzed individually, instead of simply speculating about products that you have no real background information on. While it can be enjoyable to speculate on products that are new and exciting to you, sometimes this can be a bad decision as you will be making guesses without any real information about them. You should be investigating and buying into commodities as a way to expand and diversify your portfolio. Commodities are an excellent way to turn your portfolio into something more exciting, and then money should be your second concern.

Commodity trading has been around for longer than anyone can really remember. Most modern commodities markets appeared around the 18th century, during the same period where farming was becoming modernized. While the mechanisms have been updated over time, the basics to commodity trading have never changed. Commodities are defined as most types of products, or every kind of movable property aside from money, actionable claims and securities.

Commodity trading is essentially just trading in the futures of commodities. Trading commodity derivatives would allow you to take a buy or sell position based on the performance in the future of commodities like silver, metals, gold, crude or agricultural commodities as well. Many exchanges deal in grains, pulses, oils, oilseeds, spices, metals and crude. Commodity trading on futures is actually not much different than regular futures trading, so you can take long positions or short positions based on how you believe the future of the commodity will change.

TheodoreV


It would seem that the end of days has came for the financial world as we know it, as it seems nearly impossible for us to turn on the news or read a newspaper without yet another woeful tale of disaster in the global market. With a mass global recession and inflation at an all time high, more and more are feeling the effects of this dreaded credit crunch and what with property prices, those once “untouchable pillars of the financial world” tumbling down with an almighty crash, it is little wonder that the average consumer is looking for alternative means of investing their money.

Whilst there are a whole host of different reasons as to why the global credit crunch came about, there are some very straightforward issues that keep appearing time after time again. Investors became too greedy, often investing too much money that they could not afford to lose (more often than not actually borrowing money on margin) and placing their savings into one market. Given that the capitalist world that we live in is governed by the immutable rules of supply and demand this is a very foolish decision indeed, because with the passage of time some commodities will flourish, others will flounder. Diversification is an excellent way of spreading the risks and minimizing your losses and so it is imperative that you make a wise decision to each and every investment that you make. 

Many people are very wary when it comes to investing in commodities and who can blame them? With so many scandals in the past such as the infamous “dot com market” more and more people are becoming increasingly cautious as to where and what they put their money in, and rightly so.

Oil is an excellent choice of investment, because the demand for it will always be there. Oil is not only used to help fuel our cars, but is also used as a vital component in the production of plastic which is found in so many different products and from all walks of life. With the ever increasing industrialization of nations such as China, and Russia, this has meant that the demand for oil has spiked in recent years truly making it the new “black gold”.

How much you stand to lose or make depends entirely upon how much you are willing to wager. However, if you want to take the safer option, then you may want to consider investing in the more reputable, well established oil companies because they are already well established and will have the necessary capital to develop the infrastructure needed to drill for oil.

In order to make money (of any meaningful amount) with the big companies, you will need to invest rather large amounts, because the dividends will be limited due to the large number of shareholders they already have. If you are wanting to invest a smaller amount of cash, then you may want to consider investing in the smaller companies, but this can be a risky venture indeed. Remember, whilst oil can be and is a profitable business, it does require huge amounts of capital to get the ball rolling, and many smaller companies often find themselves unable to effectively compete with the bigger companies.

 

Bruce Jack


Swing trading is a popular method of capitalizing on the short-term price variations of the stock market. It has earned a reputation of being a powerful method of maximizing profits at lower risks. The best swing trading strategy involves choosing the right stock and the right market. Swing traders usually choose the stocks that fluctuate at extreme ends. Swing trading strategy is employed in a stable market, because here the prices tend to have minor variations on which the swing trader can capitalize. In a rapidly rising or crashing market, swing trading strategy cannot be employed.

Investing Journal Let me begin with some of the eye – catching metrics that might lead an investor to consider purchasing shares. Investing Journal - this newspaper company has a price – to – earnings ratio of 11.3, a price – to – sales ratio of 0.93, a 5 year average return on capital of 17.6%, and a five year average pre-tax profit margin of 27.4%. Investing Journal - the Journal Register Company has an enterprise value – to – EBITDA ratio of 9.07 and an enterprise value – to – revenue ratio of 2.24. Obviously, this company is carrying a lot of debt. So, perhaps the multiples on the common stock price are deceptive.

Investing Tips - Given the risky nature of playing the stock market, investing tip sheets have become a mainstay of online financial advice. Investing Tips serious investors will want to subscribe to e-mail newsletters sponsored by the sites or to reputable newspapers and journals, but for beginners, the Web offers the easiest way to get acquainted with the market.

Investing the stock market - Some Stock Market References:

Stock: Stock refers to a share in the profit. Stock trading involves ‘buying into ownership’ of a company. Stock is also referred to as equity or shares.

Investor: An investor is the owner of a particular company’s stock. He has ‘claim’, in however small a proportion, to all company assets. The investor shares the company’s earnings.

Stock certificate: The stock certificate represents the stock purchased and defines the return on investment. Offline, the certificate is a fancy document, while online it is a display available at a click on the mouse.

Dividend: This is a distribution of the owned portion of a company’s earnings. It is commonly quoted in terms of a currency amount per share.

Common stock: Common stock represents ownership in a company and claim on a portion of profits. It yields higher returns in the long run.

Preferred stock: It guarantees a fixed dividend forever. In event of liquidation, preferred stock continues to be paid off. Stock is a share in the ownership of a company. When a private company decides to divide its business and allows the public to be a part of the firm, then it sells shares of ownership through stock offerings. For example, if a company sells one million stocks and you buy one share, then you own one-millionth of that company and vice versa.

When a company sells stocks to the public for the first time, then it is called initial public offering (IPO) or new issue. One of the major reasons of selling stocks is to meet the financial needs of the company for its growth and expansion. If a company plans for expansion and if the bankers of the company feel that borrowing money would be a heavy burden, they look to investors and/or shareholders to finance the growth of the company.

investing commodities - Beginner investing information, stock investment advice and help for investors on investment planning, management and strategies, venture capital investment and resources on investment services and firms. The investing commodities - modern era, so frequently referred to as the “information age,” has brought about a new breed of investor who is both savvy and equipped with the necessary technology to make informed decisions. This, coupled with the creation of many new investment vehicles, has transformed investing from owning a few stocks and having a passbook savings account to a more detailed and advanced activity. investing commodities - now, brokerage firms offer a variety of investments, including equities, bonds, CDs, REITs, mutual funds, money market funds, government treasuries, real estate, options, futures, and other derivatives. The Internet, so crucial in relaying information, is an important source of data for today’s investors. The links herein relate specifically to investments and ventures.

Charts candlesticks give you much more information than the simple line chart. They tell you the open and closing price along with the high and low of the day. Even though they both give off the same information I prefer the charts candlesticks because it is much easier to read. If you get use to the bar charts candlesticks it will probably be just as easy. But for new traders the charts candlestick is much easier to read.

Oil ETF will move in tandem with oil price. If oil rises by 20%, then its corresponding OIL ETF will move by the same amount. Thus, this makes it easier on investor. They do not have to figure out both oil price and the company specific issues such as production, cost of extracting oil or even labor unions.

Most energy ETF is futures. This means that they watch the future prices and resources of the energies. For example, oil and gasoline are futures. This energy ETF depends on the future prices of a barrel of oil as well as how much oil is being made and stored. In other words, will there be enough supply to meet the demand. If the prediction is that there won’t be enough, then the obvious follow up is that gas prices will continue to rise. Therefore, anybody owning this energy exchange traded funds are likely to make money on them.

10000 dollars - Some of the simplest strategies work the best but having 10000 dollars today to invest can be a daunting thing to do. Most investors start at the risk profile of any potential investment and doing this is the first step in making sure your investment not only pays off, but that your seed capital stays intact and is returned to you.

Invest 10000 get 10000 bucks in a year? Can you imagine the high risk venture that would offer you a return on your money? In this article we investigate the possibility of returns and if they exist, how can they be achieved. To invest 10000 you must have $10 grand, so you are not stupid. So I am going to speak to you on an advanced level.

Investing 10000 - If each share costs ten cents then you can buy 10,000 shares with $1000. And if a share rises to $12 then you can easily earn $2000 by selling those 10,000 shares. You can sell the shares for $12,000 immediately after investing $10,000. That means you have not made 20% profit but its 100% gain.

http://www.my10000dollars.com/

William Kurtz


When we invest in stock indexes, or in stocks themselves, we are investing in ephemeral things or in pieces of paper that represent something else.  We can’t very well touch, pick up, or taste a stock index.  It exists only in the mind or on graph paper or on our computer screen.  However, when we invest in Commodities, we are dealing with control over things we use every day – staples such as wheat, corn, coffee, sugar, beef, and cotton.  There is something much more “personal” about it.

One major difference between trading stock indexes or stocks (on the one hand) and the Commodities (on the other) is that stock and stock index trading is largely driven by emotion, while trading in Commodities is mostly driven by the law of supply and demand.  This, in turn, depends upon weather patterns, rainfall, carryover of last year’s harvest, amount of acreage planted, animal fertility levels, availability of labor and transportation, variations in worldwide usage, and general economic conditions.

Since emotional (or psychological) input has much less applicability to Commodities trading than it does to stock trading, it follows that we can more accurately predict the future course of Commodities prices.  We can learn to interpret the patterns of the up-and-down waves of prices and of certain Indicators which we read together with price information in order to quite closely forecast what prices will do in the future – especially in the immediate future, such as tomorrow morning.

Whether we think prices will go up – or go down – doesn’t make any difference.  We can place our bet either way.

All of us have heard horror stories about a load of wheat being unceremoniously dumped in the trader’s front yard.  That could happen, but you’d really have to work at it.  A little common sense and attention should serve to keep you away from that risk.  And, if you stick to buying options and avoid getting involved in contracts, at least while you learn the business, it could never happen.  The beauty of buying options is that you hold all the cards.  You put your money on the table and all the cards are yours.  At the same time, the absolute limit of your risk is the amount which you paid for the option.  You have the right, but not the obligation, to perform.  The party who has sold you the option has all of the risk.

Here’s the really great aspect of Commodity trading: Even before you begin to think about committing real dollars, you can reduce your investment risk to zero by paper-trading to your heart’s content while you learn the ropes.  What a concept!  Learn something new and fascinating without risking even a nickel.

And, truly, this is a fascinating world.  It is immensely satisfying to place a bet on the direction of a Commodity’s price – even a paper bet! – and have it go your way.

This should not be done haphazardly.  We know that prices move in waves; that the waves move in patterns; and that the patterns are repetitive and roughly predictable in size and direction as time progresses.  We do not simply stick a wet thumb in the air and guess at it; we make our moves with a basic understanding of Candlestick price patterns and of the various Indicators which throw off clues regarding the next likely direction of prices.  So, it’s not guesswork at all.  We deal in probabilities, with knowledge of these helping hands right there in the forefront guiding us to decisions that make sense.  It’s a gathering-in of all of the evidence before the investment decision is made.

Over many years, I have found that trading Commodities is truly an enjoyable intellectual exercise that, when done conservatively and smartly, can be a real moneymaker, at a level or risk which is strictly controllable by the trader.

David Brown


The key to successful investing is developing your knowledge in the markets and to take things slowly and methodically. Commodities trading is no different. It is an exciting market which, if you are preapred to put in the time and effort, can be very lucrative, but always be aware that risks lurk in the shadows just like any other investment. 

Physical Trading

Physical commodities trading is buying and selling the actual commodity itself not some sort of derivative instrument like a futures contract. There are obvious downsides to this method namely storage costs, insurance costs and shipping costs.

The physical market, for our purposes, focuses on those commodities that are easily stored, bought and traded for the average investor. These are such things as Gold, Platinum, Palladium and Silver.

The most popular method of trading such items on a retail basis is in the purchase of coins. There are many companies on the web that provide services for the purchase of coins for collectors and speculators.

The internet, of course, has given investors many options for the purchase, storage and trading of gold coins however, our favourite example of trading gold on the web is Bullion Vault. They allow the purchase and storage of gold in small quantities and have an efficient trading system. They hold $290mn of gold for clients and appear to have a very good reputation.

Leverage

If you didn’t know the term ‘leverage’ before the current financial mess, you do now. For those who need a refresher, here is how it works. Let’s say you buy £100,000 of gold and whomever you buy it off only needs you to put down a 10% deposit, £10,000. Let’s say gold goes up 10%. You now have gold worth £110,000, if you sell it now you pay back the £90,000 you borrowed and you get your original £10k back along with your £10k profit. Basically you have turned a 10% gain in the price to a 100% gain on your investment.

Obviously if the price dropped 10% you lose your money, hence the mess that some are in at the moment.

Physical Commodities on Leverage.

There are still some companies around that provide leverage on physical commodities across a range of products, however, the costs associated with trading, such as interest on loans, storage and insurance fees have made the product less attractive to the active trader. Having filled a gap in the market for some time the product was overtaken by some of the instruments mentioned below.

ETFs (Exchange Traded Funds)

More accurately described as ‘Exchange Traded Commodities’ these instruments  take into account all the fees such as storage etc associated with trading. They trade like shares are liquid.

An Exchange Traded Commodity is an investment vehicle that tracks the performance of an underlying commodity or basket of commodities. ETCs work on exactly the same principle as ETFs – with the ETC tracking the performance of a single underlying commodity or a group of associated commodities. Single commodity ETCs follow the spot-price of a single commodity, whilst ‘index-tracking ETCs’ follow the movement of a group of associated commodities, such as cattle, energy or livestock.

ETCs offer the commodities trader a number of inherent advantages without the associated vagaries of trading an individual stock:

Direct exposure to the commodities markets – the value of your investment will rise and fall in direct proportion to the price of the underlying commodity.

Liquidity - ETCs are ‘open ended’ securities, which are created and redeemed on-demand. This means that the supply of ETCs is unlimited and that price changes will accurately mirror developments in the price of the underlying commodity.

Stamp duty & CGT - ETCs are not shares and so trades are exempt from stamp duty. Furthermore, ETCs can be traded within ISA accounts, allowing you to shelter your profit from Capital Gains Tax.

Low dealing costs - ETCs are traded on the regular stock exchange, making them both accessible and affordable – they can be traded through your share dealing service for a commission.

Portfolio diversification – ETCs give broad representation across entire commodity sectors and different geographic regions.

Futures

A futures contract is an agreement to buy or sell your chosen commodity at a specific date in the future - at today’s prevailing market price. These markets are highly liquid and the contracts can be sold on again at any point before the final delivery date, i.e. the day when the farmer or miner will deliver the raw materials to the person holding the contract.

The producers and end-users are still present in today’s markets, but it is the traders and speculators who are now responsible for most of the volume that keeps the market liquid.

The main benefit of trading futures is that you are making a direct investment into the underlying raw material and your future profit or loss is entirely dependent upon fluctuations in the underlying commodity price.

Going back to leverage, most futures trading is done ‘on margin’, which dramatically increases potential profits (and losses, remember).

Shares

Exposure to the commodities market can be gained from buying and selling companies whose business it is to mine, distribute or trade in commodities that you are interested in.

The shares are, generally, liquid and accessible for trading, the problem, however, is that there are many other factors that could effect the share price that may not have anything to do with the underlying commodity. These could be management issues, cash flow, macro economic issues and geo-political issues.

CFDs and Spread betting.

CFDs and Spread betting are easily accessible trading instruments which are essentially derivatives of many of the above, however spreads and dealing costs can be harsh to investors.

Technical Phrases

You will hear such phrases as ‘contango’ and ‘backwardation’.

Contango is a term used in the futures market to describe an upward sloping forward curve (as in the normal yield curve). One says that such a forward curve is “in contango” (or sometimes “contangoed”).

Formally, it is the situation where, and the amount by which, the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery.

Backwardation is a futures market term: the situation in which, and the amount by which, the price of a commodity for future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery. One says that the forward curve is “in backwardation” (or sometimes: “backwardated”).

Commodities trading has many aspects that set it apart from trading other markets and for those that become learned in the trading of the instruments it can be lucrative. Commodity traders over the last few years have seen huge swigs in price which have lead to large profits (and no doubt some large losses).

Currently the global market in commodities is in a state of flux. Gold, for example, is seen as a safe haven against inflation and uncertain times, hence it recent volatility.

Having worked in commodities for some years it was always noted that volatility is our friend, whether a price is going up or down there is money to be made, when commodities are flat there is not much action and the cost of trading out ways the potential profits.

For the foreseeable future volatility is definitely here to stay. Stock market issues and global recessionary fears on the one side and continued development of emerging markets using vast amounts of the world resources on the other, will see volatility in this market for many years to come. This, therefore, as a market to learn about and trade ,is a very interesting and potentially lucrative proposition.

As with all trading, however, there is a very real possibility that trading commodities, especially on leverage, could lose your portfolio a lot of money and you should be aware that it is highly risky. Do not risk more money than you can afford to lose and make sure you have a system that allows you to use limits and stops to contain this risk.

The online trading system available from HF Markets allows you to trade all of the above with assistance, if required, from a professional regulated broker who can guide your initial trading strategies and help you become familiar with trading this exciting area of investment.

Erik Cocks


Commodities have become an attractive investment in recent years, even for those who may not know much about them but would like to participate in the profit potential from dramatic price advances posted by energy, grains, metals and other commodities, lifting them to the highest overall levels in more than 30 years.

Fundamental factors based on simple supply and demand account for much of increased price activity, of course, but other factors are behind these price moves as well – factors you should understand if you are one those investors thinking about putting some of your money into commodities. Although commodities are a hot topic for investors, it is also an area where newcomers can get stung if they are not aware of some pitfalls that can trap the unwary.

So let’s first look at some of the factors promoting this increased interest in commodities and then, if you are interested in trying to tap profit opportunities in this area, at some instruments you can use to exploit this possibility.

Getting ‘real’

You are probably well aware of the “dot.com bubble” that took stock market indexes to record-high levels in the late 1990s into early 2000. The stock market was the place to be for many investors, evident by the growing amount of money that poured into mutual funds, 401(k)s and other investments tied to the value of stocks. Investors enjoyed the run of a bull market since 1982 as they focused on investments in paper instruments rather than physical products.

As with most meteoric rises, however, the accelerated rise in stock prices at the end of the 1990s couldn’t last forever and they began to fade. Then came the Twin Towers disaster on Sept. 11, 2001, the followup U.S. war on terror marked by armed incursions into Afghanistan and Iraq, accounting and other corporate fraud scandals (Enron, Worldcomm, et. al.) and a slowdown in global economies, all of which contributed to a decline in stock indexes, especially those reflecting technology stocks.

Many investors became disenchanted with prospects in stocks and began to look elsewhere to place their funds. Some put their money into housing and other real estate investments, causing a building boom and rapidly escalating property prices. China’s economic growth of more than 9% annually and the rebuilding required after two devastating hurricane seasons in a row along the Gulf Coast added to the huge demand for cement, copper and other building materials of all types (for more on the economic effect of hurricanes, see www.hurricaneomics.com).

Oil’s key role

Adding to the expanding worldwide demand for commodities, the ongoing war on terrorism re-emphasizes U.S. vulnerability to disruptions in oil supplies from the volatile Middle East, and prices skyrocketed above $80 per barrel in 2006. The higher oil prices get, the more attractive alternate energy sources look. The favorite alternative that has emerged from the pack is ethanol, produced primarily from corn.

With a big boost from Congressional mandates for ethanol production and usage, prices for corn began to shoot up last fall to the highest levels in more than 10 years, topping $4 a bushel after years of being closer to $2. Ethanol became the buzz word of the day, reinforced by President Bush’s comments about energy in his State of the Union message. When the government is pushing something, it’s best to trade in line with the government’s wishes, as interest rate traders know from watching actions of the Federal Reserve.

As demand for corn for ethanol grows, the higher corn prices may be driven and the more likely farmers will plant more corn at the expense of crops such as soybeans and wheat as crops compete economically for acreage. Livestock and poultry producers will also feel the effect of higher corn prices as will America’s grocery shoppers when they go to the meat counter.

With what some describe as a “housing bubble” cooling and investments in stocks still not having overwhelming appeal, investors have turned to where the hottest action is – real things like commodities. Commodities have particularly become the darlings of a rapidly proliferating number of hedge funds, which can trade anything, adding further fuel to the general advance in commodity prices.

Ready or not . . .

Some commodities have backed off from their price peaks, leading some to believe that a “commodity bubble” may be breaking just like the bubbles in stocks and housing. Never has an understanding of intermarket relationships been more important to traders as the domino effect of commodity price moves extends throughout a number of commodities.

Where prices of commodities now stand in the overall economic scenario is just one of the issues investors have to face today. With all the media buzz, is there still time to jump on the commodities bandwagon? If so, should you venture into futures or options based on commodities or get into one of the new commodity-based hedge funds or exchange-traded funds (ETFs) or invest only in stocks of companies involved in raw commodities?

Commodity futures trading involves an agreement by an investor to purchase or sell a specific amount of a commodity for delivery at a specific time in the future. The key points are the price at which you initiate a trade and the time that is left until the contract expires, at which time both parties are obligated to fulfill the terms of the contract unless they have offset or liquidated their position. If you think prices will rise before the contract expires, you buy or go long. If you think prices will fall from the current level, you can sell or go short as easily as you can buy.

ETFs are set up to achieve the same general return as an index – for example, the Spyders (SPY) ETF invests in all the stocks contained in the S&P 500 Index to mimic the results of the index. Commodity-based ETFs can invest in commodities directly through futures or in stocks from a sector influenced by what happens in commodities – a gold ETF based on a basket of gold mining stocks, for example. The advantages of ETFs are that they trade like a stock, don’t have the high leverage or risk that futures do and can diversify into a number of commodities or stocks that can dilute the effect of adverse moves in one commodity or stock.

Like any development that capitalizes on the hottest new trend, new ETFs are being offered every day. You have lots of choices so sift through them carefully. Some ETFs may be thinly traded so you need to understand what this investment can do before getting into it.

The commodities-related investment that may be most familiar – and, therefore, most prudent – for many investors involves investing in those companies that are most influenced by prices of commodities. If you think prices of copper will go up, for example, buy those stocks that would benefit most from higher copper prices. Ditto for oil prices or grain prices. Again, you have a number of choices so you will have to do your research to see which prices will mean the most to which companies.

Futures pros and cons

Of the various choices, futures are the most direct play on price movement – and usually carry the most risk. The major lure of trading futures is the ability to make a large amount of money in a short time with a relatively small down payment. For example, to trade a 5,000-bushel contract of corn worth $20,000 with corn priced at $4 a bushel, the Chicago Board of Trade currently requires a minimum margin or good-faith deposit of $1,350 – less than 7% of the value of the contract. If you invest in stocks, you have to put up at least 50% of the value of the shares.

Every 1-cent change in the price of corn amounts to a $50 change in the value of a corn futures contract. If you buy corn futures and the price goes up 20 cents, your profit is $1,000. That’s a gain of nearly 75% on your initial margin of $1,350! And a 20-cent move in corn prices in today’s market conditions is very possible, sometimes in just one day. No wonder futures trading is so attractive to investors looking at commodities compared to other investment areas.

But beware. There is another side of the corn that a newcomer to futures needs to recognize before becoming involved in this type of trading. While the futures market can boost your account quickly, it can also diminish your account just as quickly. Commodities are generally much more volatile than stocks, making them a rough-and-tumble marketplace for the inexperienced.

Timing is a critical factor in trading futures. In fact, you can be right about the direction of prices but wrong about the timing of the move and lose a significant amount of money. That’s true in any market but is compounded in futures due to the larger increments and high leverage involved in futures. Even a relatively small adverse price move against your position can deal a big blow to your trading account.

Still, for those who can tolerate the risk, the possibility of large profits has an obvious appeal for investors seeking more action for their investment money. If you do decide to trade futures, you can improve your odds for success by first learning about and understanding how futures markets operate, then getting reliable information about markets and what is moving them from sources such as www.tradingeducation.com). , a free educational web site.