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When in a Frenzy, Buy Chocolate?
03/11/2008 12:00 am EST
Eric Roseman, editor of Commodity Trend Alert, says we're in a commodity buying frenzy, and he recommends a surprising investment.
Speculation has turned into absolute madness for commodities! The CTA Commodity Super-Cycle that I've long forecast has now reached the point of maximum euphoria or Phase IV.
Phase IV is an incredibly profitable environment for investors, resulting in total panic among institutional and individual investors alike racing to participate in one of the top-performing asset classes. And that's especially the case since last summer when just about everything, except Treasury bonds, has plunged.
With most global stocks in a bear market, it's no wonder investors are lunging after commodities at any price this winter. But by all measures, this has truly become a buying panic.
Commodity ETFs or exchange traded funds now hold about $30 billion in assets, up a substantial 90% from a year ago, according to State Street Global Advisors. Everyone is now jumping aboard the commodity bandwagon as prices blast higher.
The benchmark Reuters/Jefferies CRB Index, the most diversified commodities benchmark, posted its best month since July 1974, up a staggering 13.3% and since January 1st has climbed [more than] 15%-its best start to any calendar year since the CRB was created way back in 1956.
It's now fair to declare that inflation is widely prevalent in food, energy, industrial metals and, of course, precious metals. Gold, more than any other commodity, is the most sensitive to trends in inflation. With gold about to crack $1,000 an ounce, it's painfully clear the Federal Reserve and other central banks have lost control of paper money.
Welcome to the den of great profits coming our way! It's truly an exciting time to be a commodity bull and we're long and strong our primary investment themes-precious metals, agricultural commodities, and select energy and special situations.
But remember, hedging, though getting pounded since January, is a MUST. Commodities are heavily overbought at these levels and will suffer another correction-typical in a bull market. Only the next correction will be vicious.
Right now, I think the precious metals are simply way overbought and primed for a massive short-term correction. Silver, gold, and platinum are just severely overbought. Stay the course and don't buy any more gold stocks or precious metals ETFs. I promise you this: we have an exceptional buying opportunity coming, so keep some powder dry.
The only Best Buy amid a mega-commodity frenzy now is Hershey (NYSE: HSY). This stock is a high-value play on some sort of restructuring or vulture investor taking a stake. Warren Buffett loves American brand-name companies and Hershey's at this price is a big bargain. I would not be surprised if Berkshire Hathaway or some other savvy investor took a stake at this low price.
Hershey's might have its problems, but that's what makes her attractive at this distressed price. I also like the free cash flow it generates. Buy HSY up to $40. (It closed above $35 Monday-Editor.)Subscribe to Commodity Trend Alert here...
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