“Aluminum has seen tremendous price increases as a result of increased global demand, especially from China and India. Its invaluable properties to various industries make it essential for future economic growth.”
That's certainly news to me. They say that a mine is a hole in the ground with a liar standing over it. Here's a chart of the aluminum prices adjusted for inflation since 1913. Spot the tremendous price increases and win a prize.
Thanks to Coba for pointing this new ETF out to me in the comments.
Source Data:
USGS: Historical Mineral Statistics
Kitco: Aluminum
BLS: Annual CPI
Dear Global X,
ReplyDeleteThank you for starting an aluminum ETF so small investors like me can buy rare aluminum from the convenience of my double wide. I would also like to invest in dirt since it is tangible unlike fiat currency. Please notify me if you start a dirt ETF.
Retail Investor
Mr Slippery,
ReplyDeleteI love the picture of the aluminum foil in the link. I think it is now possible that my hoard might appreciate in value for a bit, lol. Sigh.
Aluminum has no where to go but up!...or sideways...for possibly 90 more years.
ReplyDeleteGood luck with that Global X.
watchtower,
ReplyDeleteThey just aren't making any more aluminum!
Once 8% of the earth's crust has been depleted, there's nothing left!
And don't even get me started on recycling old material in an attempt to create an illusion of humor. ;)
Are aluminum foil hats as effective as tin foil?
ReplyDeleteMr Slippery,
ReplyDeleteThey are 100% as effective!
There is still some debate concerning their effectiveness vs. wearing nothing at all though. ;)
I want to point out that this fund invests in aluminum companies and not in aluminum directly.
ReplyDeleteI was listening to the disciplined investor podcast, and they said that these material ETFs probably drive up the price of the material in question with added speculative demand.
ReplyDeleteSucks, because my company actually uses aluminum...I guess we will have a way to hedge though.
Coba
"material ETFs probably drive up the price of the material in question"
ReplyDeleteAs if. There's no "probably" about it.
Coba and AllanF,
ReplyDeleteNot a believer in Krugman's twisted theories I take it? He remains "skeptical about the speculation story in 2007-2008, because of the lack of evidence of inventory accumulation..."
He's got a Nobel prize in economics but apparently does not read the message boards for material ETFs such as SLV.
Speculative demand should work both ways eventually though. That's assuming we don't hyperinflate first of course.
Right now, perhaps too much money is sloshing everywhere, but perhaps ETFs backed by actual materials could prove to be a price stabilizer for many commodities. So, when alu. is very low, people might buy some of the ETF, causing demand to go up, yes, but also building some inventory. Then if the ETF were very high, people might sell, increasing supply and lowering the price.
ReplyDeleteOr is the new financial demand simply too much and moves the prices to a new plateau.
Anonymous,
ReplyDelete8% of the earth's crust is aluminum. If the general population is hoarding aluminum then something is terribly wrong. (I have hoarded aluminum foil but I hope that hindsight shows that it was a mistake.)
I would also point out that speculation has not done such a great job in stabilizing prices over the years.
You seem rational and I think you have offered a rational argument. Unfortunately, I don't think the markets as a whole are rational. I think they are especially prone to bubbles. Many investors seem to want to buy high and sell higher.
Suze Orman vs. Warren Buffett
That's right. I always say, buy high and sell higher. - Suze Orman, April 2000
I just don't get that "momentum" mentality.
"Or is the new financial demand simply too much and moves the prices to a new plateau."
ReplyDelete= Buy high and sell higher...
I was just speculating as to how maybe such ETF could act as a stabilizer.
Not sure they will, as you mention, actually do this. MBS were supposed to reduce risk after all, and look how that turned out.
Coba
Coba,
ReplyDeleteHow the Nasdaq Lobbying Worked
At $348 trillion, interest rate swaps are the largest derivative market.
I'd be very surprised if that reduced risk for the system overall.
Interest rate swap
Interest rate swaps are also used speculatively by hedge funds or other investors who expect a change in interest rates or the relationships between them.
Credit Risk
Even organizations who think that they have hedged their bets by buying credit insurance of some sort still face the risk that the insurer will be unable to pay, either due to temporary liquidity issues or longer term systemic issues.
I can only imagine what a rise in US interest rates to 10% would do to the $348 trillion in interest rate swaps.
The process of delving into the black abyss is to me the keenest form of fascination. - H. P. Lovecraft