Monday, January 4, 2010

3 Idiots of Commodities

At a time when the Aamir Khan-starrer ‘3 Idiots’ is making waves in Indian cinema world with the movie grossing over Rs 100 crore in the first four days after the release, investors in the country will be interested in knowing the big three blunders they made in commodities during the past year.

And, this will also give them some insight into the way they should invest in the present 2010. The biggest Idiot 1 among the three last year was the investor who dumped all his interests in equity and put his whole liquidity in gold bars and ETFs. If you want some statistics, just check out these facts. From a low at 8,100 in early March, the BSE Sensex is now within touching distance of 17,500.

The extreme pessimism at the beginning of the year made way for rising hopes in May as soon as Manmohan Singh was handed a stronger mandate than anybody ever imagined by the Indian electorate. For the first time ever, stock markets were closed for the day after just two minutes of trading as Sensex hit the second upper circuit to end the day with a gain of 2,100 points. With an 81% gain in 2009, veterans of the street feel that 2010 could be a good year, but repeating the year just went by may not be possible.

In comparison, take the case of gold. Those who embraced gold may claim that they had gone for safety of the gold. But remember safety at what cost. They have lost a lot of money just to park it at a safe have which the world said is the best bet during the times of recession and crisis. Check out the statistics. Gold gained below 30 per cent in 2009 in India. And, the demand for the commodity is sliding fast because of its high prices. India’s import of gold is down in 2009. If you take turmeric, price of the agri commodity has gone up 300 per cent in India in 2009. So, it is time for the Idiot No.1 to rue his mistakes and take corrective steps.

Now, Idiot No.2:
The investor who thought gold is the only metal which will post big gains and cleared all investments ion other metals to put his money on yellow metal. Much to his chagrin, mainly silver and platinum performed much better than gold and yielded good money for the wise investors. In fact, silver had given good hint in early 2009 itself that the metal is the one to watch and many investors had in the middle of the year jumped ship to put money in silver. Those who did that got good rewards and silver outperformed gold at the end of the year. Silver prices soared around 50% in 2009, pipping gold to the post in the price race.

Idiot No. 3
is the person who still banks on gold for 2010 and believes that platinum and silver will not fetch him money in the coming year. The advice to him is don’t be an idiot like the ‘Silencer’ in the movie. Change according to the times and dump gold fast to make good money in other metals and commodities like garlic and turmeric. Garlic has fetched more money than anything for investors in China last year because Chinese believe that it can fight swine flu.

And the threat of swine flu still continues, and Chinese are all set to buy more garlic, then India can also benefit. Prices are set to go up. Turmeric as I said witnessed a 300 per cent rise last year. So, is the case of several other agri commodities. Because, weather was bad last year and commodity supply is less. So, most of the agri commodities are set to soar in 2010. So, wake up idiots! And make money by using your brains before putting your money at right places!

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