Very few traders understand the fundamental reasons why Commodities Only Go Down. I will educate you.
Let's take an example of Corn. Over time, what happens with corn?
- We discover new ways of producing corn
- We create cheaper ways to produce corn
- We find faster ways to produce corn
- We learn easier ways to store corn
- We learn how to store corn for longer
- We create better supply chain structures to distribute corn
This constant pressure of innovation decreases the *cost needed to create corn*, and as a basic rule of economics, the price itself always trends towards the production cost. This is for the same reason that Televisions, Phones, Computers, Cars, and many other types of technology have become dramatically cheaper over time.
Note that we use the USM2 money supply in this chart, because for charts lasting more than a few years you should always adjust for inflation. In my view of the market, inflaton = an increase in the money supply. Most disagree, because they have been lied to and tricked by the government.
What is the point of this?
1) Do not invest in commodities
2) DO invest in companies that will capture all the value from innovating and making commodities cheaper
Thanks for playing.
Let's take an example of Corn. Over time, what happens with corn?
- We discover new ways of producing corn
- We create cheaper ways to produce corn
- We find faster ways to produce corn
- We learn easier ways to store corn
- We learn how to store corn for longer
- We create better supply chain structures to distribute corn
This constant pressure of innovation decreases the *cost needed to create corn*, and as a basic rule of economics, the price itself always trends towards the production cost. This is for the same reason that Televisions, Phones, Computers, Cars, and many other types of technology have become dramatically cheaper over time.
Note that we use the USM2 money supply in this chart, because for charts lasting more than a few years you should always adjust for inflation. In my view of the market, inflaton = an increase in the money supply. Most disagree, because they have been lied to and tricked by the government.
What is the point of this?
1) Do not invest in commodities
2) DO invest in companies that will capture all the value from innovating and making commodities cheaper
Thanks for playing.
Comment:
I also think that over the next 20-30 years the prices of most commodities will fall to nearly zero due to the parabolic rise of AI which will create innovation that humans could not even imagine.
Comment:
Another note, the US dollar is also a commodity, and the banks will find new ways to produce dollars faster and more cheaply. Therefore you should not be investing in this either.