Back on 8/8/2018 I posted "Major Buy in the Materials Cycle?" The thesis was that the commodity markets were going to implode because of a growth slowdown in the commodity-intensive emerging markets (mostly China). This would provide a low risk window to load the boat in the materials sector. I guessed that this would take about six months.
Well, six months have come and gone. I have loaded the boat in oil (WTI). That trade was timed perfectly, and I am actually taking some off at this point. But we haven't seen the major commodity-wide selloff that I was hoping for. So outside of oil, I'm still only in opportunistic positions.
What has happened? For one, the market is thinking that the US and China will come to some sort of agreement. That is clearly in the best interests of both parties. So that's supporting prices. Also, there has been increased demand from countries such as India that have made up some of the difference.
Probably the most important thing is that people in the sector are thinking like me: the long run needs higher investment and that needs higher prices. So people are willing to accumulate inventory.
I'm sure most readers of this blog are acquainted with the "fat pitch" concept. Unlike in baseball, where you only get a limited number of pitches to look at, in investing the pitches keep coming. If you have to put up monthly numbers, maybe you have to swing at some to justify your management fees. I don't have this pressure anymore, so I can just sit back. That's pretty much where I am now.