tag:blogger.com,1999:blog-7294165939647321702.post8735066340904031214..comments2024-03-28T13:45:43.362-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: What Goes Up, Must Go Up Forever? Commodity PricesSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-7294165939647321702.post-57510831409435757402012-08-27T23:37:16.676-04:002012-08-27T23:37:16.676-04:00Hi aa,
I agree with you to a point. Over the long...Hi aa,<br /><br />I agree with you to a point. Over the long-term, even goods with stable prices are unlikely to match the CPI. But for commodity products that occurs even in the short-term thanks to the relatively extreme volatility you refer to.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-76720672263570188802012-08-18T21:37:56.869-04:002012-08-18T21:37:56.869-04:00Your oil imports graph confounds changes in demand...Your oil imports graph confounds changes in demand and production. High prices curtail demand, but also lead to additional domestic supply coming on-stream. So it looks like a ~25% decrease in imports from 2006-2010 there, but the decrease in demand was only about 10%.Potatohttp://www.holypotato.netnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-29086963459119809782012-08-17T10:31:06.169-04:002012-08-17T10:31:06.169-04:00Saj,
Wouldn't your logic apply to any product...Saj,<br /><br />Wouldn't your logic apply to any product or service produced by any company? For example, let's say a company is in the business of making office furniture. I'd say it would be reasonable to assume that the price of office furniture will tend to rise with the overall rate of CPI inflation over the long term. Does that mean I know the precise rate of office furniture inflation? No. Is it possible that due to "unpredictable technological changes on both the demand and supply side" that the price trajectory of office furniture may be significantly different than CPI inflation? Yes. But if we have no other information to work with that biases our expectations of the future, then I think it's reasonable to use the overall level of price inflation as a going-forward estimate.<br /><br />Now I do acknowledge that commodity prices are more *volatile* than manufactured goods. So over the short term I agree that commodity prices are unpredictable. But over the long term, commodity prices (particularly a diversified basket of commodities) should rise with the money supply and overall CPI inflation.<br /><br />- aagold Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-78291152362893974702012-08-16T21:21:47.648-04:002012-08-16T21:21:47.648-04:00Hi aa,
I don't really agree with that. While ...Hi aa,<br /><br />I don't really agree with that. While the money supply will likely be grown such that the price of a basket of consumer goods will rise at 2%/year, there's no reason why every commodity should come in at that level. Due to unpredictable technological changes on both the demand and supply side, I'd expect various commodities to come in wildly above or below that rate of growth.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-12887897629803476662012-08-16T18:07:33.215-04:002012-08-16T18:07:33.215-04:00Saj,
Wouldn't it be reasonable to assume that...Saj,<br /><br />Wouldn't it be reasonable to assume that commodity prices will rise at roughly the rate of overall inflation over the long term? In the modern world "stable prices" is taken to mean "stable inflation", let's say at 2% per year. So over the long term, it seems undeniable that commodity prices, just like all other prices, can be expected to rise over the long term.<br /><br />- aagoldAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-8111737436350410222012-08-16T17:59:30.364-04:002012-08-16T17:59:30.364-04:00The real price of oil has been declining for the p...The real price of oil has been declining for the past 100 years. Anonymousnoreply@blogger.com