Commodity traders are not a bunch of overpaid taxi drivers. Instead they are a very sophisticated group of investors looking to gauge the supply and demand characteristics of both global demand and the specific demand for each and every commodity that they trade, and some that they don’t. In addition there are more then one type of trader.
One of the main types of upstairs traders in the commodity markets are the CTA or commodity trading advisors. They typically do a lot of long term trend following. The second major commodity trader is the global macro trader.
Global macro traders are the next major group of players in the commodity markets. Some are heavily involved and some barely trade them but all macro traders track the commodity markets to give them a better look into the worlds macro economic situation.
In 2008 for example we saw oil climb to record highs. During this time the macro trader was busy looking for what companies will benefit and what companies will get hurt by this. Yes, oil companies made out well but so did companies like MLP’s and railroads. On the other hand airlines and fleet services got absolutely hammered as their fuel costs started to cut heavily into their sales.
One area that also gets a ton of attention is that of precious metals. Precious metals have a small piece of the industrial machine but mostly are used as an inflation hedge and as an asset backed alternative currency as more and more of the fiat currencies look long term bankrupt.
After the shiny stuff we have the industrial metals. Things like copper, nickel, tin, iron, aluminum, zinc, and lead are all in this group. Cars, trucks, phones, computers, etc all have large amounts of industrial metals and are vital to the worlds economy. If you are not tracking industrial metals then you are missing out on one of the largest parts of the commodity complex and a vital part of the economy.
Next up are the agricultural commodities. While some gloss over this section they are actually a huge part of the economy. Do you eat food? Do you drink water? If you answer was yes to either of these questions then you need to pay attention to the ags. If you answered no then call the hospital please. Anyways the ags are important and can be traded based off of the demographics of different nations. Emerging markets are rapidly emerging which is changing the entire supply demand situation of food and water. Monitor and profit from this, or stay ignorant and get unpleasantly surprised.
Obviously commodities are huge part of the global economy. If you are not using and monitoring them you are missing out on some of the biggest puzzle pieces out there. If you are a global macro trader you need to be monitoring all the commodity complexes.
Tags: bonds, business, Commodities, currencies, economy, Finance, hedge funds, investing, macro trader, money, stocks, trading