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Short index or long commodity futures if inflationary 1970s return?

Discussion in 'Derivatives' started by helpme, Jul 20, 2018.

  1. helpme

    helpme

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    During the 1970s, commodities boomed while stocks crashed. Given a choice, would you prefer shorting index or longing commodity futures if the inflationary 1970s market conditions return? Do you think it is easier to make money shorting index futures than longing commodity futures?
     
  2. Mr Bear

    Mr Bear Businesses don’t change often, perception does..

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    Th answer to this question is obvious, what made you ask it?
     
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  3. helpme

    helpme

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    At the risk of sounding stupid, it is not obvious to me.
     
  4. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Short bonds, Corp debt, long gold?
     
  5. Mr Bear

    Mr Bear Businesses don’t change often, perception does..

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    All periods of inflation are different but I would buy inflation indexed bonds from a risk reward perspective.

    You can also buy oil, gold and agri products but don’t short debt.

    But to answer your question specifically I initially had two thoughts.

    1 - It depends which index, for example a resource index like Australia and Canada v a manufacturing asset heavy index like Germany.

    2 - The problem with all shorts is that you may make 50% on your short but have the opportunity to make 100%+ on the commodity bet.

    From the options given I would be long commodities regardless of the index.
     
    helpme likes this.
  6. tobeyhw

    tobeyhw

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    Right now as the whole world is running out of debt runway I would not anticipate a replay of the 1970s. Inflation is a monetary phenomenon by definition; the other side of the inflation coin is debt expansion which had been ongoing since...1970s. Doubt much runway left.
     
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