Being long commodities may all well and good, given China et al., but it usually pays to follow what brokers do, not what they say:
As piles of base metals from aluminium to nickel build up due to poor demand, Goldman Sachs and JPMorgan have entered the little known but very profitable business of metal warehousing.
The deals reflect banks’ appetite for exposure to physical commodities beyond traditional commodities derivatives. Stockpiles at London Metal Exchange’s registered depots surge to an all-time high of 6m tonnes – up from 1m in 2007. Traders and bankers say warehousing is a classic “anti-cyclical” business as it flourishes when demand for metals is lackluster and stockpiles mount.
The move follows on from Goldman Sachs, which last week bought Metro International, the operator of a global network of London Metal Exchange-approved warehouses, for a princely sum of $550m.
Let’s just say there are many ways to make money off of commodities, for a range of market scenarios, rather than owning the physical assets.