4Q21 G&R Letter; More Ukraine Background

Why the commodity market was tight before recent military action, and why the military action took place

Our commodities-heavy portfolio weighting has done extraordinarily well recently. Partially, this is luck: Nobody really expected the recent turn of events. But, recent short-term moves are part of a longer-term picture of commodities scarcity, leading (I think) to a longer-term move of commodities values to historical norms, or even, somewhat above those norms. To take the CRB commodity index vs. gold (using gold as a standard of stable value, its traditional role), we find that, even after recent explosive moves higher, commodities still look cheap. They might take a breather in the short term, but I think they still have a long way to go. These fundamental “supply/demand” factors give an idea of why the previous trend of commodities decline vs. gold seems to have come to an end, and why the recovery phase should continue.

Commodity specialists Goehring and Rozencwajg (gorozen.com) have released their 4Q21 letter, which gives a (prewar) update on the situation in several individual commodities. Of course they are “bullish all the time,” since that is their sector specialty, but the timing is right. The letter is free, but a signup is required.

Read the 4Q21 investment letter from Goehring and Rozencwajg

For those who are interested in learning more about the situation in Ukraine, here are two more resources. The first is a lecture by foreign policy expert John Mearsheimer of the University of Chicago. It’s entitled “Why Ukraine is the West’s Fault,” and is as relevant today as it was when it was delivered in 2015.

The second is a 2016 documentary about the coup of 2014, Ukraine on Fire, featuring Oliver Stone.

Watch Ukraine on Fire

The March 2022 Polaris Letter should be out soon.