When you are investing invariably you will be interested in examining companies that have a commodities focus, when prices go up, these companies share price jump. It is hard not to be interested, unfortunately unless you are very disciplined, you may own some of the shares for a long time if the price of the commodity falls after you have bought it. Until the next super cycle comes along. The key to investing in commodity related companies is understanding at what price of the commodity does the company make money? Companies report the number in their Annual Reports and analysts write about the number in their description of the company.

Understanding commodities also allows you to understand the world around you. For commodities are found around the world, it influences the governance of the country and equally important how and why the commodity price moves up and down.

In the book Gold, Oil and Avocados by Andy Robinson, published by Melville House, Brooklyn, New York, 2021 the author focuses on Central and South America’s economies through commodities.

All developed countries or G7 countries and more likely the G20 countries have something similar to the US’s Munroe Doctrine which you may have heard President Trump’s Cabinet members talk about. The Monroe Doctrine is from President Munroe telling the other European countries that essentially these countries are in our backyard or it is our sphere of influence and you stay out. That could have meant many things, but one aspect is we want and have a say in how that country operates.

The Monroe Doctrine is not particular to the US, history teaches every country that sent explorers to another country often times the second or third trip declared it as their sphere of influence. It is easy to look at British Commonwealth Countries; Britian using the British Navy to sell opium to China; countries finding raw materials for their industry in another country and then the prime export market became their country; one can see China’s Belt and Road program along the same lines.

The reality is industry is formed and an example is the steel industry in the US. The industry was formed in Pittsburg, Penn because of the location for the steel mill needed water, coal from nearby West Virginia, iron ore from Minnesota, the money came from Wall Street. This is what is learned in the school textbooks. It was all from the same country and made great practical sense. What happens when either the costs to mine the raw materials goes up? are there less expensive alternatives?

In the book, Cleveland based Hanna Mining and US Steel sent their geologists around the world or particular the US’s spheres of influence and discovered a great find in the Minas Gerais state of Brazil. The iron ore was mined, a railroad built to transport the ore to a port and then shipped to Cleveland and onwards to Pittsburg. Since the book is written showing the negative effects of corporate development, what tradeoffs did the government of Brazil give to the US to ensure the ore moved in an orderly fashion? Part of the answer is ensuring a government in power to do the work that benefited the US interests.

At the moment, the term rare earth minerals is in the news and some of those deposits are in South America. If a country says we need to have sources of rare earth, what does that mean?

Linking to dividend paying stocks, in investing we all want to make more money, and one method is to buy commodity companies when the price is low and watch the price go higher which is reflected in higher stock prices. The trick is eventually to sell at a higher price and move onto the next “hot” area and repeat. If you are not good at selling at higher prices, a way to protect yourself is to buy companies which can pay dividends to ensure you get a reasonable return, when the stock price goes up it is a wonderful bonus.

There are more questions than answers, till the next time – to raising questions.