Hot commodities .....

Last friday, CPI number in the US is higher than ever expected. What does this mean?

CPI number is nothing but Commodity Price Index (CPI). This tracks prices of baskets of commodity goods such as Oil, Food, Energy ,Cloths .. used day in and day out by the consumers. Increase in the value of these index means rise in inflation. How does this affect the stock market?

There may be fear that Fed in US stop cutting the rates. This is not good for the stock market. Market expects cheap money. So this might cause significant sell off in already troubled stock market.

As we have seen in the past, commodity prices tend to do counter cyclical with stock market. What am I doing to take an advantage of this rising in commodity prices?

1. In my retirement account (such as 401k), I moved out from stock index fund to commodity ETFs, funds such as Gold (GLD), Crude Oil (USO) etc.
2. Focus on short term trading with Agri futures (such as Corn, Wheat, Soybean) and Metal futures.
3. Focus on buying currencies for commodity rich countries such as Australia, New Zealand and Canada.

I would encourage everyone to read book called Hot Commodities by Jim Rogers.

Mahadevan.L