Investment – hedging against Inflation and an Ideogramme Poem

The dual theme of my A to Z Challenge this year is the world of Commodities and Poetry Forms so the juxtaposition of these two themes may throw up some strange poems – could be a Heroic Ode to Heating Oil or will it merit a Haiku or a Haibun – whichever, I will be endeavouring to bring you interesting facts about commodities that may change the way you think about the stuff we variously depend on…

By commodity I mean certain items that are of both sufficient value/volume to be traded in special markets and are generally volatile enough to attract traders in “Futures” which are a way of hedging bets in the trading world of stocks, shares and commodities.

The A to Z Challenge runs throughout April and will consist of 26 posts – there are only a couple of letters for which I couldn’t find commodities but plenty of poetry forms to carry the day!

I could not find any Commodities beginning with I and so I decided to focus on the idea of Investment and how Commodities are used as a hedge against Inflation in a portfolio of Stocks and Shares.

Commodities are the only major asset class to provide a hedge against inflation, new research by London Business School (LBS) experts Professor Paul Marsh and Dr Mike Staunton and LBS alum Professor Elroy Dimson confirms.

But these same inflation-hedging properties also mean commodities tend to underperform in extended periods of disinflation.

London school of economics

Dear Readers… I know that among the readers and writers of the A-Z Challenge, will be found Poets, Novelists Genealogists and other exotic bloggers and each of you will have your own particular jargon – Iambic Pentameters, Inciting Events, Ahnentafel number and as for the writers of Erotic Fiction – let’s not even go there… So I ask you to admire for its sheer jargon and general opacity – the following statement from a London Business School article:- “Based on historical returns, it seems reasonable to assume that a balanced portfolio of collateralised commodity futures is likely to provide an annualised long-run future risk premium of around 3%.” Anybody know what that means?

What I do understand, is that there are “Soft” Commodities, often referred to or bought as “Futures” – things like crops which are bought ahead of time, before they have grown, and if there is a bad harvest, then the person who bought the futures, is going to do well and if there is a good crop then he may have paid over the odds because the market price will be low. But in a period of rising inflation, commodities – especially soft commodities like foodstuffs, also rise because the price to the end consumer also rise as a response to inflation – hence commodities are among the few things which protect an investor – and I guess that’s what that jargon-laden sentence means! “Hard” Commodities are things like metals but although they are not subject to the vagaries of weather, they have their own “levers” that cause fluctuations in the market – you only have to look at the sanctions which have been applied to trade with Russia as a result of her unwarranted war on Ukraine to see how certain hard commodities from Russia, not least of all oil and gas, have had profound effects on the market prices. Germany, for example, has had to scrabble around to try to replace its unwise over-reliance on Russian gas and that has affected the price from and for, other countries.

So moving swiftly on to today’s poem which is an Ideogramme which is a form of poetry that relies heavily on typographical elements, design, and layout. It is a form of Concrete Poetry where the shape of the typeset poem depicts the subject.

Investment (Moneybags)

© Andrew Wilson, 2024