Tuesday, February 2, 2010
Yesterday, the good folks at Hard Assets Investor were kind enough to run a somewhat lengthy article I had written for them about which classes of commodity provide the best hedge against dollar inflation. You can check it out on their fantastic blog.
For the article I compared various commodities closing prices to the USD/CHF exchange rate for that day, and analyzed the correlation (or lack thereof). The article makes extensive use of scatter plots and highlights the R_Squared value expressing a relationship (if any) between the two factors; I was considering publishing the full regression outputs, but they aren't any more telling than the graphics combined with the R_Squared values that appear. Also, I should point out, as I did in the article, that the data sets have some degree of auto-correlation, so these should not be taken as predictive analyses. Rather, they serve as a means to compare the correlations BETWEEN different commodities. Anyway, for the, you know, actual content, go read the article on HAI.
Quick and dirty summary:
Good Hedges: Precious metals, Grains
Bad Hedges: Meat, Lumber
Full disclosure, as of writing, author is short March 2010 Lumber (LBH10)