Stansberry Research’s Take on Commodities
Stansberry Research agreeing that commodities, such as marijuana go through exceptional booms and busts as they mature. Still, commodities have long been considered a good way to diversify an investment portfolio along with stocks, bonds and real estate. In fact, commodities are very cyclical. The reaction to supply and demand changes is often forces the market to add new resources and then readjust when it reaches equilibrium.
The volatility of the commodities market causes it to expand and contract based on the surplus of demand and the shortage of supply. This also draws new competition and reduces the number of competitors, which increases the supply and then decreases it.
Resource markets or commodities, unlike other markets respond at a slower pace. Because these markets are intensive in both capital and time, consequently all that money spent (sometimes billions) to get started and all the profit earned causes business owners to hesitate when faced with a downturn in the market. Reaction to changes is very slow. Because supply and demand affect the price, the prices remain constant for an extended period as the changes to supply and demand are not corrected quickly.
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