Many commodities are still cheaply priced. Prices are often well below the all-time highs, especially when we take inflation into consideration. Traditionally, com­modities are priced in US dollars — a currency that gets cheaper versus most other currencies all the time.

When Bunker Hunt was trying to force a silver squeeze in 1979, he was holding 100 million ounces of the white metal, which skyrocketed to over $50 an ounce. So silver prices at $29 an ounce in August 2012 are still cheap (Figure 1.3).

The picture looks even more extreme when we take inflation into consideration. If we compare the price of silver in 1980 at $48, today’s silver price is insignificant. On 21 January 1980 at its all-time high, $48 silver translates into $135 in today’s dollars. In other words, it would take $135 today to equal the purchasing power of $48 three decades ago. Looking at the Consumer Price Index (CPI), it takes $2.81 now to buy what a single dollar bought then. Let us thank the Federal Reserve for this enormous stealth tax that has eroded all the capital we have saved ever since.

Even crude oil, trading at all-time highs in 2008 at $149 a barrel, looks cheap today, especially as it is priced in cheap dollars as well (Figure 1.4).

Is it wise to invest in commodities? Selectively — absolutely. I think it is best to invest in the complete value chain of commodities that are growing independently from stock market moves. This means you should buy land, start plantations of sugarcane, teak wood, eucalyptus, or Jatropha, get a crop every year, get an income out of your crop, convert the agricultural or wood waste into agripellets and woodpellets, and sell these energy products at a high price for additional income.

Since we are relatively still in the early years of the new commodity boom, there is plenty of room for rising commodity prices and it is not too late to invest in commodities this way. With the exception of specialized newswires like CNN, Bloomberg, CNBC, or NTV in Germany, commodities are not well covered in the media. Seldom do magazines like Time Magazine, Newsweek, Fortune, or Forbes publish a good analysis on coffee, copper, rubber, or biofuel trends. There are not many good documentaries on commodities on television. I give speeches around

the world and it amazes me how poorly people are informed about this new liquid commodity group or feedstock called biofuels. Even the largest commodity trading firms are not yet dealing in biofuels or biomass. Likewise, the general public is not yet aware of investment possibilities in the complete value chain of renewable biofuels. Thus, if you invest now, you are way ahead of the curve and that is where the biggest profits are made! I think in a few years the supply of biofuels and biomass will increase, and most probably one or two biofuels will become traded commodities in liquid cash and futures markets. Simultaneously, more and more biomass will be recycled into renewable energy commodities.

In 2008, we witnessed a gigantic melt down of all assets, caused by the mortgage crisis in the United States. A global “deleveraging” unfolded and investors came down to earth. The stock of Citigroup was selling at $500 a share in 2007. In August 2012 you can buy the stock around $29 a share. The prestigious Swiss bank UBS was selling 5 years ago at CHF 40 a share. At the end of 2011 you could buy UBS at CHF 11 a share. Brazilian agricultural land was selling at $100 a hectare 5 years ago. You are lucky if you can get it today for $500 per hectare. That is the difference in investment style!

One of the big retail global banks, with over 500 derivative products like ETFs and baskets of stocks, informed me that in 2008 they had sold €2.5 billion in commodity products. Although commodity markets boomed in 2010, they did not sell more than €700 million in derivatives — less than one-third of their 2008 levels!

In 2011, several banks started to shrink their investment bank departments. So do not think financial bank products — think hard asset investments.

1.4