Test your knowledge ... investment, knowledge, buying, called, direct

dotamasta

Is buying commodity futures called direct investment in commodities or indirect investment in commodities ?
Have fun

chunty

Hmm.. how relevant is ths in real world? Doesn’t matter if its direct or indirect.

IAmNeil

Direct.
Indirect would be investing in a company that creates or processes the commodity; e.g., mining, oil refining, farming.
(Interestingly, before I got to Stalla several years ago (as Level III Curriculum Manager), they had this wrong: they classified it as indirect.)

d2rockstar

very good question GOSETGO but im gonna have to go with direct.

eoin

From my notes:
Direct: Entails cash market purchase of physical commodities, or exposure to changes in spot market values via derivatives, such as forwards and futures
Indirect: Involves the acquisition of indirect claims on commodities, such as equity in companies specializing in commodity production (i.e. buying a share of BHP, SQM)

kkn006

Good question…and great way to think about it Maratkus

eoin

I agree with clouiscar’s explanation.
Futures provide direct investing. Buying a share of a company that invests in commodities would be indirect investment.

AndyNZ

What is actually buying the wheat? Really direct?

hoangvu90

I recall the reading and I remember being confused.
…derivatives are considered direct investment in commodities.
I just now grasp the concept that buying a company that deals in the commodity is indirect vs. owning the commodity or a derivative on the commodity = direct.
it is like a light bulb just went off. silly los, I hope it is tested.

iteracom

So what is the answer ? I’ don’t have my books with me