Does someone knows why commodities are an attractive investment in recovery and recession stages?
no one knows??
The business cycle has 5 stages: growth (expansion), peak, recession (contraction), trough and recovery. See these as a sinusoid with a rising slope (the growth trend). Growth goes into a peak above the line, gets up to the peak, then economy slows down and descends contracting, below the growth trend line, hits a bottom, and then rises again in recovery and entering into a nes growth phase. After recession, business is picking up, and demand for commodities will increase as result of it. This is making commodities valuable and attractive during a recession, and immediatelly before the end of a recession commodities prices are going up in expectation of the increase demand during recovery. In a recovery, business picked up and is growing, which increases consumption of commodities and drives up prices.
and why bonds are not a good investment during recession or recovery??
Interest rates have already tightened up during the Recession phase. Hence Bonds are not the best investment choice. You want to purchase bonds by locking into them when interest rates are at their highest point.
gabrielamdea Wrote: ------------------------------------------------------- > and why bonds are not a good investment during > recession or recovery?? interest and price of the bond are like dog and cats… have you ever seen both of them kissing each other? 
much clear now, thank you guys!!!
I saw a dog mothering kitties, a cat mother for a baby dear, a goat mother for a baby horse, a tigresses taking care of the baby chimpanzee orphaned by her (she just killed the mother chimp and than embracing and licking the baby chimp). It was in the news!
did see that recently on the news. Also, saw a lion caressing a lady who apparently saved him when he was little. Moral of the story: you can still buy bonds even during recessions!
“interest and price of the bond are like dog and cats” this is POSITIVE CONVEXITY. On non straights, you’ll have a different picture: a drop in rates will not bring bond prices up (see callable bonds) like they are brought up on normal bonds
strangedays Wrote: ------------------------------------------------------- > gabrielamdea Wrote: > -------------------------------------------------- > ----- > > and why bonds are not a good investment during > > recession or recovery?? > > > interest and price of the bond are like dog and > cats… have you ever seen both of them kissing > each other? > > There are scenarios when interest rates could be rising and bond price could be rising too. Think about a discount bond, that is appearing to maturity, it is possible that during the year interest rate rose, but bond price rose too, because the fall in bond price due to rise in interest rate, is more than offset by the bond’s convergence to par value due to passage of time.
"There are scenarios when interest rates could be rising and bond price could be rising too. " or rates fall and bond price falls – THINK ABOUT MBS securities. The biggest RISK is prepayment risk – as rates fall, borrowers are incentivized to REFINANCE That is bad from the bond owner’s perspective MBS demonstrate negative convexity