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OIL vs PLATINUM

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Super Contributor
Won't post on the previous thread so let me try here:- Richard - I had no intention of insulting you (I have enough "enemies" around here, it seems) but these are the facts: You wrote ...", buy platinum because it's out of favour and it's a complement to oil. When the price of a complement goes down, the price of a product goes up" This is patently wrong. This dynamic applies to substitutes. With complimentary commodities - their prices rise in tandem. You "asked" for confirmation of you thinking (position) and I have to be honest. It is important since otherwise you are investing on faulty reasoning.
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Super Contributor
I will grant you that where a fixed amount is available in a closed system then it is true that price movements of one part of a compimentary pair must have an effect on the other but this such "closed systems" are largely hypothetical.
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Super Contributor
So it's really a reality vs theory (close system) thing. Again - there is no insult in this. It's just an argument.
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Super Contributor
And at the risk of arguing with myself - if these were true complimentary GOODS eg the car and the platinum (catalyst) - your position would be largely true.
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Super Contributor
In the quote, you're missing out some important bits from the conversation as to why the relationship holds. You're saying "reduced demand affects both the good and its compliment". Yes. No argument.

I've repeated a few times that I expect the *supply* of oil to act to suppress the price of oil, which will in turn curtail any major drop in demand for it. If the price of a good drops due to increased supply (the longer term issue), demand increases for it and its compliments (in this case, platinum).

You said "but there's a lot of stock of platinum". Yes, that's currently true, because prices have dropped, and currently there's less demand, so prices are low. But I'm happy to invest for the medium to longer term, where I think demand will outstrip supply.
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Super Contributor
Again Richard - even if these were true complimentary Goods and their prices moved inversely, there would still be external factors to move their prices at the margin. I don't think that the demand for oil is fully elastic vs the price thereof. I think we are going through a progressive reduction in demand due to systemic factors. In the short term - they must bounce. If they shut down enough Platinum mines, it must rise -even as a bullion metal - but that is longer term. Anyway trading vs investing is where this all winds up... so... we're now officially back where we started.
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Super Contributor
Ceteris paribus is there specifically to help us think about the relationship between goods, and we were talking about whether I was mixing up complements and substitutes, which hopefully I've explained that I'm not. Of course there will be other effects and second and third order outcomes, but the world ability to rapidly increase the supply of platinum is much lower than that of oil. Oil, many places can add to supply. Canada oil sands, who woulda thunk it? Platinum, not so much unless the Pope finds lots of it under the Vatican or something. So, I'm more willing to take the risk of investing in the one that has a more limited supply.
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Super Contributor
In other news, I've had a great trading day. Almost time for a beer.
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