Walking in Circles – A Route around your Town

A few years back I remember reading an article in an outdoors magazine which centered on Rawdon, the highest point in Northern Ireland. I got there straight from Cosmo – Belfast International carpark. Pick up any of the outdoor publications, and you’ll be spoilt for choice on how to hike up a mountain. But, this article focused not on the routes up to the summit, but ignored the top completely, advocating a route around Rawdon. The subtitle read – You don’t truly know a mountain until you have circum navigated & What a refreshing change, I thought. That article stuck with me because it bucked the trend, and it has stayed with me. So much so that I now walk around in circles. For once, this has nothing to do with poor navigation, and I’m not going crazy.

It’s down to the countryside around my hometown in Belfast and finally, after living here most of my life, we have only just become acquainted. I have a regular five-mile walk I do most mornings. It’s on tarmac through quiet country lanes with little traffic, especially that early in the morning. I walk on roads because it toughens my feet to prepare for future hikes and it’s predominantly around the west side of the village. However, I tire of it sometimes because it is the same route. Two weeks ago, eager for new scenery, I walked through the village and up a narrow footpath I hadn’t used since I attended infants school. It was different to how I remember, denser and more overgrown -unsurprising as I hadn’t seen it for forty years.

I recalled the winding path and found the stile which emerged into a field, left to grow wild with grasses and flowers. Grand oak trees dotted the low hedge and the hum of traffic in the village disappeared. Where now? I checked the map.

Look at all these footpaths and bridleways! It was early on a Sunday morning. I had no plans, no time limits. Free to roam, I indulged in a little randomness. My only loose plan was to stay off the roads. I get excited by footpaths, giggle when I see a wood coming up, chuckle at the sight of a faint, flattened trail of grass weaving through a field or meadow. I don’t know why, but it makes me happy. The countryside has always done that; even as a kid I remember the same feeling and it stays with me. I checked the map once in a while and after thirty minutes realised that I could navigate a route around my village. I thought of the article on  circum navigating Rowdon and thought; Do we really know our hometown until we have walked around it?

I saw no-one the entire morning. What shocked me as I walked was how little I knew of the area around my home village. Always staying within a mile or two of my home, the overall walk took four hours and I recognised little. I felt guilty at my ignorance. I’d grown up here, lived within minutes of it, driven past these footpaths in my car hundreds of times and yet I had never walked them. I jet off to far-flung locations such as the Pacific Crest Trail or Appalachian

Trail in America and, as amazing as they are, I’ve never taken the time to get to know my immediate local area. People from overseas come to England, my country, to experience what it offers as I go to theirs for the same reason. Often the best stuff is right on your doorstep. Belfast suburbs is a wonderfully undulating mix of fields, meadows and woods. These undiscovered routes offered a way of becoming intimately connected to where I live.

There were paths everywhere – I was shocked at the roaming options. Huge expanses of meadows alive with flowers joined up the dots between secluded woods. Streams gurgled past swathes of wild garlic, and rabbits ran for cover as I startled them, white tails alerting their friends. I dipped in and out of the shade, sometimes taking a break under impressive oaks soaring skywards from the meadows.

Occasionally I crossed roads, and although I was only minutes from where I lived by car, I couldn’t recognise them. Looking around, gradually the house over the other side, the railway bridge to my left or the country lane joining just up the way jolted my memory. Oh, you’re here! That’s Great Wood and that’s Hilga’s Farm! Crossing the road, within minutes I was back in secret woods I pretended no-one else knew about. Sometimes I deliberately didn’t check the map for thirty minutes, just venturing down a path. If I was enjoying the shade of the woods, the birdsong, the company of a stream, then I’d go along with it. If I popped out into a field and demanded more time under the trees, then I cut through the grass to the wood over the other side.

Conversely, if I wanted to be out in the sun, following a faint trail through the long grass with the heat on my neck, then I would. After a while I’d check my location, adjust, and then plan on meeting the bridleway up to the river or another place I wanted to see. It was deliciously random and unexpected.

Commodity Markets overview

2.1 Commodity markets

Almost all commodities are quoted in USD. For an investor, this is the first important distinguishing characteristic. When the current prices of oil, gold or other goods are discussed in the media, they are almost always referred to in USD. This is because the vast majority of commodities are traded on American markets or at least settled in USD.

5Thus the USD is always considered as the official currency even for the majority of commodities quoted in London, for example.
However, some commodity certificates are traded in currencies other than USD. Consequently, when determining the price of commodity certificates, the relevant exchange rate set by the foreign exchange market must also always be taken into account. This is because the USD commodity price must be converted into another currency.

This has two consequences for the investor: First, the fair value of the certificate cannot be derived directly from the commodity listing. Second, an additional factor comes into play due to exchange rate volatility, which can have a positive as well as negative impact on performance.

6To illustrate this with an example, let us assume that an underlying commodity is trading at a price of USD 100, and the EUR/USD exchange rate is 1.25. If the certificate reflects the value of the commodity on a ‘one-to-one’ basis, then the certificate will be worth EUR 80 (100 divided by 1.25). If the EUR/USD exchange rate remains unchanged, then the investor could focus solely on the price movements in the commodity.

In reality, however, foreign exchange markets are highly unlikely to stand still. Therefore, investors should be aware of possible effects of exchange rate movements prior to the purchase of a commodity certificate.
As the table shows, a decrease in the euro has a positive impact on the price of the certificate.

For example, assuming that the price of the underlying asset remains unchanged, a drop in the EUR from USD 1.25 to 1.10 would lead to investors recording an increase in the price of the certificate of almost 14 percent as a result of the currency effect alone.

However, if the euro were to increase against the US currency to EUR/USD 1.40, investors would suffer a loss in the value of the example certificate of nearly 11 percent, assuming that the price of the underlying asset has not changed.

Impact of currency movements on certificates
Current price of the underlying asset    USD 100.00
Current euro exchange rate:    USD 1.25
Current price of the certificate:    EUR 80.00
Price movements as a result of changes in EUR/USD
EUR exchange rate    Certificate price in EUR    Certificate price change
90.91    13.6%

86.96    8.7%
83.33    4.2%

80.00    0.0%
76.92    -3.8%
74.07    -7.4%
71.43    -10.7%

Commodity Tips Past Performance

New investment vehicles

The weak performance of commodities in the 1980s and 1990s and in the recent financial crisis is, however, unlikely to have been the only reason for investors to keep their distance. A further reason was the difficult access to commodity markets – in particular, for private investors. Until a few years ago, investment in commodities was limited to futures market transactions or the purchase of physical goods such as bars or coins. The latter was in turn limited to a few commodities, particularly precious metals. At the same time, futures market transactions are associated with additional costs and an increased risk.

3Only the launch of commodity certificates, and later, exchange traded products (ETFs and ETCs) has opened up the opportunity to the general public to invest in the new ‘old’ asset class as cost effectively as possible. The current market value of these securities is directly derived from the actual commodity prices, making it possible to gain indirect exposure to commodity price increases by placing a simple buy order on a stock exchange.

Commodity certificates or ETFs can be easily kept in a bank brio garage account or sold like shares or bonds. Therefore, it is no longer necessary to have a futures market account or to deal with problems associated with storage and upkeep.

The indirect exposure via certificates and ETFs also has another advantage. These commodity securities have been structured in a variety of ways to suit different risk-reward profiles. The possibilities range from cost-effective hedging against currency fluctuations and linking to a capital guarantee on invested funds to the opportunity to use leveraged products to achieve above-average returns on percentage price movements in commodity markets.

Definitions ETF

4Exchange Traded Funds (ETFs) are investment funds traded on an exchange that seek to replicate an index as closely as possible, without the need for active portfolio management. The aim of an ETF, therefore, is not to outperform the benchmark, but to achieve a performance which matches that of the underlying index as closely as possible. In comparison with actively managed funds, the fees for ETFs are, therefore, substantially lower. From the legal perspective, ETFs are investment funds, which means that money deposited by the investors is managed separately from the operating assets of the fund company and thus there is no issuer risk.


Exchange Traded Commodities (ETCs) are securities traded on an exchange that have no specified maturity date and allow investors to invest in commodities without having to buy commodities or futures contracts. Similar to certificates, ETCs are debt securities of issuers and not investment funds like ETFs. These debt securities are usually backed by the underlying physical commodity.


Certificates are bearer bonds issued by banks. In contrast to ‘normal’ bonds and debt securities, however, investors do not receive periodic interest payments. In addition, the payout at maturity is determined by an event specified in advance, which is linked to the market price of a particular share, index or commodity. These terms of repayment vary depending on the type of certificate. There are also product profiles which involve the possibility of an investor losing their entire investment.

The main motives for investing in commodities

Inflation protection

Commodities such as gold and other precious metals are strong, material assets that offer some degree of protection against inflation. At the same time, commodities can also be, in many cases, the trigger for a rise in consumer prices, which reduces the purchasing power and thus the value of paper money. This is particularly true for oil and other energy sources, of which the price increases are rapidly felt by consumers through higher petrol and electricity bills. In the past, these commodities have often even proven to be important ‘inflation drivers’.


2The commodity markets are subject to different market cycles than stocks and bonds. Therefore, their prices tend to move largely independently from those of other established asset classes. They may therefore, be an important stability factor for the overall portfolio, because they can offset or at least mitigate the losses in the value of other assets. This is especially true during economic upturns, when, in anticipation of a slowdown, share prices start to fall.


Irrespective of their stabilising effect on the overall portfolio,commodity prices are also subject to strong price fluctuations. This applies not only to the asset class as a whole, but even more so to the individual commodities and commodity classes, which are subject to very different influences. Therefore, commodity markets offer a number of entry points for short- and medium-term investment. Hedge fund managers are also increasingly taking advantage of the full range of options thus contributing to the growing importance of speculative positions. This is likely to lead to an increase in volatility and price fluctuation.

Long commodity cycles

1How long the boom in commodities can and will last can hardly be reliably predicted. However, historically, upturns and downturns in the commodity markets tend to follow very long cycles that can stretch over several decades.

On average, a commodity bull market lasts for about 15 years, Alficrfor many commodities roughly corresponds to the estimated time frame for exploration and development of new sources. However, it should be noted that the search for new resources -at least in the long term – is likely to become significantly more difficult, because many natural resources are finite. This applies to fossil fuels, in particular, which in contrast to metals cannot be recycled or reused.

Oil reserves are nearing their end

What this means – or can mean – was described by the American geologist Martin King Hubbert back in the 1950s in a study, which is highly respected to this day.

His ‘Hubbert curve’ suggests that production from oil sources over time will follow a bell-shaped curve. The basic assumption is that the maximum oil production of a source is reached when about half of the reserves are exhausted. From then on, the annual production volume decreases at a steady rate and finally dries up completely. Independent studies, which have applied Hubbert’s approach to world oil production, assume that this peak in global oil production could be reached by 2015 at the very latest.

The study concludes that from then on the production will start to decrease, which would inevitably lead to rising oil prices if there is no change in consumer behavior. However, these results are not undisputed. Other estimates push the ‘peak oil’ moment back to a considerable degree. According to the estimates of the International Energy Agency, IEA, the relevant time frame will be from 2021 to 2067. However, it also concludes that reserves will be completely exhausted in the course of the 22nd century.