Is This the Beginning of a Long Term Bull Market in Commodities?

For a while there it really looked like "Opposites Attract". Commodities increased in a synchronous manner with US Long Term Treasuries; a relationship rarely seen.

But now, the natural order of things seems to be establishing itself. Let's look at the recent behaviour of CRB versus TLT.

We are reasonably sure that this is the beginning of a long-term bull market in commodities. We will wait and see the performance of the above over the next few weeks but, stretching our neck out a bit, we get the feeling we have just seen the first signs of an inflationary environment.

Interested in how others view this.

Disclosure: Long DJP, GLD, TBT.

Comments

[Mad Hedge F...:]

ccv Those of you searching for the “new normal” better take a close look at the China National Offshore Oil Company’s (CNOC) efforts to top Exxon Mobil’s (XOM) $4 billion bid for development rights to a giant new field off West Africa. This is only the latest chapter in a global bidding war for essential resources they, and we, need. Long gone is the day when the Standard Oil Company only needed to deliver King Saud a new Cadillac every year to assure rights to his kingdom’s oil supplies, even though it often had to be towed by teams of camels, as there was no refining capacity yet on the peninsula. Decades later, I was part of a SWAT team at Morgan Stanley whose schmoozing kept the crude flowing and the cash surpluses recycling. Having grown up in the desert near Indio, California, I was the only one in the company who actually liked caravanning out into the desert to scoop up cooked rice with my fingers off of giant brass platters, and guzzle illicit Johnny Walker Red, said to be smuggled in by a wayward member of the royal family. I never did get used to the sheep brains, though. But I digress. To the current generation of oil traders, I might as well be talking about the Pax Romana than the Pax Americana, which is now equally ancient history. The hard truth is that they are out there bidding against the new 800 pound gorilla in the market, as are others for coal, iron ore, copper, gold, silver, wheat, corn, soybeans, and myriad other essentials. If you have any doubts about China’s acquisitive determination, look at the chart below showing that the Middle Kingdom’s outbound direct investment is outstripping inbound investment for the first time. Will the Pebble Beach Golf Course next? For you and I, this means we can count on the price of everything to go up in the future, a lot. Keep food, commodity, and energy ETF’s permanently on your radar, like the PowerShares agricultural (DBA), the Rogers International Commodities (RJI), and the Oil Trust (USO). Jim Rogers, are you listening?

Oct 23 12:02 PM

[Wildebeest:]

Long term bull market financially maybe. Not so much on the ground among commodity producers and their consumers. eg. copper consumption down 17% in USA, Europe and Japan and capacity utilization down somewhere near 72% among producers.

Taking a longer term view though, the bull market in commodities has been under way for 5 years. The GFC was a hiccup-- admittedly a severe one that nearly caused the person to choke. Any return to sustained global growth, and frankly I think we're a long way off, should see commodities spike higher than they did pre-crash.

Oct 23 01:35 PM