Aly-Khan Satchu

Is Anyone Benefiting From Global Inflation?

Sir,

You say; Although the general price level is rising, the truth is that relative prices have experienced an imbalance, with commodities outpacing the rise of other sectors.

Surely, this entirely depends on your starting point. If you care to look on a longer term basis, many Commodities sufferred from a long period of price underperformance. This started to correct in 2002-2003 with the Oil and Metals complex. The Softs have only recently started to perform and I agree we have passed the tipping point in this regard. We are at the start of something and not even anywhere near the middle.

Clearly, the Beneficiaries are those who are long of resources. The Natural longs faced a one sided demand structure [The West] and the rapid arrival of China and India brought competition to that demand equation. It seems to me to be as basic as that.

Hence one could argue that Consumers [and the biggest Consumers are in the West] have paid an Alice in Wonderland price for their consumption. We are now reverting to a fairer price structure.

Our 'Goldilocks' economic assumptions were just that. They were too US and Euro centric.

The free ride is over. Investors have already taken note.

Aly-Khan Satchu
rich.co.ke