Brahm

Is the Commodities Bull Market Over?

For commodities other than food, I prefer to forget Jim Rodger's 18 year cycle theory. The conditioins are quite different now with regard to supply and demand. Prior to 2000, the major consumers were primarily the US, Japan and Europe. These regions, more or less, had predictable demand, economic cycles, and growth rates. Despite their growth rates, supply was always ample, or new capacity could be created expeditiously in a predictable manner.. Potential mines/fields were relatively plentiful to meet the demand, except if at all during brief periods. And the potential resources base were rich also, and needed less investment and shorter lead times to develop for new production..

Conditions have changed dramatically. There are many more consuming nations growing at very high rates, and demanding supply to respond to growing consumption rates and even still much higher investment rates for development of national infrastructure for which some of these commodities are essential.. At the same time.available new resource sources are of lower quality and smaller squantity with regard to total extraction potential. Nationalism is also rampant now, and access to these new sources is not that easy or even attrative as it used to be quite often. Long lead in relation to the urgency of demand for developing known projects are almost legend now.

Intuitively I surmise the changed circumstances and conditions should have a profound effect on the applicability of Jim Rodger's commodity cycle theory in the context of the prevalent reality.. I agree with the author that the fundamentals are still there, and at this moment sentiment is a better explanation for the major part of the recent slide in commodities.