mslasky

Hard Assets Investing: An Interview With Brad Zigler

I agree that short term commodity pricing is complex, and unpredictable; but also, that malthusian pressures give a strong upward bias for the indefinite future. I agree that a portion of commodity pricing has nothing whatever to do with population pressure. But, technological improvements cannot change the fact that the present population outstrips earth's sustainable agricultural productivity, and other resources. Technological exploitation of the deeper crust, the ocean basins, or the asteroid belt, will inevitably be accompanied with much higher prices, and still the population grows. Mean reversion is mere mathematics. Without a comparable context and history, of which I propose there are none, there is no mean to revert to. When, previously in history, has the earth had this population base? When in history has technology permitted the level of use of metals and land? I say never. Thus, reversion to the mean is the wrong tool to be used to evaluate future commodity prices. I again agree with your observation about investing and straight lines - especially over short time frames. In longer time frames, short of a population implosion, I can't see any way for commodities to decline in value, especially in comparison to other types of equities. I agree that absolutes are dangerous. The conventional advice to put 5 or 10% in commodities, is way too cautious. Decisions based on commodity price performance for the last 200 years, will not, I fear, serve us well going forward.

Hard Assets Investing: An Interview With Brad Zigler

Addendum: I forget to address your point about diminishing rates of growth. In the face of a constant large population base, and a diminishing supply (think metals), price pressures are more moderate than they would have been, but an implacable up-trend remains intact.

Hard Assets Investing: An Interview With Brad Zigler

RE: Managing editor. Good points, but, the history, that reversion to the mean depends on, is no longer present, therefore, it's power to predict the future is invalid, in my view. Prior generations used a very small portion of earth's resources - this is no longer the case. Agriculture in particular; there's no way to manufacture more land, and arable land is diminishing, by virtue of erosion, climate change, increased climate variability (climate is reverting to the mean, the last 100 years being utterly unique), land used for dwellings, increased worldwide meat consumption, etc. I conclude agricultural prices are going up "indefinitely". Non metallic minerals less so, since the supply is the entirety of the earth's crust! Statistical arguments, while valuable, are very tricky - they depend on assumptions and contexts. Are you certain your assumptions and contexts are still valid for a world of close to 7 billion people, all clamoring for 'stuff'?

Hard Assets Investing: An Interview With Brad Zigler

This isn't a commodity "super cycle". It's a Malthusian fact. Human population is at an all time high, and going higher, with several billion people newly engaged in enthiastic capitalist consumption. Unless I forsee a population decline, I'm heavily overweighted commodites - permenantly.