Tuesday, February 10, 2009

FT – Credit crunch will exacerbate the commodity super-cycle

Commodty prices will probably spike like crazy in 2010 and 2011

The world natural resources were grossly under resourced even before the credit crunch as so much money was squandered in real estate investment instead of extracting resources. Thats why we had the commodity boom before the credit crunch. Now because of deleveraging, commodity prices have temporarity collapsed making new investments in extracting resources uneconomic. Also thanks to the credit crunch, no spare money is available to invest in new resource developments. Anyway when we come out of the credit crunch (2010 and 2011 presumably) commodity prices should spike like crazy.

Posted by penbat1 @ 09:08 AM (1550 views)
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33 thoughts on “FT – Credit crunch will exacerbate the commodity super-cycle

  • This view is consistent with that of Jim Rogers and Peter Schiff and doesnt even make allowances for a falling dollar or high inflation whcih will also add fire to the flames.

    There is currently a huge amount of supply destruction which will excede deman destruction in the long run.

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  • mountain goat says:

    “In other words, markets failed and too much money went into real estate, too little into energy. The spike in energy and food prices that followed – primarily the result of under-investment in productive energy capacity and rapid demand growth – crippled fast-growing emerging markets. The financial turmoil is thus coming from a gross global misallocation of capital, not excess indebtedness.”

    Interesting point but I still think excess indebtedness became unsustainable and made the global economy ready for a crash. However, perhaps it was the spike in commodity prices last year that was the last straw to break the camels back though.

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  • Cynicalsoothsayer says:

    No, energy and food prices spiked because a lots of speculators ramped them. As evidenced by this post, they’re still trying.

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  • Is it OK if I reproduce the whole article to save people signing up to the FT to be able to read the full article ? Signing up to the FT is free and easy anyway. Its just that maybe some people wont bother.

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  • Yes mountaingoat, I agree with you that those particular comments are suspect but still the argument that commodity prices are set to surge in the futiure seems very solid.

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  • The 29-30 year commodity cycle is discussed in this book

    The Great Depression Ahead
    http://www.hsdent.com/tgca_pr.pdf
    See chart 3 on page 2

    “Harry Dent forecast the housing slowdown years before it occurred and sees the minor recession of 2008 as
    the beginning of a greater stock crash and depression to unfold between 2009 and 2012, with the worst crash
    for stocks and housing likely between late 2009 and mid 2011. Home prices will continue to decline into late
    2008 and then will likely experience a minor rebound in early to mid 2009. However, rising inflation, interest
    rates and a last commodity bubble will bring a final blow to stocks, the economy, housing, and even the greater
    emerging market bubble in stocks overseas.”

    This ties in with the Martin Armstrong high on 19 April 2009

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  • I love these headlines! Onlly one word missing, IF.

    The whole of this commodities supercycle rubbish is based on reflating the economies of the world as is the inflation theory.

    Lets face it its the same politicions and “talented bakers” that got us into this mess that are handling its salvation!!! So what do you think the odds are of them saving the day?

    Take a look at Jim Rogers funds they have tanked latley along with the oil price.

    At the end of the day its all about supply and demand, will they wont they reflate the economy? My money is on they won’t and we will get deflation but I am not betting everything cos I’m not sure!!!!

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  • sold 2 rent 1 – hopefully commodity stocks are exempt from your gloomy stock scenario.

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  • Harry Dent only says the spike is 2009-2010

    Using the Calleman model we can pin point within weeks the commodity peaks

    Gold peak —– 21 Jan 1980 ——> maps to 28 March 2010
    Oil peak —– April-July 1980 —–> maps to 5 April 2010
    CRB index peak —– Nov 1980 —–> maps to 12 April 2010

    Also in the month of April 2010 we have a major shock on the scale of 9/11 (as defined by Armstrong in his 2007.15 high + PI [3.141]) which is around 16 April 2010. Armstrong also notes a big change in the Russian political system on 27-28 April 2010.

    So April 2010 looks set to be the lowest point in the sixth night before the POWER gives way to ETHICS.
    A likely event here is when the authorities try confiscate gold from the masses. The gold confiscation should fail but how many people will lose their gold in the turmoil of that month.

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  • “when we come out of the credit crunch (2010 and 2011 presumably)”

    And just what makes them think that we will be out of the credit crunch so fast without governments worldwide forcing banks to simply write off the bad debts? I am not so optimistic. My own estimate is that we will see the light at the end of the tunnel by 2015.

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  • penbat1,

    After April 2010 commodity stocks (including gold stocks) will get battered and will ulimately return to zero (as all Elliott waves will do) over the next couple of years. Oil stocks will get battered the most as free energy systems emerge.

    Looking further ahead, we still have one more bubble on the horizon in autumn 2011. IMHO this will be in monatomic noble elements (gold and silver) with monatomic gold being the last bubble to collapse as we head into the consciousness singularity of the tenth dimension.

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  • NO, NO, NO s2r1 Your post at 10:20 is just about believable (by some) despite anything factual to support the statement (other than references to some guys ideas).

    Then you go and spoil it all at 10:29 with utter drivel about free energy, monatomic gold and the tenth dimension singularity.

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  • Bring on the Revolution of the mind! Ethics over power the beginning of the aquarian age, fantastic!

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  • p. doff,

    The world is running on a set of very complex mathematics – it is not random – we are on a schedule.

    There have been many authors that have studied tiny aspects of these patterns.
    A. Bartlett, F. Harrison, N. Kondratieff, R Elliott, O. Spengler, C. Calleman, M. Armstrong, R. Prechter, Fibonacci, H. Dent (above).

    Each author’s work is like a piece of a plane. Harrison produces the wings, Kondratieff produces the engines, Elliott produces the fuselage etc.

    All I can say is when you add the parts together the thing flies. The whole is greater than the sum of its parts.

    Just because you can’t see it, it doesn’t mean I am wrong.

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  • S2R1 i’d respect your ideas, however wishful or mad, if they were at least your own

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  • 14. sold 2 rent 1 said…’Harrison produces the wings, Kondratieff produces the engines, Elliott produces the fuselage etc. All I can say is when you add the parts together the thing flies’.

    Doesn’t it follow that the person who is able to assemble the plane from the constituent parts must have a greater intellect to spot that each ‘tiny aspect’ does, in fact, form part of a greater ‘machine’. Either that, or the person is just working from an imaginary blueprint.

    Anyway, I think Darwin might have disagreed with your analysis that ‘The world is running on a set of very complex mathematics – it is not random’

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  • s2r1. 3 very serious questions.

    If the ‘free energy’ systems are vaguely realistic:

    1. Are they based on hydrogen?
    if so.
    2. Do you think that, by extracting hydrogen from the h2O on the planet, then having an ‘orgy’ of (relatively) free energy will this cause the most significant natural disaster when we reduce the amount of water on the planet by turning the hydrogen into energy?
    3. Will the availability of cheap energy (for it cannot be free) result in a serious depletion of almost all other resources as the increased energy usage could/will result in a vast increase in human activity (which is rarely, if ever, to the long-term benefit of the planet)?

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  • p. doff,

    The authors listed above are much smarter than me.
    All I have done is connected their work by viewing the bigger picture.

    “Anyway, I think Darwin might have disagreed with your analysis that ‘The world is running on a set of very complex mathematics – it is not random'”

    The randomness is always at the local level and is what most people see. The further you look back in time and the wider the lense, the randomness begins to stabalise.

    Think of Last Days of Disco’s chaos theory, “Globally stable, locally unstable”
    Darwin was studying at the local level and would only have seen randomness

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  • Shining Wit @11.52
    Question 2
    It is a cycle. Hydrogen is stable with water. It takes energy to split off the hydrogens as ions, for example sunlight is used by plants to do this in photosynthesis. The hydrogen ion that is split off H2O then needs to be joined to others elements, for example C or another H atom, to form hydrocarbons or H2. The oxygen from the original water molecule is then released as O2 to the atmosphere. Using hydrogen as fuel relies on oxygen in the atmosphere to be the final hydrogen receptor, be it in your muscles, the combustion engine or fuel cell. This produces water again. So there is no loss of water from the planet.

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  • shining wit,

    IMHO free energy probably gets the “free” bit from dark energy. Laws of conservation of energy are intact as we just can’t detect the dark energy yet.

    Read this for free energy systems and how it might come about.
    http://www.free-energy.ws/lindemann-1.html

    From Calleman’s model we are due one more revolution similar to the industrial and internet before the consciousness singularity. I hope it is free energy/dark energy. It should last 12-18 months and will empower the masses during the time when big corporations and governments are crashing from The Greatest Depression in 2010

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  • 18. sold 2 rent 1 said…’The authors listed above are much smarter than me. All I have done is connected their work by viewing the bigger picture’.

    They can’t be that smart if they didn’t have the wit to view the ‘bigger picture’. You seemingly managed it ok.

    Ah…. the dark energy thing – all theoretical, so nothing tangible to debunk as with the water powered car. I do admire your faith though.

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  • Thanks mountain goat and s2r1. I’m not too sure about any of this but it is intersting

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  • Ugh. s2r1, I posted this link before, from a source that knows what they’re talking about – this is a fundamental debunking of the idea that dark matter can supply ‘energy’ like you’re suggesting. The point is that the Bremsstrahlung losses are always going to make the conversion negative. The magnetic field required to contain the ions is too great and can’t compare to the gravitational field that stars have. By the way, this is what a proper peer-reviewed scientific paper looks like – have you got one that suggests dark energy will provide power?

    http://dspace.mit.edu/bitstream/handle/1721.1/11412/33227017.pdf?sequence=1

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  • Love your guy’s bit on ‘cold fusion’ too…

    “Cold Fusion. In March 1989, two Chemists from the University of Utah (USA) announced that they had produced atomic fusion reactions in a simple tabletop device. The claims were “debunked” within 6 months and the public lost interest. Nevertheless, Cold Fusion is very real. ”

    What, because you say it is? That’s not really how this works, y’know…

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  • sold 2 rent 1 says:

    p. doff,

    “They can’t be that smart if they didn’t have the wit to view the ‘bigger picture’. You seemingly managed it ok.”

    It wasn’t that they didn’t have the wit to view the ‘bigger picture’, it wasn’t “their time” to see the bigger picture.
    If the world is on a schedule then certain things can only be revealed at certain times.

    We are now in 2009 and the time is close (within 2 years) to move to a free energy paradigm.

    One question that I struggle to answer is if the world is on a strict schedule, why do I bother, as I cannot have any influence over the overall outcome. My answer would be that if I am not part of the solution then I must be part of the problem.

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  • YOU ARE INSANE!

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  • Fun theories, but IMO just that – theories and fun.

    I prefer to think of a tug-o-war between efficient markets and the psychologies of individual agents and herds.

    Possibly the most intelligent and aware individual born in the last century (yes including Einstein), Benoit Mandelbrot, criticised Elliot Wave Theory in 2004 (in ‘The (mis)Behavior of Markets’, which won the FT’s Business Book Of The Year).

    I would say Elliot Wave Theory is the equivalent to Scientology in religious circles – that is to say none of the alternatives are accurate per se, but none are as much fun to pretend to believe; however believing it is not something to trumpet!

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  • sold 2 rent 1 says:

    51ck-6-51x,

    “I would say Elliot Wave Theory is the equivalent to Scientology in religious circles”

    “There will be those who believe in the business cycle and use it to their advantage just as there will be those who refuse to acknowledge its existence. As long as not everyone believes, the cycle will exist forever” – Martin Armstrong

    The same is true of Elliott waves.
    So, from all us believers to all you non-believers, THANKYOU !!!!!

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  • mountain goat says:

    S2R1 – I enjoy your left field theories, thanks. Keep them coming.

    I have always been fascinated by the cold fusion claim by Fleischmann and Pons even though it has been “debunked”. Palladium does weird things to hydrogen reversibly absorbing it into a metal hydride. In this way palladium is able to act like a hydrogen sponge absorbing huge amounts of hydrogen (900 times its volume). This got people wondering if they could induce cold fusion because they had all this hydrogen in a fairly compressed form inside the palladium. I certainly wouldn’t write off this field of research.

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  • S2r1 You are akin to the creationist on tv last Sunday am who believed that the Earth was no more than 6000 years old. His belief was based on the Bible, because somebody had analysed the begats and begets and worked it out. When presented with an ammonite fossil he simply responded that there was no date stamp on the piece of rock containing the ammonite, and so he remained a ‘believer’.

    You are obviously on a mission. Your quoted authors have collectively written your Bible. You have analysed their writings and placed your own interpretation on the ‘bigger picture’. You will not be swayed from your belief.

    Still, I accept that you are entitled to your opinion, but it does worry me when you anonymously offer what might be taken as investment advice to an online audience, some of whom are apparently vulnerable to suggestion.

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  • S2R1 – You are entitled to believe … whatever you want to believe [to paraphrase The Matrix], I just thought I’d air my opinion.

    A second point – and one counter to the religion analogy – which I believe is worthy of note, is that the greater the notional of the group of traders who believe in such a philosophy the more real it will end up being.

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  • ^^ oh – and that goes against your thank you note ;p you should be trying to convert as many as possible now you have put on your trades!

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