At the end of the commodity decade

[hardnox604008]

In retrospect, investing is easy. Or actually not so much easy as simple- it is mostly about having the right secular theme- picking instruments is a lot less important than being right in the big picture.

In the 80s, all you had to do was be long Japan, period. In the 90s, it was US equities- throw money in an SP index fund and go fishing for the decade (and, oh, yeah, sell at the end). In the 00s it was commodities.

Of course I can tell you that shorting at the end of an era is a perilous thing- the Naz beat me to death trying to sell it in early 2000- when everyone wants the fairy tale to be true it can go on longer than you'd think.

I suppose the argument that this time is different goes something like this- that above all else governments will keep liquidity in the system so commodities simply can't lose. An end to the secular commodity bull does imply a tightening of liquidity so the game becomes one of government against the market- the market badly wants to liquidate massive global misallocation of capital and the debt that underpins it, governments desperately want to avoid the piper Tricky business, this.

The epicenter seems to be China, where global capitalists hope and pray that commuinsts are better at managing economies than democratic capitalists have been. The situation is without precedent but it should be a lot of fun to watch one way or the other if you maintain an appreciation for the farcical.

The real question is, what is the play for the 2010s?

Best, h

[4wd]

Merry Christmas to you Noxie!

"The real question is, what is the play for the 2010s?"

Simple Noxie, be long or be wrong.

 ~The leadership in DC has proven it will try and inflate our way out of this debt morass we are in. It has worked in the past for us, and maybe will work again, who knows? But is much better to try and fail, than to face the pain that certainly would visit every American should we not try inflation. The only ones hurt will be the US bond holders (China), and the ones holding dollars, and, that will be primarily the old folks, as they know nothing but saving for a rainy day, that is the way they have lived all their lives. And now in their sunset years, their own government will come like a thief in the night and take it all away from them. Oh well, they are to old and tired to put up a fight, so why worry about them anyway. And as far as China, we don't give a sheet about them either, do we? We've got to take care of the doers, the plungers, the unions in this corntry. They are the ones that re-elect... ---right?

[Sou Tx]

Merry Christmas Nox

I see where the Chinese raised i-rates.  While that is a short term item, it made me think of the Chinese gov't. as compared to the Fed.  Each autonomous entities with vast powers and secretive ways.

If they desire to control inflation, they have a roadmap. 

An interesting and amazing time. 

Be well.

[rightone]

nox, you answered your own question.

Action always leads to yet more action.

The action is based in China ( also India, Indonesia etc.,....WHOLE AREA is building ).

Thus all the Pacific Basin Equities are where it's at for the 10's decade.

[smokeyjay]

Are you saying that China, with its centralized government can escape the realities of economic activity, unlike the way every other economy, planned or otherwise, has failed to do?  We forget the hyperinflation in the days leading up to WWI and II in Germany.  Like Russia discovered only 75 years after the big revolution, they cannot escape, only defer to another year, or decade.

[Mark, ncIA]

Maybe if it is decadal we've got another 4-5 years left for the commods?  While I doubt that, it does seem like the rally didn't start until mid '00's.

Guess I just have no faith in central bankers or planned economies. so my vote is eventually for the Decade of De-leveraging.   Dollar will re-affirm it's status, cash will be king, & when the music stops there'll be lots of folks wearing tin-foil hats looking for chairs.

[Palouser]

There are industrial commodities, and then there are grain commodities. The exception might be corn, which bridges both categories.

Since the industrial commodities are directly influenced by developing economies expanding at high rates, and since these economies with their gargantuan population base still have a long ways to go to reach a plateau anywhere near Western standards, I would argue the industrial commodity boom still has a long ways to go. Even a global economic set back would seem to be temporary in the longer run.

As for the food commodities. The trend is tight inventories every year we don't have good global production compared to the trendline and w/o 'Normal Production Variation'. No doubt we will have the great years, but we can't take that for granted as the future any longer. We've proved that beyond any shadow of a doubt. One will have to nail exactly what wouold change the trends to basically change the over all situation - and I don't know what that would be in any short run.

The commodity age is going to stay with us unless there is alternate technology, or the modern dark ages descend. I think technology is the stronger candidate, but not a quick answer. Any dark age prediction may have more to do with personal orientation rather than realistic scenarios.

[rightone]

China (AND the other countries in the Pac Basin ) ARE the reality of economic activity.
LOOK with OPEN Eyes and you should be able to see that.
Keep in mind the EU zones are part of this also ( just not the hub so to speak ).
Also keep in mind the USA has some sects that FEED the afore too ( all of usa agri for instance ).

All that other stuff your trying to justify to the current OBVIOUS, is just other bull$hit stuff that means nothing.

[tiwarson]

Dear All,

Maybe it is a mistake to think of the world in terms of fixed decades? Commodity markets clearly have been affected by two demand shocks. The industrialisation of China, where industrialisation is perhaps a misleading word, but growth out of poverty, then. The second is biofuels. Neither of these shocks are over. And when China is done there is India, being ten to 15 years behind in development. For biofuels, in one of three scenarios the EIA in its World Energy Outlook 2010 from November actually expects oil consumption to peak, and be replaced by biofuels. So, the bull market is probably not over. And now there is still NAO in its negative phase and ENSO in La Nina. And we are just a few months out of recession in the US and commodity prices peak when the business cycle peaks. So every thing points in the direction of a continued bull market for commodities.