Why the Commodity ‘Supercycle’ Might Only be Halfway Done – by Dr. Alex Cowie (Money Morning.com – May 1, 2013)


What if I told you that mining boom hadn’t even got started yet? …Or that commodity prices have another fifteen years to keep rallying? It’d be music to the ears of resource investors who have had a tough few years.

It’s tough to imagine in this bearish environment, but this is exactly what we heard from an expert in an exciting new presentation with our buddy Dan Denning recently… Phillip J Anderson, of businesscycles.biz, sat down in front of the cameras with Dan a couple of weeks ago. Most of the talk revolved around Phil’s theory on property cycles.

It’s a cracking interview. We haven’t been exactly bullish on Australian property here at Money Morning. But Phillip made an interesting bullish argument based on a predictable 18-year cycle.

He sees the US property market leading the Australian market by about a year and a half, and as US prices are starting to pick up slightly, he’s very bullish on Australian property.

In a way he’s more of technical trader of the property market — less focused on the fundamentals, and more on the technical aspects of property. I don’t want to steal his thunder. Watch the video if you get a chance (it’s available as a Strategy Session for all subscribers of any of Port Phillip Publishing’s paid services).

But I’ve got to admit, that it wasn’t his view on property that interested me.

He has an interesting take on the commodity price cycle too.

The Bull Market is Not Over

According to Phil we’re only 15 years into a 30-year upswing in commodity prices. That would mean that having started around the year 2000, commodity prices won’t peak until 2030.

Commodities to Rise?

The theory behind his thinking is that of ‘Kondratiev waves’.

This is the idea that 60-year cycles are common in a capitalist society. So in the case of commodities, that would be thirty years up — which we are halfway through — and then thirty years down.

Although I should note that mainstream economists don’t accept Andre Kondratiev’s theory…which probably means it’s a good one.

We doubt he worried much about acceptance. What probably upset Kondratiev more was being executed by the Soviets in a concentration camp in 1938, because they didn’t like his theory. That might have stung a bit more.

I like the sound of Phil’s view on commodities, though I have a different reason for thinking the same thing.

My reasoning is that there are a lot of populous countries that are getting much wealthier, and very rapidly too. As they do so, they increase the demand for raw commodities — the building blocks of a new society.

China is obviously the biggest player in this story. In the last twenty years, 400 million people, out of the 1,400 million population, have moved into cities. This has added to the 300 million already in cities. That means about 50% of China is now ‘urbanised’.

For the rest of this article, click here: http://www.moneymorning.com.au/20130501/why-the-commodity-supercycle-might-only-be-halfway-done.html

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