The secular bull market in commodities is alive and well. Two asset classes that tend to move in opposite directions during a 17 year cycle. As equities started their secular bull market from inflation adjusted lows in 1982, commodities peaked. The chart above is a comparison of the way stocks started their bull run, compared to the way commodities have started theirs up to to the current time frame.
In my opinion, the 1987 crash in the stock market, which was due to forced liquidation, reassembles the 2008 crash in commodities, which was also due to forced liquidation. As stocks rallied into the bubble parabola of 2000s, the 1987 crash looked just like a little blip. I assume that the same outcome will occur to commodities within the next 5 to 10 years.
The chart above shows the return for various commodities, which are part of the CRB Index, since June 2010 lows. Agriculture had the most powerful move since those lows, and still remains very depressed from historical perspective.
Does this mean that gold is undevarlued with respect to the rest of commodities overall? Great Posts. Thank you.
ReplyDeleteI am not so sure about that. Gold has under-performed other commodities since June of last year, but Gold is close to making new records, while for example silver is still 30% below its all time high which was recorded in early 1980s. Sugar is still 70% from its all time high recorded in mid 1970s, and Natural Gas, that is still 60% below its all time high recorded in 2008. You get the point...
ReplyDelete