Commodities by RGE Monitor

RGE Monitor

# There have only been two significant super-cycles in the past 150 years. The first, in the late 19th and early 20th centuries, reflected the emergence of the US as a global economic superpower. The second was triggered by the post-war reconstruction of Europe and Japan between 1945 and 1970. If we are in the third super-cycle, its cause is the integration into the global economy of China, India and many other smaller developing countries
# In previous super-cycles, supply has always eventually caught up with demand. But after years of under-investment in a 21-year bear market b/w 1980-2001, there is an enormous amount of catching up still to do
# Many analysts foresee the current downturn as a cyclical correction in commodity prices that will continue next year due to global recession (and the resulting fall in demand) and credit crisis (and the resulting unwind of speculative positions)
# The low prices in commodities has led to production cuts and investment delays, sowing the seeds of a future supply crunch when commodity demand recovers
# Analysts forecast commodity demand to pick back up in China in 2010. India's demand will surpass China's in 2-3 decades. Then Africa will surpass Chindia demand in a few decades after that, keeping the commodity super-cycle intact
# Economic growth in developing countries argues for a secular bull market in commodities. However, the credit crisis may permanently restrict the ability to leverage, keeping the commodity supercycle's uptrend moderate compared to the pre-crisis run-up
# Debt-financed consumption in developed countries and leveraged investments into developing countries and commodities drove the rapid growth of developing countries up until this year

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