COMMODITY PROSPECTS
prices rise strongly for 17 years in broad upward cycles. It has all of Theentirediscussionofasupercycleis
the statistical underpinnings of the ‘New Economic Paradigm’, the a senseless distraction from the reali-
marketingpitchusedbyfinancialadvisorsinthelate1990sthatsug- ties of the commodities markets. The
gested there would never be a period of recessionary economic con- upward trend in commodities prices
ditions, high inflation, or declining stock market values ever again. since2001canbebestexplainedbased
CPM Group has written about the lack of substance behind the on simple fundamental economic
supercycle marketing pitch. It has pointed out (as can be seen in trends: Strong fabrication demand,
Figure 1) that since World War II, the only two upward moves in strong investment demand, and lagged
commodities prices lasted less than three and a half years, or twelve supply responses as a result of years of
years if you think of them as two legs of a broader upward move. To under-investment in commodities pro-
ducing industries. Within such a
The entire discussion of a supercycle is a
straightforward economic analysis of
senseless distraction from the realities
the roots of recent commodities prices
of the commodities markets
lies the answer to whether recent price
strength is sustainable.
find longer-term upward legs in commodities prices, one must look As long as these underlying trends
at prices back to 1800. There, one finds longer running upward remain in place, and allowing for cycli-
moves, related to the revolutions that wracked Europe and the US cality in economic and market condi-
Civil War in the 1850s and 1860s, the First World War, and the tions, one should expect commodity
Second World War. In other words, to justify the concept that we are prices to perform well in the years
in the early stages of a supercycle, one almost needs to believe that ahead
CN_908_EWORLD:Layout 1 24/8/08 17:13 Page 1
•
the world is on the threshold of World War III. The marketing groups
behindthesupercycletheoryhaverespondedbysayingthatperhaps
Jeffrey M. Christian is Managing
theworldisheadedtowardathirdworldwar,overlookingthefurther
Director with CPM Group.
analysisthatanyfutureworldconflagrationwouldnotbefoughtlike
the previous shooting wars, and thus would have radically different
www.cpmgroup.com
implications for basic commodities – and everything.
10.-12.2.2009
Essen /Germany
BUSINESS
NETWORK
www.e-world-2009.com •
mail@e-world-essen.com • Hotline +49 (0)201.1022.210
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