Replies to post #4965 on The Rising Influence of Rising Affluence

[wow_happens28]

This chart says it all with no words about commodity prices. I think I posted it here before. The question is, "Will Congress raise the debt limit again? If so commodities go up, if not then probably not? My guess is we are at 2008, gold got on the debt limit line line then fell back. A bottom may be near???

I don't see how they can't raise the debt limit. If we canceled all the government and military and all we could not pay entitlements.

http://www.ritholtz.com/blog/wp-content/uploads/2012/01/chart.gif

[DewDiligence]

HES, CLF, and VALE are very compelling buys at the current valuations, IMO. Disclosure: I thought this was also true when the stocks were 10% higher—c’est la vie.

[biomaven0]

The changes to the supply-and-demand picture, and the recent declines in prices, have ignited a debate over whether the so-called super-cycle in commodities is over

My instinct is that it's over. There's a long lag before supply responds to increasing prices and demand, which means that the system by its nature is very prone to overshooting. We've had enough years of higher prices for a lot of new supply to come on-line now, and I'm guessing it's time for the overshoot to happen.

(The picture is a bit different in areas like oil, where the long-term supply constraints will at some point kick in. But the new drilling techniques will presumably be exported to other countries, so the eventual supply constraints have maybe been kicked down the road a few decades).

Peter

[jbog]

[The plateau in the bull market for commodities is undeniable, but the question is whether this is temporary or it indicates a long-term flattish or bear market. My vote is firmly on the former scenario; other viewpoints are welcome.]

I'm not so sure BHP agrees with your scenario:


BHP Billiton Ltd. backed away Wednesday from ambitious spending plans that would have led the company to invest around $80 billion on new projects in the next five years.

Management at the mining giant have been rethinking its capital expenditure plans laid out last year "every day," as the global economic climate and uncertainty within the Australian mining sector cloud the outlook, Chairman Jacques Nasser told reporters on the sidelines of a business lunch in Sydney.

Asked whether the miner still plans to spend the hefty $80 billion it had previously estimated, Mr. Nasser said "no" He didn't elaborate further on to what the forecast may be revised.

The tail wind of high commodity prices, which have helped the mining sector report record growth in recent years, is moderating and is expected to ease further, Mr. Nasser said in an earlier presentation.

The sector also faces continuing global volatility and uncertainty since the global financial crisis, which has led shareholders to lose confidence and focus more on cash returns and dividend yields, he added.

"Rather than the world settling down, we will face increasing volatility and uncertainty," Mr. Nasser said. "It is really going to feel as if the ground is shifting under our feet," he added.

Mr. Nasser described the 2008 global financial crisis as a structural shift and said ongoing developments in the euro-zone were a short time ago "almost unthinkable."

[DewDiligence]

Barron’s also likes NEM, the gold-mining stock, which is trading at an unusually wide discount to the price of gold:

http://online.barrons.com/article/SB50001424053111904571704577404221785143122.html

Disclosure: I don’t own any precious-metals stocks.

[DewDiligence]

Iron-ore price is headed back up, says Seeking Alpha blogger:

http://seekingalpha.com/article/909351-iron-ore-is-headed-up-through-year-s-end-here-are-the-catalysts

This piece is somewhat simpleminded, but so are many of the bearish pieces contending that 7% GDP growth in China constitutes a “hard landing” that will cause commodity prices to plummet to multi-decade lows.