Time is Running Out

Like a pre-Thanksgiving sale (if there is such a thing), the introductory offer at the companion investment website Iacono Research ends today.

(Actually, the sign-up page probably won't be changed until sometime late tomorrow as it's been a while since the original page, with the original prices, was updated - if memory serves, this was a fairly complicated process last time.)

With gains at 21 percent for the year, after what many have termed the "bursting" of a commodity bubble, there are few complaints regarding performance. The only gripe that could be offered is that companies in the model portfolio are increasingly the subject of acquisition by other, much larger companies.

As this results in higher share prices, it does have an upside.

A couple of commodity super-cycle articles have appeared in recent days.

From StockInterview comes Commodity Super Cycle to Last Several Decades, an interview (naturally) with David Fuller that includes one of the more interesting charts that help put the events of the last few years in better perspective.
It would appear that adjusted for inflation, the commodity prices of the last few years haven't been all that high at all.

The argument for "several decades" seems a bit much. Many commodity investors would be happy with another five or six years, but the 3.5 billion people aspiring to a middle-class lifestyle in Asia could drive demand for quite some time.

Also, Jim Puplava of Financial Sense Online has penned Commodities: Boom or Bust? a new entry in his Captain's Log series.

There are a good number of charts and graphs along with details of a 16 page report from Cambridge Energy Research Associates intended to debunk the claims of peak oil theorists. The report can be purchased for $1,000, and according to Jim, is underwhelming.

As for overall thoughts on the commodity boom, bubble, or bust, he begins:

The American economy has been called a bubble economy. We have bubbles everywhere you look — from real estate and mortgages to bonds and consumption. There are many on Wall Street who believe that commodities have become an asset bubble as well. Oil prices have risen from $20 a barrel to today’s prices of close to $60. Copper prices have gone from $.60 to over $3.00. Some would argue that base metal prices don’t reflect the economics of production and are due for a sharp fall. In the short term, prices may decline based on investor perceptions. However, the bubble theory for commodity prices doesn’t hold up on closer scrutiny. Unlike real estate or tech stocks, there aren’t large stockpiles of supply and Larry Lawnmower and John Q aren’t buying commodities as they did in the late 1970s. And unlike most asset bubbles, there aren’t any signs of excess supply and the public hasn’t come on aboard.

Talk to your neighbor. Is he buying sugar futures, cashing in the family silverware, or hoarding bullion coins? I doubt it. He may own an oil stock or two, but it is doubtful he is invested in commodities in the same way he owned tech stocks in 1999. He may have mortgaged the family castle to the hilt, but I don’t believe he is day trading currencies or commodities. The only participants in this commodity bull market have been institutions like hedge funds and pension funds. Because the commodity markets are infinitesimally small in comparison to the financial markets, any influx of funds—albeit a hedge fund or pension fund—has a large impact on such a small market. Therefore by leveraging or concentrating its investment, any institution of size can have a huge impact on a commodity's price whether sugar, copper, or natural gas. Money coming in drives prices up precipitously and conversely in the opposite direction when hot money exits a trade.

At the dentist the other day, the subject of investing came up as one of the assistants was lamenting the postponement of their retirement plans due to college tuition and other rising costs. After learning of what goes on at the investment site, she asked what areas are good to invest in.

"Natural resources" came the reply.

"Oh, you mean like the new liquid natural gas terminal their trying to put in? Is that why my gas bill is so high? I don't even use much gas."

People are catching on, but as Jim Puplava observes, the general public has not yet discovered commodities as an investment.

When they do, that's when the fun really begins.