The Next Commodities Super Cycle and the Sale of a Lifetime
Known to march to the beat of its own drum, commodities often ignore the moves of other asset classes. Prices have fallen for the past six years, heralding the end of the greatest commodities boom in recent memory. Since then, attention has shifted toward other asset classes, and 2017 has been a good year for them, generally speaking. The so-called Trump Rally boosts the stock market to new records almost daily. Recently, unemployment hit its lowest number since 2001, the IPO window has re-opened, and the economy is clicking along merrily.
But the GDP growth figures, a booming Dow Industrial Average and low unemployment rates, may be just a thin veneer with cracks already forming in the façade. Is a new commodities super cycle in the offing? Best selling author and economist Harry Dent predicts the wheels might begin to fall off soon – as soon as this year – while the commodity markets wait quietly on the wayside for the next great boom.
“I’ve been bullish for most of my career,” notes Dent in an interview with Sprott’s own Albert Lu. He could see the growing economic power of the baby boomer generation and predicted the greatest growth driver in recent American history. The generation that was born after the Great Depression had cleaned the system, reduced corporate debt levels, and wiped out less competitive businesses. The result was a stage set for booming growth and a massive, educated workforce. But, warns Dent, that wave is breaking.
“Economists suggest that it is impossible to predict anything beyond the next election, but the important trends are the long term ones, and they are incredibly predictable.” It’s harder to forecast tomorrow’s stock market than it is a return of the commodity cycle 10 years from now. Tomorrow hardly matters for a patient investor. And Dent can see certain trends budding already. The emerging market economies’ populations are growing, many of them are becoming wealthier, creating legitimate middle classes where before there had been none. At home, the Millennials will continue to build their economic power, amassing it over the next two to ten years, rescuing the economy from the dearth of baby boomer capital.
But in lag time before the Millennials accrue true wealth is where the trouble lies, with imminent effects on the U.S. economy and equities markets as soon as this year. Despite an aging workforce and dwindling spending from the Boomers, the stock markets have, surprisingly, continued unwaveringly – a warning sign of a bubble. The result, Harry predicts, is an ongoing cycle of asset price bubbles characterized by significantly increasing volatility: ever-higher highs, followed by ever-lower lows. And what is coming soon, perhaps this year, is what Harry Dent calls the “Sale of a Lifetime.” And while commodities are not immune to another global recession, resurgence is due to follow.
“We will hit $4,000 – $5,000 gold,” warns Harry, but not before the bubble burst of 2017. To hear his full interview, including other long-term trends, and musings on the Japanese, Chinese, and German economies and what investors can learn from them, please click here.
Don’t forget the 2017 Vancouver Natural Resource Symposium is coming up on
Vancouver July 25-28
James Rickards is the Editor of Strategic Intelligence, a financial newsletter, and Director of The James Rickards Project, an inquiry into the complex dynamics of geopolitics + global capital. He is the author of The New Case for Gold (April 2016), and two New York Times best sellers, The Death of Money (2014), and Currency Wars (2011) from Penguin Random House. He is a portfolio manager, lawyer, and economist, and has held senior positions at Citibank, Long-Term Capital Management, and Caxton Associates. In 1998, he was the principal negotiator of the rescue of LTCM sponsored by the Federal Reserve. His clients include institutional investors and government directorates.
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