The State of Commodities Boom, Bubble or Bust? Julia E. Bussie, CMT Money Mentor Solana Beach, CA...

The State of Commodities

Boom, Bubble or Bust?

Julia E. Bussie, CMT

Money Mentor

Solana Beach, CA

October 9, 2004

Commodity Research Bureau – CRB Index

Is It Over?

Headlines

• “Looking for the Next Bubble” – Feb, 2004• “The Great Commodities Bull” – Feb, 2004• “It’s a Bubble” – April, 2004• “You Too Can Tap Gushing Commodities Prices”

– June, 2004• “Explosion Ahead for Commodity Prices” – July,

2004

• “A New Secular Bull Market” – Sept, 2004

Bull Markets Topping in 2004

March• Soybean

Oil• Copper

April•Corn

•CRB

•Gold

•Platinum

•Soybeans

•Soybean Meal

•Silver

•Wheat

May•Gasoline

•Lumber

•Hogs

•Pork Bellies

June•Feeder Cattle

Bear Market Rally Highs2004

March• Oats

April•Palladium

May•Dollar

•Natural Gas

June•Live Cattle

August•Cocoa

Odd Men Out

• Orange Juice• Cotton• Sugar

Still Bullish

Crude Oil and Heating Oil

Non-specific Fundamental Factors

• Fear

• U.S. Dollar

• Globalization

Globalization Factor - China

• Population

• Land mass

• Arable land

• Fresh water

• Oil

Population -Over-riding factor

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200

400

600

800

1000

1200

1400

0

200

400

600

800

1000

1200

1400

Chinese Demand

• Cement• Steel • Iron Ore• Coal• Aluminum• Oil

• Copper• Platinum • Grains• Soybeans• Cotton• Meat

Supply has a way of compensating for demand.

• Improved efficiency

• Scientific advances

• Innovations in production methods

• New mineral exploration

• Recycling

Response to Higher Prices

Gold Annual Production

Source: IMF Staff Papers, 2002 Paul Cashin, C. John McDermott

The Big Picture

Questions?