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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
0
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?