Blistering Rally: Talk of a new commodity supercycle is suddenly on everybody's lips
Blistering Rally: Talk of a new commodity supercycle is suddenly on everybody's lips; Bets on Trump boosting metal prices further are tempting fate as US dollar soars
Tweet Topic Started: 24 Nov 2016, 09:04 AM (691 Views)
Rampant speculation and exaggerated hopes of a Trump-led boom have fuelled a blistering rally in industrial metal prices. Oil is perking up and talk of a new commodity supercycle is suddenly on everybody's lips.
It is as if we were returning to the glory days of break-neck industrialisation in China and the rising powers of Asia. But this time, the bulls risk bitter disappointment.
A hauntingly strong US dollar is watching like Banquo's ghost over the party. Sceptics warn that the market is already starting to fray at the edges, and signs are growing China's latest recovery is about to fade.
"When you have copper going up by $US1000 in barely a week you know there is something wrong. Fundamentals don't change that fast," said Robin Bhar, base metals strategist at Societe Generale.
Copper was already on a tear before the US elections, chiefly driven by the latest housing bubble in China. Prices on the London Metal Exchange have risen by 25 per cent to $US5445 a tonne in a month.
Zinc, nickel and lead have followed to varying degrees. Iron ore has jumped 40 per cent in the same period, doubling since the start of the year.
Investors have thrown caution to the wind since the election shock, making a collective bet that Mr Trump's fiscal stimulus and bonfire of regulations will lift the world out of its deflationary malaise once and for all.
It is a bet that his spending plan on roads, bridges, telecommunications, harbours and the power grid - either a putative $US550 billion ($743 billion), or $US1 trillion, depending on Mr Trump's mood - will gobble up commodities.
Another huge cost and burden for the US is maintaining the failing and ageing infrastructure that is already in place.
Its not like Australia where we are only 200 years young by comparison. There buildings, bridges, railways and roads etc are much older, are falling apart. The cost to maintain or replace this continually ageing infrastructure is already a huge problem, some areas now a vast economic wasteland. Detriot train station, closed down in 1988 I think it may have been from memory, and has NEVER reopened. While some of us may laugh at Detriot, there are many things to take away from this example. Firstly , it once had the HIGHEST WAGES PER CAPITA IN THE WORLD.
What it shows us is an insight into the future. It shows where the US was at its greatest, and where from that point on, it has slowly declined as cheaper foreign wages and jobs have knocked them from their pedistool.
The reality is, Detriot is a micro of the macro of the bigger picture for western economies. Was all good until cheaper foreign wages starting taking their sales and profits, their jobs and wages with it. Now here in Australia we lose our motor industry, yet even the US had not. Shows just how uncompetative our wages are, even compared to the US, let alone china, and now India.
When the US stock market collapses this time round, we wont be able to drop rates 6% this time round. Everybody is now loaded to the eyballs at zero percent.
Another huge cost and burden for the US is maintaining the failing and ageing infrastructure that is already in place.
Its not like Australia where we are only 200 years young by comparison. There buildings, bridges, railways and roads etc are much older, are falling apart. The cost to maintain or replace this continually ageing infrastructure is already a huge problem, some areas now a vast economic wasteland. Detriot train station, closed down in 1988 I think it may have been from memory, and has NEVER reopened. While some of us may laugh at Detriot, there are many things to take away from this example. Firstly , it once had the HIGHEST WAGES PER CAPITA IN THE WORLD.
What it shows us is an insight into the future. It shows where the US was at its greatest, and where from that point on, it has slowly declined as cheaper foreign wages and jobs have knocked them from their pedistool.
The reality is, Detriot is a micro of the macro of the bigger picture for western economies. Was all good until cheaper foreign wages starting taking their sales and profits, their jobs and wages with it. Now here in Australia we lose our motor industry, yet even the US had not. Shows just how uncompetative our wages are, even compared to the US, let alone china, and now India.
When the US stock market collapses this time round, we wont be able to drop rates 6% this time round. Everybody is now loaded to the eyballs at zero percent.
I would expect the next crash to be in a couple of years time, and I think it would be best if they just let nature take it's course. Interference doesn't really get us anything. Let it correct, and then we will build from there. But till then, there is money to be made. And when the crash comes all it will be is a trading opportunity. It won't be the end of the world.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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