On 22/02/2016 13:31, Dave Plowman (News) wrote:
> keep them. One thing is certain - the present low prices for most raw
> materials won't last.
>
Actually it might. The great commodities supercycle that started in 2002
had a hiccup in 2008 but the Chinese pumped $zillions into the world
economy, which simply reinflated asset prices. It hit a peak in late
2011 (witness BlackRock Gold & general fund price since then). Look at
the historical share prices of Rio Tinto and Broken Hill Propriety to
see what was 'normal' prior to 2002.
Now we all know what the Chinese have been doing since 2009 - in just 5
years they have built up the level of debt (and much of it in their
shadow banking system) that the USA took 100 years to acquire.
Oil might go back to about $50 and then bumble along at this level for
quite while, but the dollar is the problem, and it's US presidential
year (Weak Dollar = Strong Commodities; Strong Dollar = Weak
Commodities, this is why even with cheap oil, we still pay £1 per litre).
Base metals and thermal coal are dependent on Chinese demand, but they
have built ghost cities and tower blocks of residential flats everywhere
and no-one wants to buy them. Then when the writing was on the wall for
their contrived building boom (end 2013) they allowed Chinese citizens
to open share trading accounts and speculate on equities using borrowed
money !! (Blimey, didn't they look at the history of share price
volatility in Hong kong ?). That bubble popped in June 2015. One can
only guess what the Chinese government will try next (40% devaluation ??)