Commodities: boom, bust, or supercycle?

Ltd commodities: the boom in the markets is over. Get out while you still can.

It can be said with some confidence that these days nearly everyone agrees on a whole raft of macro assumptions. We all agree gold is going up in price, as are all other commodities. We all believe China is the main driving force behind this boom. We all believe sectors that feed off commodities, such as shipping, will continue to boom, and we all believe trade will keep growing. On the other hand, we all believe that the US dollar and most first-world equities are too expensive, and should thus fall in price.

Unfortunately, one of the inconvenient things about financial markets is that whenever you're pretty sure everything finally looks predictable - and this is especially true if everyone agrees with you - everything will almost certainly change. The most obvious reason for this is that as long as everyone you know ends up being a reasonable proxy for the whole market, by the time they all agree, they've all placed their bets and there's no marginal buyer left.

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James Ferguson qualified with an MA (Hons) in economics from Edinburgh University in 1985. For the last 21 years he has had a high-powered career in institutional stock broking, specialising in equities, working for Nomura, Robert Fleming, SBC Warburg, Dresdner Kleinwort Wasserstein and Mitsubishi Securities.