An EPIC Commodities Boom Is Starting

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“Digitization and the online platform have become too successful. So much so that they have exceeded the capacity of [the world's] physical structures to deliver to their success.”
Demand for commodities, tangible assets and the companies that mine, manufacture and transport them is about to blow sky-high predicts, Steen Jakobsen, Chief Economist and CIO at Saxo Bank.

He bases this prediction on several factors.

First, the digital world does not exist independently from the physical world. And the massive success of virtual platforms over the past several decades has now reached a point where the infrastructure to source, build and deliver the products they sell is becoming a serious constraint.

Second, governments are becoming more concerned about social equity and stability. Steen predicts a significant increase in federal spending on ‘green’ infrastructure to drive jobs and upgrade capacity for commerce.

Third, Steen believes the market is not pricing in the prior two factors. So he expects a price-boom to occur once investors wake up to the fact that commodities haven’t been this undervalued relative to other financial assets for at least 50 years:

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This is a companion discussion topic for the original entry at https://peakprosperity.com/an-epic-commodities-boom-is-starting/

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Agree or disagree, Steen just gave us viewers a dozen blunt investment recommendations for free! Wow what a great interview.

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Well after a big 80% rally in copper off the lows in March 2020, when compared with SPX, it still seems undervalued. Either SPX will be crushed, or HG will rally. Assuming that “stuff” will still be in demand going forward.

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A boom in “things” means there has to be a boom in “people” using them or just more use. This is what I can’t quite see. 1960-1980 the baby boom came of age and there was a rush to commodities due to demand. I’m not quite getting Steen’s model. I am too skeptical government spending plus MMT can generate the kind of consumption Steen anticipates, especially with a divided government trying to get infrastructure built alongside declining/collapsing birth rates.
One of the big deflation drivers is also simple efficiency. I used to photocopy my taxes and mail them, now it’s all digital. I used to publish written books, now I’ve moved to Kindle. Bikes are so much better today I ride a lot more in worse conditions. As the population ages it just spends less money on things. I sure hope Steen is right and I’m wrong, though.

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A boom when record numbers of small businesses have gone under? A boom when the unemployment numbers are exploding every quarter? The entire economy just underwent a lockdown. 50% of the restaurants in NYC are literally going out of business.
Big tech and Walmart are the only winners, and I’m not sure that makes up for the historical losses to the real economy. Well, I guess he’s the expert…
To tell the truth if he ends up being right I might just cash out of all my investments because it will be proof that I have absolutely no idea what’s going on.

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So if you don’t travel, and don’t go to restaurants, and don’t get your hair cut, and you don’t go to the movies, and you don’t get your nails done, and you no longer go to the gym because you have been terrified by the pandemic and all those places have been shut down (while target, and wal-mart, and costco remain conveniently open), you have a lot of extra money to spend on things.
That’s what we’ve seen happen anyway. All that money that used to be spent on “hospitality” and “experiences” has been retargeted at buying stuff.
And stuff uses commodities - like copper. That’s my sense anyway.
Will this continue? That I don’t know.

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My entertainment budget has definitely been repurposed to a combination of paying off all debt and buying stuff. Now my stuff may be a bit more practical than the latest gadget but solar panels and other useful stuff most definitely use materials to make them.

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Dave your copper-spx graph looks like the US birth rates. Commodities boom when you have consumption, and an active middle-class having children is really what drives consumption. Old people just aren’t very active.
This is exactly why I have a problem with Steen’s thesis. But I’m mulling it over, and I’ve never seen a smarter guest. I think I’m getting old and just am not “getting it” :-).

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Fine interview Adam. I have started to build an inflation portfolio a month or two ago. And things there are just starting to look up. There is a catch, however, and that catch is Mitch McConnell. If the Repub.s win those two Georgia run-offs, then he will slow the green new deal and infrastructure spending to a trickle. Then the boom will be pushed out into the future even though there will, indeed, be upward pressure on commodity prices next year.
Stay safe out there, best to everyone.

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Oil is about to rip!!! I am fully invested and will be for quite awhile until I’m not.
Falling dollar…Covid/Vaccine…World wide reopening…vast quantities of metals needed… fuel for Infrastructure, Travel. Inflation.
In my humble opinion this will be a lifetime worth of profits as OIL crawls out of its world Wide malaise and they better get ready to pump whatever it is they can because as it pertains to infrastructure this is our last shot at building out an Infrastructure for our next 100 years and we won’t have oil again to meet the needs that will be needed to build out a state of the art Electrical Energy Future.
I think Hydrogen will be a huge part of our future as well. Merry Christmas.
 
 

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Be good if Mike and John could weigh in on fixed income; baby bonds, preferred shares, and REIT’s. Seems like the advisory is mostly focused on growth vs safety when many of us here are fixed income seekers. Thanks!