Commodities Boom Only In 'Early Innings'

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Back in December, Saxo Bank’s Steen Jakobsen predicted a massive boom in commodity prices was dead ahead. Not many others shared that view back then.

But, boy, was he ever right.

Commodity prices have exploded in the five months since that interview was recorded.

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And more important, in Steen's eyes we ain’t seen nothin’ yet. He predicts commodity prices are going to continue heading higher, a LOT higher, from here.

Why?

Growing demand for limited supply (demand push inflation). And further fresh $trillions in upcoming stimulus programs (monetary inflation).

Infrastructure around the world is being rebuilt – much of it badly needed. Tens of $trillions will be spent over the coming decade by governments now looking to such massive spending as a way to spur jobs and growth.

And in the more immediate future, Steen calculates 2021 economic growth has already peaked and sees a weaker Q3 ahead. He predicts the central planners will need to step in with new stimulus programs like we saw earlier this year.

Which is why Steen agrees that, now more than ever, it’s important to partner with a financial advisor who understands the nature of the market risks in play as well as the opportunities, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate.

To watch our interview with Steen, click on the image below:

Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical resilience preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

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This is a companion discussion topic for the original entry at https://peakprosperity.com/commodities-boom-only-in-early-innings/

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Thanks for this interview Adam.
I love the detail that he provided on the “100 year” portfolio (of Chris Cole fame). I think the most important component of that portfolio is the long VIX positioning. I was able to use the market volatility this week to roll my long VIX positions from this month to December. Everybody wanted VIX call options on Wednesday, so I sold, and nobody wanted them today, so I bought.
There was a big sale on Pan American Silver (PAAS) yesterday (covid-related production problems) so I bought some long term call options. Based on this interview I think I will be buying more miner call options on price weakness.
If you could get an interview with Chris Cole in the future that would really be fantastic.
Thanks again for the great interview.
 
 

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I notice that Adam rarely discusses the reasons for differences in New Harbor’s recommended portfolios versus that of his guests. Perhaps that is a courtesy to the guests or helps in recruiting new guests. No one wants to come on and get put down later behind their back. I also noticed there was no New Harbor commentary after Pippa Malmgren’s video. I don’t know if I could have made many polite comments on her reasonings either.
It turns out my portfolio is very similar to Steen’s portfolio (except I have no TIPS nor Treasuries). It is similar to Ray Dalio’s all weather portfolio. While John and Mike are very into hard assets I think that they are making a mistake in not looking at REITs, which are another hard asset with returns. I share their concerns with market valuation and I consider my equity exposure as a hedge not FOMO. As John and Mike say, “we are in uncharted territory”. We don’t know what the result of all this stimulus and extreme deficit spending will be. So if it results in high inflation I don’t want 100% cash losing value. Inflation can be harmful to the stock market but it can be harmful to your purchasing power also.
So good luck to everyone in maintaining (or growing) their assets. Having to guess what the policy response to any event will be doubles the danger. I haven’t been so conflicted in my life.

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The pandemic has made a big difference for us. We will all feel the consequences of this, it should be remembered that there will also be people who will be willing to earn on it, which is not always consistent with the conscience of a human being. The choice is up to each individual.

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You might have to wait quite a while for decent returns

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I suspect the play is overblown and risks now are on the downside. The infrastructure play is less than meets the eye (remember all those Shovel Ready jobs under Obama that turned out not to exist?). Infrastructure projects could take a decade just to permit.
And then there are all kinds of shortages from labor to concrete to transportation. We won’t see much actual building for years.

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davidrussell: You might have to wait quite a while for decent returns
Yeah....it took two whole days to double my money on PAAS.
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Some interesting thoughts and questions raised here:
https://wallstreetonparade.com/2021/05/are-record-setting-commodity-prices-a-result-of-demand-or-futures-manipulation/

... From 2016 through 2019, lumber prices traded between $300 and $600 per 1,000 board feet. During just this month, however, lumber has spiked to as high as $1,733.50. It closed on Friday at $1,390. These skyrocketing prices in commodities are more than a little peculiar. The federal government believes that the economy of the U.S. is at such grave risk that Congress needed to infuse $1.9 trillion into the economy in a stimulus bill passed just two months ago. Just a year ago, GDP in the U.S. for the second quarter had plunged by 32.9 percent, a worse quarterly record than even during the Great Depression. The grave worry then was deflation. All of these commodities that have been setting historic record prices have one thing in common: they all trade on futures exchanges owned by the CME Group. ...
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@westcoastjan This is an interesting idea to be sure. A few weeks back Zerohedge covered a guy claiming to have video of quite a bit of lumber stacked up in a rail yard. Enough to lumber to make one question the shortage narrative.
 
https://www.zerohedge.com/commodities/what-lumber-shortage-train-loads-lumber-just-stacked
As someone who believes PM prices are held down (actually I gotta update that to say, “As someone who has seen the head of the CTFC publicly admit to tamping Silver prices down”) I fully expect the finance guys to position themselves for a big manipulative ride up in the end.
This will be important because there are gonna be a lot of bagholders after the (someday) precious metals blow off top. Commodities are always like that it seems.

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In the futures market there is ALWAYS someone on the other side of the trade. Someone can’t be short without someone else being long. Most times the prices of commodities are normal but at other times they are very influenced by speculators who think that the price will either go up or down and want in on the action. The only way to prevent this would be to restrict futures trading to producers and consumers. For example in oil then a producer would be an upstream oil company and a consumer would be an airline. The futures market for most commodities is 10X to 100X the amount actually produced/consumed. Supposedly the convergence to a delivered price is supposed to stop manipulation but for many producers/consumers, especially in the short term, they must continue to produce or consume or they destroy their business. PM though is much less of a necessity and I believe harder to manipulate or if manipulated then definitely not be the bullion banks. The profits that they make in bullion are miniscule compared to their overall profits. For everyone that thinks that PM prices are manipulated downward, then just keep taking delivery. The problem is no one wants that much PM sitting around their house.