Commodities tipped to collapse

[YOUNG_TRADER]

ur first property in 15years?
Thats what i used to aim for.... when i was 5!

lol but now just past 20 and still no house... but im confident EVE and OMC will do it for me... OMC a nice car, but EVE, EVE is for my house!

Funnily enough I'm gonna need all of my EVE for the deposit requriments on my house that I'm building, settlement on land is in mid Dec, so run or not my EVE money is gonna have to come off the table

 

[nizar]

i reckon if it doubles to say 20c by then, maybe take the $125k and free-ride the rest?

just my opinion, obviously i dont know ur situation, etc.

 

[Sean K]

Looks to me like the resource bears have been put into hybernation.

1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)

 

[michael_selway]

Looks to me like the resource bears have been put into hybernation.

1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)

true but eventually i think it will crash

thx

MS

 

[thestorm]

Commodities are sure to crash shortly. Every expert around is predicting their downfall.

I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents!

 

[michael_selway]

Commodities are sure to crash shortly. Every expert around is predicting their downfall.

I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents!

i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous

thx

MS

 

[CanOz]

i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous

thx

MS

I agree...its bound to happen. Remember what causes a crash though...fear. Vertical increases create the nervous tension....then the slightest ruffle and whooooosh, down they go. Demand has and will intervene to push things along again...but as demand weakens, so will the rate of recovery from these little mini corrections. As long as the BRIC continues to pressure supply, the trend will continue.

I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example). Other factors that should create some nervousness are the amount of investment in Chinese banks, fixed assets and other "bubbles" in China and the other BRIC nations (and the US to some extent, although it seems to be a resilent BULL)

I would say that an overall picture of the global geo-political climate, as well as the economic cycles in the BRIC nations should be kept as up to date as possible for any trader or investor in a day to day manner. Its the difference between being in cash, fully invested in the equities booming, or starting to get defensive in your portfolio.

I soak up every bit of information i can every day while skimming over the rubbish that can distract you from your goals.

For a trader or an investor, the only decent bit of news to pay attention to is the broader picture.

 

[Sean K]

I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).

Yep, China will probably keep growing at it's lazy 10% until the Olympics and then what? Perhaps the middle class will have grown to a level that they start consuming their own trinkets and don't need to export every last mobile phone to the US....A self sustaining China is an Australian economic dream. Well, a WA and QLD dream....

 

[nizar]

I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).

Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...

Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??

After 27 years of growth, it will all come down because of the olympics?? or after the olympics??

So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??

I beg to differ i must say...

Please elaborate....

 

[CanOz]

Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...

Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??

After 27 years of growth, it will all come down because of the olympics?? or after the olympics??

So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??

I beg to differ i must say...

Please elaborate....

Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)

Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.

Only my opinion. I'm very interested in your take on it too.

Cheers,

 

[nizar]

Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)

Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.

Only my opinion. I'm very interested in your take on it too.

Cheers,

Did u hear about ICBC float?
The retail portion closed 78times oversubscribed and the insto 30times oversubscribed! A good effort!
And they were raising, us$19billion OH MY!!
(its not like one of our uranium floats raising 5mil and closes 3x oversubsribed big woop)

Yeh u make good points about the OLympics i suppose, but remember, China was growing at 8-10% for 27 years, long before the olympics of any of this was even known.

While back in the 80s and 90s, it wasnt really a major force, now, China is of scale (biggest consumer of copper, zinc globally) and a major player that it doesnt need to grow at 10% a year to make a big difference and push up commodity prices. The problem i see is not the demand slowing (it will possibly in %terms but in actual absolute figures, it will still grow) but the supply response. The supply response for copper is supposed to come in 2006-2007 but because of labour and equipment shortages and high oil prices causing cost blow outs, they will not come until 2007. Zinc i suspect 2008, maybe even 2009.

Every commodities cycles in the past, and they last minumum 15 years, have had mini corrections. I suspect that will happen after the olympics perhaps, and maybe u are correct. The drop in demand, or rate of growth of the demand, coupled with the (huge) supply response, should cause at least some sort of correction/crash.

 

[CanOz]

Good points Nizar...also, one thing i forgot to mention that is positive for the cycle too is the rate of savings by the Chinese people, something like 60% of their earnings....where as if they were similar to Western countries they would have all of this expansion plus consumer debt, which has yet to take root.

I hope the boom lasts much longer as you say. Certainly good to see the people prosper too.

Cheers,

 

[YOUNG_TRADER]

Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...

Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??

After 27 years of growth, it will all come down because of the olympics?? or after the olympics??

So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??

I beg to differ i must say...

Please elaborate....

Nizar, I agree with Cana

I was in China last year and was blown away at the rapid level of development, a large portion of which was being done for the Olympic games, I'm not saying that this is the only factor, but it is a big one,

I have been told by many top level Exec's that they have been amazed at how determined China is to shrug off the 'peasant farmer' status it has had for the last few centuries and cement the 21st Century as the 'New Economic Super Power' and that the 2008 Olympics will act as their Stage for the world,

As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,

While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,

Long Term Stronger for Longer driven by the Industrialisation of 3Billion People

 

[michael_selway]

As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,

While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,

Long Term Stronger for Longer driven by the Industrialisation of 3Billion People

I agree and ive said this a long time ago

Late 2007 to 2008

Thanks

MS

 

[nizar]

Long Term Stronger for Longer driven by the Industrialisation of 3Billion People

THats key

 

[BSD]

http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html

Time to get in heavy!

When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.

Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?

Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?

What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?

Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.

Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.

 

[michael_selway]

http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html

Time to get in heavy!

When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.

Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?

Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?

What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?

Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.

Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.

3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?

thx

MS

 

[wayneL]

http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html

Time to get in heavy!

When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.

Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?

Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?

What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?

Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.

Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.

I was thinking along the same lines myself, though I don't see the link between property trends and commodities.

 

[BSD]

I was thinking along the same lines myself, though I don't see the link between property trends and commodities.

More a reference to this continual assertion that there is a 'normal' value for commodities.

The mentality prevails (worse in the US) that commodity prices cannot have a bull market for more than 5 minutes but homes can easily double every couple of years and the rental property is always 'cheap' despite a 2% yield.

3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?

Probably - on momentum but maybe not on valuation.

Most analysts are getting values for BHP and RIO far in excess of current levels based on expected 2008 Cu prices around $2.50 (most have risen recently though)

LME 15 month (now a start 2008 figure) $3.15
LME 27 month $2.82

This gives an approximate 2008 average of $2.98 from the futures players.

Many analysts are still below the forward curve and nobody has a sell on BHP or RIO.
___________________________________

Grades are falling, capital costs are rising by multiples and ongoing costs are up by a huge factor as a result.

Copper is not going back to $1.20 and the long term numbers in analyst models are rising slowly.

$1.40 + long term is now common and most laugh when they use such numbers in their models.

The Olympics has very little to do with commodities demand in my view.

"Of the 36 Olympic venues, 31 are in Beijing and of these, 11 are new, 11 are being renovated and nine will be temporary sites. The cost is estimated at $38 billion (£21.7 billion). Of that, about $2.4 billion will be spent on the Olympic venues alone and possibly as much as $40 billion will be spent on urban renewal and on infrastructure improvements."

"That compares with the $16 billion expected to be spent on London’s infrastructure." -

http://timescorrespondents.typepad.com/sinofile/2006/04/in_the_heart_of.html

$70bn USD is a lot of money in anyone's book - but not enough to generate 10% GDP growth for an economy with a GDP in of US$2.50 trillion in 2006. Let alone a commodities spike.

 

[MiningGuru]

There has been a bit of a history of cities experiening post Olympic blues. Usually the boom lasts to just after the games, and then there is slowdown.

There is usally an optomistic frenzy up to the games.

Look at Sydney, where there has been a property bust pretty much since the games were over.

Barcelona, Seol, and Athens all experienced it, and Beijing proabaly will as well.

Boom to 2008, then a mini-correction