Resource cycles

[obiwan]

ok, i think your first experience of the stockmarket sets a real bias imprint. I found stocks in the 90's when resources were a dirty word, like you had to spit every time someone said 'resources' and run away so you didn't buy any of this cheap stuff as it went lower and lower, and as the last resource bulls got ground into the ground.

Resources have run hard recently, I am rethinking whether it could keep going, get hotter even. Does anyone have info on resource cycle, average duration, relation to interest rates, variance over full cycle, bear, bull periods ?? All I know is that the average resource cycle is somewhere between 10-16 years ??

 

[Cosmos]

Typical you would not look at metal prices to find the answer to this as there are so many factors involved.

Normally resources do well when the economy does well and this period is not eception as you have pointed out.

The problem is todays economies are rather new and finding set "20 year" cycles are very difficult. I have the inflation and GDP data for the US back to 1666 and I tell you there is no set pattern as time has gone on we have become much better a managing the economy and the cycles are lasting for much longer.

I am asuming you trade stocks and not the likes of the nymex and london exchanges. For stocks like Santos there is a pretty exact 3.2 year cycles matching the highs which we are just about at the peak now, WPL tends to be a bit longer with about 7.5 years between peaks.

Its not hard to find the cycles to trade stocks at all, for example using data for Santos back to 1983 its pretty obvious.

As for getting an exact "resource/economic cycle" I am still working on that, its not easy as its only recently when the cycles have been more stable.

Cheers

 

[RichKid]

Some observations by Ross Gittins in the SMH about resource cycles, just a few basic comments:
http://www.smh.com.au/news/Business...urces-hog-cycle/2005/02/11/1108061868642.html

 

[Wysiwyg]

How do we know when resource demand is declining? Is there a defining moment when demand for Australian resources is on the decline and the downward cycle is unfolding gradually? Could this be identified by large contracts being severed or reduced, less new mining operation start ups, less output of resource end products?

The decline feels like it is happening now but the American financial crisis has shrouded any affirmation that the down cycle is well under way. Like it's only a Chinese thing now and that demand has peaked and is on the decline.



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[Wysiwyg]

Another opinion about the resource cycle is shown below. This guy reckons there is substantial more urban growth in China yet we see whole modern cities devoid of people. Maybe people like the country or prefer not to be herded into other locations.
India has a completely different ruling party as well as different social and economic groups compared to anywhere in the world. India to me appears disorganised, scattered and in no big hurry, but the resource boom dedicated to India and their supposed urbanisation still gets circulated.

Commodity demand outlook is strong

Allan Seccombe | Thu, 08 Apr 2010 14:58
[miningmx.com] -- ONGOING funding tightness in the mining sector is one of the factors feeding into Xstrata’s belief that the recession was merely a blip on the super cycle in commodity prices and the short- to medium-term outlook is positive albeit fraught with uncertainty said CEO Mick Davis.

Commodity prices are running higher again, with copper at pre-economic meltdown levels, platinum surging higher and iron ore prices being targeted for large increases.

Xstrata has long held the view that the supply side of the commodities market is constrained and that demand will rise strongly as urbanisation picks up pace in developing nations like China, India and Brazil, which are home to a sizeable portion of earth’s inhabitants.

http://www.miningmx.com/news/markets/commodity-demand-outlook-is-strong.htm