An Alternate View on the Commodity Bull Market

12. April 2009 by Dan Walkow, CFA, CMT.

As playwright Arthur Miller once observed, “An era can be said to end when its basic illusions are exhausted.” And most of the illusions that defined the late global economic boom—the notion that global growth had moved to a permanently higher plane and housing prices from Miami to Mumbai would rise indefinitely—are now indeed exhausted. Yet one idea still has the power to capture imaginations and markets: it is that commodities like oil, copper, grains and gold are all destined to rise over time. Lots of smart people believe that last year’s swoon in commodities prices represented a short pause in a long-term bull market.

According to an article in Time magazine the bull market that ended last summer saw oil prices rise tenfold over nine years, mirroring the duration and magnitude of the previous bull market, which ended in 1979. That was followed by a bear market that lasted 20 years. If history is any guide, we’re only at the beginning of another long one.

My comment, as always commodities and commodity stocks are meant to traded.

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