Your SlideShare is downloading. ×
0
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
America and the Commodity Supercycle
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

America and the Commodity Supercycle

646

Published on

Objective Capital's Americas' Resources Investment Congress 2011 …

Objective Capital's Americas' Resources Investment Congress 2011
Ironmongers' Hall, City of London
1 February 2011
Speaker: Chris Watling, Longview Economics

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
646
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
11
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. AMERICAS’ RESOURCESINVESTMENT CONGRESS America and the Commodity Supercycle Chris Watling – CEO, Longview Economics IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY, 1 FEB 2011 www.ObjectiveCapitalConferences.com
  • 2. Commodity Super Cycle: Alive & Well?Chris Watling, CEO & Chief Market Strategist, Longview EconomicsPresentation to Objective Capital ConferenceJanuary 2011
  • 3. Commodity super cycle – alive & well? CRB commodity index – rebased to 100 @ start of the bull cycleFeb-11 www.longvieweconomics.com 3
  • 4. Commodity Super Cycle – Alive & WellCommodity Super Cycles (1780 – today)US Commodity Super Cycles (1780s – today)Start of super End of Super Size of Super Length of cycle Indexcycle cycle Cycle (years)Mar-1788 Dec-1814 135% 26.8 Warren and Pearson Kondratieff, a RussianDec-1814 Feb-1843 -62% 28.2 Warren and Pearson economist working in theFeb-1843 Aug-1864 208% 21.7 Warren and Pearson 1920s, found evidence ofAug-1864 Jun-1896 -70% 31.8 Warren and Pearson a commodities super cycle back to the 1780sJun-1896 April-1920 218% 24.0 Warren and PearsonApr-1920 Jun-1932 -80% 12.2 CRB monthly Since his work in theJun-1932 Jan-1951 689% 18.6 CRB monthly 1920s, those superJan-1951 Jul-1968 -40% 16.6 CRB monthly cycles have continued although appear to haveJul-1968 Oct-1980 215% 12.3 CRB monthly shortened in durationOct-1980 Oct-2001 -31% 21.0 CRB monthlyOct-2001 today 137% 9.0 World, CRB, Spot Index Feb-11 www.longvieweconomics.com 4
  • 5. Kondratieff Waves 1750 - 1910 Warren & Pearson & CRB combined Commodity index (1750 – 1910)Feb-11 www.longvieweconomics.com 5
  • 6. Kondratieff Waves: 1900 - present Warren & Pearson & CRB combined Commodity index (1900 - present)Feb-11 www.longvieweconomics.com 6
  • 7. Commodity Super cycles – What drives them?1. Industrialisation phases2. Weather cycles3. Monetary cycle4. Long Capex cycles5. Long term demographic trends“Price historians in Europe have suggested seven causal explanations, which might be called monetarist, Malthusian, Marxist, neoclassical, agrarian, environmental, and historicist models” From ‘The Great Wave’, David Hackett Fischer.Feb-11 www.longvieweconomics.com 7
  • 8. Demand Drivers: Developing (& industrialising) Asia: A 3 billion elephant Largest non developed Asian economiesAsia (Population rank in GDP GDP per capita population Long term Realsize relative to RoW) ($bn 2008) (US$2010) (bn; % of ASIAN total) growth ratesAsia (23) (a) $7,239bn 4,070 3.60 (100.0%)China (1st) $3,206bn 3,999 1.33 (36.9%) 9.1% (1997-2007)India (2nd) $1,200bn 1,124 1.13 (31.4%) 9.7% (1997-2007)Indonesia (4th) $433bn 2,858 0.23 (6.4%) 5.9% (2001-2010)Pakistan (6th) $143bn 1,067 0.164 (4.6%) 4.8% (2000-2009)Bangladesh (7th) $68.4bn 624 0.147(4.1%) 7.4 % (1997-2007)Vietnam (12th) $68.6bn 1,168 0.086 (2.4%) 10.0% (1997-2007)a: excludes HK, Japan, Singapore, South Korea & TaiwanNB USA = 3rd 304mn pop; Brazil =5th 191mn; Russia = 8th 142mn; Nigeria = 9th 137mn; Japan = 10th 128mn; Mexico = 11th 110mnFeb-11 www.longvieweconomics.com 8
  • 9. China & India: Climbing the Industrialisation commodity intensity path Chinese, Korean and Taiwanese Copper Chinese, Korean and Taiwanese Oil consumption and real GDP per head consumption and real GDP per head 35 20 Oil consumption per head (barrels) Copper consumption per head (kg) 18 30 16 25 14 12 20 10 15 8 10 6 4 5 2 0 0 - 5,000 10,000 15,000 20,000 - 5,000 10,000 15,000 20,000 China South Korea Taiw an GDP per head GDP per head China South Korea Taiw an Source: Longview Economics, Reuters Ecowin, WMBS Source: Longview Economics, Reuters Ecowin, BP Statistical Review of World Energy June 2010Website: www.longvieweconomics.com Feb-11 9Twitter: ChrisatLongviewLinkedIn: Longview Group
  • 10. Commodity Super Cycle – Alive & Well Chinas share of world consumption (% of total) 1998 2008 2020**Copper 11% 28% 43%Aluminium 11% 33% 45%Oil 6% 9% 20%Lead 9% 36% n/aGold 8% 13% n/aCoal 29% 43% 50%+Natural Gas 1% 3% 15%+ Source: Longview Economics, WMBS, BP world oil report **Forecast Longview Economics Feb-11 www.longvieweconomics.com 10
  • 11. Short Term Risks: Residential Housing Bubble Average house price to per capita Residential property prices in ‘Top disposable income in major cities Tier Cities’ RMB (per square metre)Website: www.longvieweconomics.comTwitter: ChrisatLongview Feb-11 11LinkedIn: Longview Group
  • 12. Why will money creation continue? US Total debt to GDP (%): 1916 to 2009 400.0% 370.6% This spike in the debt to GDP ratio peak reflects a 30% fall and subsequent 2008 350.0% pick-up in GDP, not dramatic changes in debt levels, although debt rose rapidly, prior to that in the Total credit market debt to GDP (%) 1920s 300.0% 250.0% 200.0% 150.0% 100.0% 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008Feb-11 www.longvieweconomics.com 12
  • 13. Ageing Western populations Drives Rapid increases in Public/government DebtPublicdebt as a% of GDPOECDestimates Source: BIS WP300, March 2010 Feb-11 www.longvieweconomics.com 13
  • 14. Four phases of the Gold Price (1971 – 2010) Long term gold spot price (USD/ounce)Feb-11 www.longvieweconomics.com 14
  • 15. Monetary Argument: 4 Phases of Real interest rates (1971 – 2010) The 4 phases of real interest rates (1971 to 2010) 15.00 real rates Loose/negative sharp tightening of real rates - broadly low/negative this real rates real rates stable early/mid 80s to past decade mid/late 90s 10.00 sharp falls in gold price Gold price up gold price gold price up sharply thro to broadly flat sharply 1980 peak 5.00 % 0.00 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- n- Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja -5.00 -10.00 Fed funds rate less 1 yr forward inflation Fed funds rate less 3 yr forward inflation Source: Longview Economics, Reuters EcoWinFeb-11 www.longvieweconomics.com 15
  • 16. Potential Geopolitical Challenges/Resource Wars Resource Bottlenecks – Potential Conflict FlashpointsGlobal trade chokepoints/bottlenecksFeb-11 www.longvieweconomics.com 16
  • 17. contact us at: info@longvieweconomics.com join our LinkedIn Group: “Longview Economics” follow us on Twitter at: “ChrisatLongview” www.longvieweconomics.comLongview EconomicsT +44 (0) 207 062 8802 Market Timing, Macroeconomic, Thematic & Commodity ResearchInfo@longvieweconomics.com
  • 18. • Disclosures: This report has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete description of the securities, markets or developments referred to in the material. The information on which the report is based has been obtained from sources which we believe to be reliable, but we have not independently verified such information and we do not guarantee that it is accurate or complete. All expressions of opinion are subject to change without notice. This report has been prepared solely for the person to whom it is addressed and must not be relied upon by any other person for any purpose whatsoever. We accept no responsibility whatsoever for any investment or asset allocation decision taken on the back of any or all of the information and/or advice in this report.• Longview Economics is not authorised nor regulated by the FSA.Feb-11 www.longvieweconomics.com 18

×