The Future of Commodities Markets

When you really get down to it, successful investing is nothing more than establishing a balance between running with the herd and avoiding a foolish commonality. It is not about being right in any objective sense: Consider those who made fortunes on worthless companies in the 1990s.

Nor is it about being right too early, a strategy often described as standing in front of a moving train. Only a small percentage of fortunes have been established by being the first on board with the best idea. It's likely that far more money has been made by selling too soon in a mania or buying too early in a panic.

These thoughts kept springing to mind last week in Geneva, where I was part of a panel entitled the Commodities Investors Forum. There were some items of consensus in the room, not the least of these was that we remain in the early stages of a multiyear bull market in commodities. There were also some disingenuous arguments made on behalf of commodities that confuse past performance with future results, alleged to be a real no-no in this business.

Why Commodities: First, the Obvious

The reasons for such a bull market enjoyed no such consensus. There was the usual red-meat approach of saying governments will debauch currencies, so people should buy gold and other inert stores of value.

The Wall Street/City of London representatives' opinions can be summarized as follows: We went through a long period of low investment in commodity production facilities, and it will take multiple trillions of dollars (trillions with a "t," it was emphasized) of new investment to rectify this. New production will not arrive until 2014 or so at the earliest.

As an aside, the year 2014 promises to be an exciting one. Pseudoscientific market technicians who are capable of adding 16 to the year of an earlier market peak or trough tell us that 2014 will mark the takeoff point for the next great bull market cycle. Alas, suspended animation until such a point arrives is not an option.

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