Investment

Is the “commodity supercycle” really over?

  • author Brandon Rowe
  • calendar November 18, 2021

Investing in commodities in the 2000s was easy. Just put your money into something that tracked various commodities and largely, you’d make money.

China was the reason. Never before had such a big country industrialized so quickly at such scale.

Those days are behind us. It’s just not that easy anymore. Or is it?

For months, we’ve been hearing about this new “commodity supercycle.”

Bloomberg’s News Trend function analyzes about 30,000 financial news sources. It’s a good proxy to understand what themes are “hot” and which ones are not, as far as the financial press is concerned.

In February, there were 3,584 articles about the supercycle. May clocked up 3,685. But by August, the theme was no longer so hot. There were “only” 1,882 articles about it.

But does that mean the supercycle is over?

Or is it really just getting started?

Like so many things, it depends on what you mean.

Do we believe that commodity prices in general are undervalued and due for big gains? Yes, we do.

But do we think it will be one where a China-driven rising tide will lift all boats in the same way it did more than a decade ago?

That’s highly unlikely.

Rather, it’s likely to be a “clunky” increase across the board. Some will rise over time. Some will spike and drop back (can anyone say “lumber”?). Others that are fundamentally sound may just defy the trends for longer than they should.

And, in a few cases, some commodities just may “pop up” to a new base and build from there.

That is especially true of commodities tied to the green revolution.

Including one that has already delivered some very nice gains to our subscribers.

I’m talking about uranium—the key commodity that drives nuclear power. With our current technology, it’s the only energy source, with the scale and stability needed to hit the world’s climate change goals.

The new case for uranium

At the end of August, we started work on our first issue of the Global Stock Analyst.

As with every issue, we had a central theme for the month. We had options:

– that had strong fundamentals

– where the market was obviously ready to “pop”

But of those options, uranium was the clear winner—or more specifically—companies that do well from increased uranium demand.

And just as we sent out our first issue on October 6th, we got what we wanted.

We launched with four uranium plays, which “popped” more than 20% just two days after recommendation. Here’s how the chart looks:

Charting our uranium positions over 30 trading sessions.

Now, because this is only four positions (three stocks and one fund) – all tied into one small sector – you see a fair amount of volatility. This is normal.

And depending on how actively you want to trade, you could choose to buy when the price is lower and sell when the price is higher (how you do that is something for a future issue.)

But even with such volatility, the trend is quite clear — towards higher uranium prices and for uranium-connected companies moving forward.

In the meantime, keep your eyes on this sector. We certainly are.

On another note, many clients first get to know us by accessing some of our free publications, courses and reports on important topics that affect you.

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