Commodities: Be bullish, you’re not buying at the peak – by Martin Mittelstaedt (Globe and Mail – May 6, 2013)

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Gold has cratered into bear market territory. Ditto for silver and copper. Aluminum is in a big downtrend too, along with its metallic cousin nickel. The price of oil has been moving sideways and agricultural commodities are well off last year’s drought-induced highs.

Glance at a list of commodities, and just about everything other than natural gas has been doing nothing or heading south. Sure, there are occasional counter trend rallies, like Friday’s nice move upward for oil and copper on the back of stronger-than-expected U.S. payroll figures, but the overarching trend doesn’t look good.

Investors have got to be getting jittery about one of the prime reasons for plunking down money in the space – the notion that we’re in a commodity super-cycle, a once-in-a-generation move upward for natural resource prices. If the trend is really over, commodity exposure will be a sure way to sink portfolios.

But my hunch is that we’re in a kind of pause that refreshes, a lengthy and painful correction in what is likely to be recognized as a bull market that has further to run.

Those views were reinforced at Desjardins Securities Inc.’s annual commodity conference last week in Toronto. Each year, Desjardins assembles some of the world’s leading experts.

Contrarians take note. One comforting observation for the long term bullish thesis is that the event was lightly attended, always a good sign that market players don’t have to worry that they’re buying in at the peak. The apathy partly reflects that equity investor attention to miners has been reduced through the hollowing out of the sector’s Canadian large caps through foreign takeovers of Inco, Noranda, Alcan, and Falconbridge. But it’s also because investors in the space are punch-drunk from the recent blows to their portfolios, and can’t bring themselves to hear anything about commodities.

Many of the comments by experts weren’t full of doom and gloom. Even though many commodities have growing supplies, there was no chatter of prices declining anywhere near back to the lows of the early 2000s, when many commodities were at a fraction of current levels.

Take the worry that China’s growth is slowing dramatically, and will pummel copper, a commodity for which the Asian country is the world’s largest consumer. Recent Chinese purchasing manager surveys have suggested lacklustre economic activity, but on-the- ground observations are telling a different story.

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