Are you looking for a bargain to buy in 2018?
Commodities are cheap. Dirt cheap. And I’m going to show you a chart illustrating just how danged cheap they are.
This is a Bloomberg chart. It compares the Standard & Poor’s GSCI Total Return Index, which tracks 24 raw materials, against the S&P 500.
The chart shows us that commodities haven’t been this cheap compared to stocks since 1999. A generation is 25 years. So, this is as close as we’ll get to a once-in-a-generation buying opportunity.
Now, there are two ways this chart could resolve.
- Stocks could get a lot cheaper. I know many of my colleagues believe stocks are overvalued. Our work at the Edelson Institute tells us that stocks are going higher – potentially much higher – before they go lower.
- Commodities could go a lot higher. Indeed, we’re already seeing this start to happen. The first sparks of what is likely to be a great bull run.
For example, we just saw the U.S. oil benchmark hit $60. That’s the first time that’s happened since mid-2015. And back then it was on the way down.
There are a lot of reasons why oil prices are recovering. Part of it is due to OPEC and Russia getting their sh*t together and making production cuts stick. But there’s also rising global demand.
Oil demand grew by 2.4% in the second half of 2017. So says the International Energy Agency. That’s up from the 1.7% in the first half of the year. Global oil demand is accelerating.
Looking forward, many analysts say demand is going to gather steam in 2018, too.
Part of this is that the rest of the world wants to drive like big, fat Americans. And this is pumping up prices in another commodity: Palladium. It’s vital for catalytic converters in gasoline powered cars. No wonder the price of palladium just hit a 17-year high. I told you about that supply/demand squeeze just last month.
But what about the electric vehicle megatrend? The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2 million now. And let me pound the table about this: Every forecast of electric vehicle adoption has been too conservative.
So, won’t that lower global oil demand? Not in the next decade. For one thing, by 2040, the IEA (and others) say the number of cars on the road will double from one billion to two billion. Wow!
But sure, that EV megatrend is gathering steam. And that’s ramping up the prices of “energy metals” cobalt and lithium. I’ve written about the surging demand for those metals in columns like this one and this one.
But the EV megatrend is also going to ramp up metals that we normally don’t think of as energy metals: nickel and copper. I told you that as well.
And just this week, we learned that China shut down its top copper producer, Jiangxi Copper Co., as part of its war on smog. At the same time, China’s imports of finished copper are soaring. Up 19% year over year in November.
No wonder copper just jumped to a 3.5-year high! And this bullish story has a long way to run.
I could go on and on. There are so many commodity bulls snorting and pawing the ground, it’s like the running of the bulls at Pamplona around here. That red flag is going to wave. They’re going to be charging down Wall Street soon enough.
Get yourself positioned for that big bull run. 2017 was a great year. Thanks to commodities, 2018 could be spectacular.
All the best,
Sean
Do you like gold, silver, and other metals? How about the micro-caps in exploration and development? If so, you’ll want to join me in Vancouver on January 19 and 20. I’ll be speaking about energy metals at the Metals Investor Forum. And I’ll be joined by an all-star team of analysts, writers and experts: Eric Coffin of HRA Advisors, Gwen Preston of Resource Maven, John Kaiser of Kaiser Research Online and many more. To find out more, just CLICK HERE.
Mr Richard Bosshardt January 5, 2018
ATTN: MIKE BURNICK
1. THERE SEEMS TO BE NO AGREEMENT ON WHETHER THE THE STOCK MARKET WILL PULL BACK BEFORE EIGHT SHOOTS UP HIGHER. I AM CONTRASTING SEAN BRODERICK’S ARTICLE VERSUS THE TSUNAMI WAVE ARTICLE. ARE YOU AND YOUR EXPERT’S NOT ON THE SAME PAGE?
2. I CAN’T FIND THE ARTICLE ON TSUNAMI WAVE. IS IT UNDER THE EDELSON AINSTITUTE OR WEISS REPORTS WEB PAGE ? OR CAN YOU SEND IT TO ME ?
3. I HAVE ASKED BEFORE: WHAT ETF IS BEST FOR BUYING COBALT ?
THANKS,
RICHARD
David January 4, 2018
“Commodities are booming. But some say they’re about to get shredded.” This is from another article on the same page. So which is it?
Our Outlook for 2018: Stocks, gold, oil and more. – Retirement Cheat Sheet January 3, 2018
[…] This is a chart I snagged from Bloomberg and posted to The Edelson Institute site in a column titled: “Your Once-in-a-Generation Buying Opportunity.” […]
Robert Schubring December 28, 2017
That palladium shortage is likely to get shorter.
With gold prices rising, semiconductor manufacturers need a cheaper, electrically conductive, soft, malleable material with which to wire-bond microchips to chip carriers. (When you pull the cover off your cell phone, chip carriers are the black rectangular objects with shiny wires sticking out, that are soldered on top of the circuit board. Inside them are flat wafers of silicon where all the electronic goodness takes place. And hooking the silicon to those shiny wires sticking out, are Wire Bonds.)
For decades, Wire Bonds were made with skinny gold wires. But now that gold isn’t dropping back below $1000 an ounce, but is clearly moving the other direction, chip makers need a gold substitute.
They’d like to use copper. It’s cheap, soft, malleable, and conducts electricity. But there’s one teensy problem. Copper forms an oxide that conducts electricity a lot slower than the metal does.
So chipmakers want something to plate on top of that copper, to stop the oxide from forming.
Right now, that something is Palladium.
That’s why Palladium prices are exploding upward. it does a bunch of functions that no other metal does as well.
Will someone start digging through landfills to exhume old electronic scrap and get the gold out of it someday?
Peter D. A. Warwick December 28, 2017
You’re ignoring peak oil, which all evidence points to we being at. Therefore it is just a matter of time until oil extraction goes into a terminal decline. The decline will be slow at first and then it will pick up speed. One scenario I’ve seen is that modern civilization could implode and vanish within 20 years of the crisis starting. Oil shales and soil sands represent the last desperate gasp to keep the oil party going. I’ve seen an estimate that the Permian Basin will peak about 2021. Assuming that other oil shale basins peak about the same time in the United States and elsewhere that gives an estimate of 2023-2025 for the beginning of the post peak era for the world. However this is a moving target effected by quite a number of variables, including the impact on world demand for oil by the new great depression, the electric car, solar power, solar fuels and other such things.
Paul Jackson December 28, 2017
I’m a believer in the commodity prospects but would also like any info you have on a crypto-currency ETF. Any info there?
Josh Holliday December 28, 2017
Instead of just “Talking about it” . . . Why don’t you recommend (3) ETF’s we could buy to take advantage of the coming Run up in commodities/metals ??
That’s what we pay for! . . .Where is that?, I don’t have time to search all over this website for it, so don’t send me that suggestion.
Josh
Verne Collier December 28, 2017
Gentlemen:
You guys are doing great. I am anxious to know if gold has hit the bottom yet. If not approximately when do you look for that ?
Thanks,
Verne
Mr Michael Mirata December 28, 2017
WHAT IS THE RIGHT SYMBOL
Ed S. December 28, 2017
Sean,
I usually enjoy reading your analysis and ideas; however, this statement: Part of it is due to OPEC and Russia getting their sh*t together and making production cuts stick. – is below the standard of professionalism I expect from a Weiss associate. A much better way of expressing this thought would have been to say that Russia and OPEC have agreed to co-operate on production cuts for their mutual benefit. There is no need to join the rest of popular culture (and journalism) in a race to the bottom of the barrel, so to speak (since the article was about oil). I think many of the subscribers to a Weiss product expect a higher standard. I look forward to seeing that expectation met in your future output. All the best.
Como651 December 29, 2017
He was using the colloquial or vernacular language that’s easy to understand. I didn’t find it offensive but refreshing compared to the same culturally conservative choice of words we most often hear. Freedom of expression and creative writing are essential to capture the readers interest and not put them to sleep. I think all the writers at Weiss are excellent with their sometimes over the top choice of words. If you fault this what does that say about the President and his unorthedox tweets?