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CHINA AND COMMODITIES - NEAR TERM DANGERS - LONG TERM BULLS
by Jim Rogers
September 9, 2004

A bit over 5 years ago, commodities entered what should be a long term bull market.

[...]The current danger for commodity prices lies with the potential for China to hit a hard landing. Remember the last two times China had to cut back on an overheating economy? In the late 1980's it led to the Tiananmen Square chaos. The second time was in the mid-1990's, when they had to devalue their currency.

This time they are attempting to curtail spending by administrative means. And probably through interest rate increases soon. Regardless [...] expect this to lead to headlines such as <Turmoil in China>.

That will be the signal to start buying all the China and all the commodities you can. The coming crisis in China may mark the end of this first leg of the bull market in commodities. The big rally followed by disappointment and consolidation.

But, remember how bull markets tipically play out. The second leg of a big bull market tends to be wondeful and the third leg is often spectacular. But, in the fourth leg people start dancing in the streets while in the fifth leg everything is skyrocketing every day!

The pause with China growth, and the likely turmoil next year, will help generate doubt about the commodity bull market. Yet, it will likely only serve to produce consolidation after the first leg. We are nowhere near the second leg, much less the third, fourth or fifth!

That will likely serve as the bottom of this consolidation i commodities and consolidation in China. It will prove a powerful buying opportunity, so don't get distracted b the noise leading up to the event.