Water Shortage Poses A Great Opportunity in Commodities

The World’s Biggest Threat Is Your Greatest Opportunity

Date 25/07/2008

The Right Side

Garry White

The recent price fall in commodities is actually good news… there are buy opportunities ahead

There will always be cycles in supercycles... prices move ahead too quickly and investors cash in profits they have made.

Markets, even runaway bull markets, always correct. Those corrections can be painful, but you should hold your nerve. The long-term secular bull market for commodities is still here… and it still has many more years to run. Probably decades. It offers a fantastic opportunity for those in the know to get rich… very rich.

Any price falls are a welcome buying opportunity. Fundamentals have not changed at all.

The Earth is being stretched to the limit, as populations soar and affluence rises. This has created a supply crunch for basic materials such as copper, iron ore and oil.

It takes years to find and develop new resources to meet this demand… and discoveries are few and far between.

This means that when demand goes through the roof, there is a massive lag in the ability of industry to get these raw materials into the market.

History repeating?

This is not the first time we have seen a correction in commodity prices in the past 12 months. It has happened before on more than one occasion... only for new highs to be reached in the following weeks and months.

In October last year, commodity prices slid as problems in credit markets hit home. This did not last for long.

Oil rallied to a new all-time high at the start of January, before falling 13% in the following 4 weeks.

The bulls were then back in charge… until March.

A smaller-than-expected US interest rate cut caused the dollar to temporarily reverse its decline. This prompted another commodities slide.

During the third week of March, the commodity-tracking CRB index, which tracks 19 distinct commodities, saw its largest weekly fall since its inception in 1956. It fell 8%.

Between 24-28 March, oil fell by almost 10%, platinum lost 10% and wheat fell 17%. Gold sank by 11% in just three days – with one of those days seeing gold’s worst one-day fall in more than 17 years… But prices did not fall for long… and I believe they will recover again.

The CRB Index has fallen 11% since July 3rd. It is now back to the level seen in March. There may be further falls to come – but they will be temporary setbacks.

Just consider what is going on with the dollar.

The US government is still pumping taxpayers’ money into the financial system. The Fed won’t be able to raise interest rates to tackle inflation until the economy is on a more even keel (if it ever manages to right itself).

It is going to take years to unravel the US housing mess and the problems in the credit markets. This is bad for the dollar… and good for commodities in the long run.

Personally, I welcome a relatively brief dip in prices. It will give me chance to recommend some of the companies I have had my eye on for some time – but have been concerned about valuations.

In particular, I have one copper play in mind. It is listed in Canada and I had the opportunity to talk to its CEO a few months ago… but you will have wait for those details until another day.

Do not be over concerned by this bull market correction. You have seen it before… and you will see it again.

All you need to do, to get in on these opportunities… is become a regular Smart Commodities UK reader… Read how the biggest threat to the world is actually your biggest opportunity here.

Regards,

Garry White
Editor
Smart Commodities

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