When commodity prices started to go up in 2001, nobody believed that the move would be a permanent move, so there was no supply response. Towards 2006, commodity prices had gone up substancially and there was some supply response. But then came the crisis in 2008 and the financing dried out, so suddendly the supply did not increase.
Therefore at the present time in my view, we have no real supply response yet, and it takes a long time to to bring on a new oilfield...and the marginal cost of producing oil today is 70 dollars per barrel. And in the copper industry the situation is similar. The cost of production has gone up substancially. It takes at least 12 to 15 years to bring onstream a new copper mine.
But near term I would not buy industrial commodities because as I told you, I think the chinese economy will decelerate very substancially in 2010, and could even crash. If the chinese economy decelerates or crashes, what you have is of course a disaster for industrial commodities.
in Bloomberg
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world. Dr. Doom also trades currencies and commodity futures like Gold and Oil.
