Even in the face of incredibly strong global oil demand, oil prices in 1970 were only slightly higher than they were in 1957 (approximate $3.10 per barrel). This chart provides a breath taking picture with essentially one huge rising channel. So let’s turn the clocks back to 1970 to see what the financial landscape looked like as commodities made their bear market lows. Given the above normal temperatures in the US Midwest over the last several weeks, the risk of lower-than-expected yields has increased. The closing of the “Gold Window” had an immediate impact on nearly every commodity. The last time we saw such a wide divergence between reality and perception was back in the 4th Q of 2001, when oil hit $17 (on its way to $145, we might add). PR Newswire 06/02/18. Real-time streaming quotes of the NYSE TOP US 100 index components. The intense level of bearish commodity psychology caused by years of excess supply growth, severely exacerbated by dismantling of the FSU, had by 1999 produced another great investment opportunity (1999 on the chart above). Finally, in a strange parallel with both 1970 and 2000, a very richly-valued equity market and a related investment mania are once again taking place at the same time as a great commodity bear market. However, we believe just the opposite is now unfolding. Overnight, commodity investors no longer needed to worry about a massive tightening of monetary and fiscal policy to protect the dollar’s value relative to gold and to foreign currencies. Please study the chart at the top of this essay. Goehring & Rozencwajg Associates, LLC © 2020. At the New York Stock Exchange, we are driven every day to lead through innovation and are proud to be the exchange of choice for those who embrace new thinking and fresh ideas. Furthermore, as we have discussed at length in these letters, we believe the US shale revolution will not be exportable to the rest of the world, with the exception of three plays (please see our 3rd Q 2016 letter for a detailed analysis). Store Chart Settings. Indicators. Over the last seven years, the Federal Reserve, through its three rounds of “quantitative easing” has run the loosest monetary policy ever experienced and, just like what happened back in the 1960s and 1990s, very little (if any) of that money wound up invested in commodity markets. Basic Chart Advanced Chart. Comparison . From the late 1960s until the early part of last decade, we calculate the world had approximately 500- 750 million people residing in emerging market economies that are in their period of high intensity commodity consumption at any given time. Stock Screener. In an age where everyone is obsessed with underperforming their benchmark, no one can take the risk of buying a declining or stagnant asset class— the safest bet is to stick with popular investment classes such as bonds and technology stocks. Exchange Rates. For the year, E&P stocks are down over 22%. Our modelling tells us that these upside surprises are far from over, especially with regards to oil, natural gas, copper, and agricultural commodities. (For a great essay on my research and opinion on the impact of the FSU implosion on global commodities market, please consult the book Mr. Market Miscalculates: The Bubble Years and Beyond by James Grant and look up the chapter titled “Thank Mother Russia”). Gold Prices Today - Live Chart. Comparison . Gold Price - Last 10 Years. It may therefore take some time before it appears on our website. Related Charts. Intense pessimism regarding oil prices dominated global resource markets in the 2nd Quarter. In August 1971, President Nixon “closed the gold window” and in so doing ended the US pledge to exchange dollars for gold. We and our partners will store and/or access information on your device through the use of cookies and similar technologies, to display personalised ads and content, for ad and content measurement, audience insights and product development. We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. Although commodities languished in an undervalued state through much of the 1960s, by the end of the decade they had set themselves up for a massive bull move. A group of approximately 50 high-quality growth stocks (the “Nifty Fifty”) were about to become institutional darlings and form the nexus of a stock market mania. As we have written extensively in the past, for the first time ever (even including all of the reserve revisions), we are now shrinking our reserve base of conventional oil.
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