On Commodity markets:
- Historically, commodity bull markets have lasted an average of 18 years. The last one started 1999.
- Commodity bull markets are bad for stock markets. The last stock market bull run started in 1982, and probably ended 2001.
- So we are probably halfway through the current commodity bull market. If this is true, I expect the stock market to stagnate in the next 5-8 years. e.g.: Brief 'mini-rallies' of 1-2 years, whose gains are lost in the subsequent declines.
- During a commodity bull market, retracements of 40-50% are common.
- It takes 8-9 years to bring newly discovered oil supplies to market. North Sea and Alskan oil were discovered in '69 and 68 respectively, and both shipped in '77.
- 1998 was a trough in oil prices ($10), by 2006 it was $70. As an estimate, the current oil bull market may end in 2015 to 2018.
- We will know when the bull market ends when:
- Higher prices causes long-term changes in consumer behavior to decrease demand. This may be starting to happen now: eg: MRT usage increasing, Americans driving less, China and M'sia cut oil subsidies, Americans debate nuclear power.
- New oil comes to the market. eg: Recent Brazil 5-8 billion-barrel Tupi oil field. Iraq mabye (used to produce 2.5m bpd). To judge the size of oil finds: The world used 87m bpd in 2007.
- The wildcard is Saudi Arabia. Most of their oil production is from ghawar oil field. No one knows the size of their reserves (Satellite O'er the Desert). Or even if they will still want to sell it if they have a change of government: 15 of the 19 Sept 11 terrorists were Saudis.