"The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true."- James Branch Cabell
PERRINEVILLE, NJ (Grandich Publications) -- Ever since returning to the bullish camp on metals in the spring of 2003, I've watched numerous "experts" attempt to step in front of this commodities freight train by predicting its top or best days behind it. Even I'm guilty of that in the copper market lately. And each time so far, the party or parties have been flattened. (I, personally, have been tied to the tracks with copper wiring).
Who could forget that commercial a year or two ago on TOUT-TV (CNBC-TV) for the sergeant-at-arms of the "Don't Worry, Be Happy" army on Wall Street, Jim Cramer, where he cried, "Commodities are dead!" Or how about TOUT-TV's number one Pied Piper, Larry Kudlow, making constant "gold is dead" predictions all the way up from $350?
The secular bull market in commodities has taken no prisoners on its march to one new high after another. It has eaten up and spat out bear meat all the way up. The $64,000 question (and based on the numerous people who have contacted me of late, the dollar figure is a lot higher based on how much of their portfolio is now in commodity-related investments) is, "Has the party reached a climax?"
James Branch Cabell's quote above is most appropriate at this juncture in the commodities market. The bullish argument is indeed a best of all worlds view: Numerous years of under exploration and development led to a shortage of commodities while demand continues to outstrip supply. The bearish argument, which is hardly audible now, is that prices have risen too far and if demand slackens, prices can tumble and when all seems perfect, the end is near. So where do I stand? Hold on - let me remove the copper wiring.
While there's no apparent reason to exit the stadium for the parking lot before the crowd, I do think the easy money has been made. I also believe going forward it's no longer just about being a buyer, particularly on any weakness, but instead one should consider being a scale-up seller on selective commodities going forward.
While certain commodities like precious metals, uranium and certain agricultural-related still look to have very bright futures, I do think we're going to witness a significant economic slowdown in the U.S. and other parts of the world, and when we do, base metals in particular are vulnerable going forward. It's critical that you realize this doesn't mean start selling the moment you finish reading this. This outlook is for the months and few years ahead. Again, be a partial seller as prices rise versus a buyer now. It doesn't mean you don't involve yourself with an attractive copper stock but you make sure precious metals stocks outweigh your base metals components.
In the guessing game that Wall Street calls "market forecasting," I'm very pleased that I've been on the right side of every substantial move in gold, silver, platinum, palladium and uranium since the spring of 2003. But knowing most investors' attitudes are, "what have you done for me lately," resting on my laurels now is not going to lead to having my name added to many 2006 Christmas card list.
Therefore, I will wheel out the Ouija board, cards, spinning wheel and coin and give you my prognostications (okay now, heads is up, tails is down).
(c) Grandich Publications, LLC 2006
Peter Grandich is Editor of "The Grandich Letter," published by Grandich Publications, LLC, which provides research, analysis, and investor relation services.
