⛏ THIS could kill commodities

Greetings Contrarian,

This is another Sunday edition, with your most pressing question. Here we go:

Dear Capital-defender,

The big question right now that’s threatening most if not all commodities (perhaps excluding uranium and gold, but that’s to be confirmed), is a possible imminent recession.

There are a few reasons to believe this, whether it be a deflationary one caused by commercial real estate, the end of government backed incentives during and post-covid or inflationary ones of yet-to-be-fixed supply chains.

In short, there are many reasons to be bearish everything.

Commodity stocks are particularly sensitive to crisis in the short to mid-term because they 1- may reflect the price of the commodity, specially a flash crash and 2-may reflect the general state of the stock market because they are stocks after all.

I can’t remember a recession that’s been so advertised, expected and yet slow to really show it’s claws.

That’s not to say we’re living in a time of plenty, and I personally believe many commodity stocks are historically cheap, but that doesn’t mean they can’t get cheaper.

The bigger question is what is your time frame?

If it’s 5-10 years, it might be safe to assume that by weathering a possible recession now you’ll be riding a wave of “clean energy hype” in the next couple of decades and will be wishing you bought more at these levels.

If your timeframe is shorter than that, I’d be spreading my bets and treading more carefully.

There is one more thing you should not ignore.

Technology.

I think the demand vs supply argument for all metals is very strong and well established. What may put a wrench in it would be what killed oil in 2014 - technical advancements that either dramatically increased supply or reduced demand.

Let me give you an example of what that looks like:

No, this is not to say that the bull is dead.

But it does help us to put things into perspective.

Now, maybe the price of copper will only reach highs that will be visible with the use of binoculars instead of a telescope. 😅

Happy speculating (responsibly),

The Editor

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational/entertainment and is not investment advice or solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.