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A surprising resuscitation in commodity stocks
Tuesday 15 March 2016
A crisis, which we did not seen for decades. Commodity stocks went downhill for four years in a row. An industry literally collapsed.
Thousands of geologists became unemployed. Prices imploded. But, suddenly, the stock market is turning around.
The start to 2016 in stock markets was volatile. Most stock indices slipped into the red. The boom time in industrial stocks in the market faltered. But this was not the case for the universe of commodity stocks.
It is always the same in the stock market. In the end the investor cannot stand the pain any more. He can not suffer further losses. The first year with prices dropping he grudgingly holds on, however, there is still hope. Because of me, he will hold on through the second year, but in the third year with further drops in prices he has had enough and does not even wish to check prices anymore. That was in 2014. Then 2015 came along and commodity stocks, such as
gold mines, industrial metals, as well as oil & gas, fertilisers and diamonds – everything - crashed again. Large blue-chip companies such as Glencore and Barrick lost about 80 percent of their market value in the past few years.
Without the general public knowing it and unexpectedly, a turnaround began in February 2016. It was led by gold mining stocks. The effect was impressive: Our commodity equity funds "ME Fund - PERGAMON", where we maintained our course during the crisis years, recorded an increase of 14.5 per cent in value since the beginning of 2016.
Maybe it's time to look at the world of commodity stocks again. So far, the music has only played for gold mining stocks. The fertilisers, oil & gas, uranium and
base metals sectors are still not involved. It may turn out that 2016 will be a year of stabilisation in the commodity sector, so that a new phase may begin
in 2017. There is an understanding in stock market that prices discount the future by at least six months.
Exciting months await us.