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If it takes a decade to create a mine, how do supply and demand for commodities find an equilibrium?
Badly.
The commodities supercycle is driven by the mismatch.
During a boom, miners overinvest and overpay for ore in the ground. By the time the mines produce, there’s a glut and prices crash. This leaves marginal projects shelved. But that only creates the future shortage which causes commodity prices to spike again.
In other words, supply is constantly overcorrecting for demand.
You can see why it’s called a commodities cycle – the booms and busts are inherent in the equation.
The question for investors is: where in the cycle are we today?
And my old friend Shae Russell has the answer, as well as the particular part of the commodities cycle that are set to boom.