Commodity Insight: Bull markets for commodities to unfold

The first weekly newspaper column I penned for 2019 was entitled “Commodities will rule and stocks drool in 2019.” I stated boldly in the final paragraph, “The new year, 2019, should present aggressive investors and traders with some low risk, high probability opportunities with a host of commodity markets. I also predict that in 2019, commodities will rule while stocks drool.”

As it turned out, stocks rose approximately 30% in 2019, their best performance since 2013. Commodities, per se, on the other hand, were woefully weak in most cases until the final month of the year, when they finally caught a bid and closed a tad higher.

In 2019, stocks ruled and commodities drooled — the opposite of my forecast.

But now, a new year has arrived, and a new decade, as well. And, for kicks and giggles, here are some startling facts about the single best performing asset in the decade of the “twenty tens.” That asset, of course, was bitcoin.

From Bloomberg News with a headline that blared “Bitcoin’s 9,000,000% rise this decade leaves the skeptics aghast” — and, yes, that is not a misprint. The gain for Bitcoin in the last decade was 9 million percent.

Bloomberg News stated, “Emerging out of the ashes of the financial crisis, Bitcoin was created as a bypass to the banks and government agencies mired in Wall Street’s greatest calamity in decades. At first, it was slow to break through, muddied by a slew of scandals: fraud, thefts and scams that turned away many and brought closer regulatory scrutiny. But once it burst into the mainstream, it proved to be the decade’s best-performing asset.”

Bloomberg News stated, “The largest digital token, trading around $7,200 (each) has posted gains of more than 9,000,000% since July 2010, according to data compiled by Bloomberg.”

However, Bitcoin first came into existence on Halloween 2008 by someone named Satoshi Nakamoto. At the time, I understand that 1 cent — a penny — could have bought 3 bitcoins. One U.S. dollar could have bought 300 bitcoins.

Bitcoin showed little volatility from 2008 to 2016. In 2010, it never traded over 39 cents — yes, cents — but in July 2017, it popped over the $1,000 level. Shortly later, intense volatility was unleashed and roller-coaster trading quickly ensued.

In late 2017, bitcoin rose to $19,783 level, but in late 2018, was back down to a bit over $3,000. In the summer of 2019, it was back up to $13,800 and now trades around $8,200.

A host of forecasts are calling for bitcoin to take off to the upside in 2020, with a possible assault on new all-time historic highs.

Obviously, a 9,000,000% rise is a solid return on any investment. Still, you had to stomach, to sit through the volatility that unfolded over the following years.

Also keep in mind that the single hardest question to answer when trading or investing is this: When to get out with a profit? Or, a loss?

It is a question that has no clear answer. It all comes down to how much heat you can tolerate when the market position begins to cause pain.

But for a moment think about a 9 million percent return on your investment. Buying $100 worth of bitcoin on Halloween 2008 could have led to a gain of $90 million before the end of the decade.

If reluctant to risk $100 because money is hard to come by and instead plunked $1 down, that would have returned $9 million before the end of the decade.

And if $1 was too much to risk and instead you bought 10-cents worth, a measly dime, that would have led to a $900,000 gain. As Bloomberg News so aptly stated, such gains leave me “aghast.”

Few expect commodities per se to do much on the upside here in the new year. But yours truly is convinced that climate change issues this year will be numerous across the globe supporting food stuff markets.

I also believe that a signed trade deal with China will be revolutionary for U.S. agriculture as it will be “newfound demand” and underpin grain and livestock prices for the next few years.

In the entire Big Four — stocks, bonds, currencies and commodities — the market with the most extreme cycle is commodities. And that is because sudden changes in weather, fires or natural disasters and so on can lead quickly to much lower supplies and sharply higher prices.

All my work suggests loudly that commodities per se are on the cusp of bottoming in 2020-2021 and moving higher into 2035.

My lean is for major bull markets for commodities to unfold in the new year and beyond, allowing U.S. grain and livestock producers to experience the biggest agriculture boom in history.

The year and decade ahead will be historic and highlighted by climate change challenges and newly found demand from China and emerging economies.