John Stephenson is Senior Vice President and Portfolio Manager of First Asset Investment Management, Inc. He is also the author of “Shell Shocked; How Canadians Can Invest After the Crash” and “The Little Book of Commodities Investment”. What he has to say is that Europe has done what the US has done. They have thrown everything at the banks to get the economies going. However, he feels that we are 6 ½ years away for stock market recovery and 8 ½ years away from a Real Estate recovery.
He was down in the US recently and he noticed that New York was still zippy, but Miami, in a tourist state was very sad. Stephenson thinks that there is structural unemployment in the US. Some of the jobs that went with this recession are not coming back. In the sunny part of Europe, Spain, Greece and Italy, they have real estate problems and a bad economy.
However, resource prices are going up (coffee, oil, zinc, copper, etc). This is because there is a shift to the east going on. China is driving commodity demand. The thing is so many people in China are entering the middle class (and middle class income in China is about $4,000 a year). In the 1950’s some 60 to 65 million westerns entered the middle class. For China, it is going to be a few 100 million going into the middle class. Commodities go through 20 year cycles of doing very well, with stocks being quite weak. The problem is that manufacturing companies cannot raise their prices with rising commodities prices.
Commodities will rise for 7 or 8 more years and it is still a great time to buy them. Some hot commodities are in food, like coffee, wheat, pork bellies and corn. There are 3 drives for these commodities. First, is a growing population; second, is changes in diet (as people move to the middle classes); and the last, is weather. Currently gain stocks are at there lowest in 15 years. China still has small farms, but these will go big and they will mechanize. This will be good for John Deere Company and all farm equipment manufacturers.
He also feels gold will be going up. Banks are opening up gold vaults for people to store their gold. Toronto has opened one under the Scotia Towers.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.
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