The world sure does seem to want to use a lot more natural resources these days. It seems it really started during our dotcom bust. Go figure.
Let's put this in perspective. There were 6.68 billion people on this planet in 2008.
The world produced 2.84 billion metric tons of cement. That's 937 pounds of cement for every man, woman, and child.
The world produced 1.33 billion metric tons of steel. That's 439 pounds of steel for every man, woman, and child.
The world produced 39 million metric tons of aluminum. That's 13 pounds of aluminum for every man, woman, and child.
The world produced 15.4 million metric tons of copper. That's 5 pounds of copper for every man, woman, and child.
That's just 4 materials out of many and my share is already up to 1,394 pounds. That's in just one year. Mind boggling. I didn't even mention lumber, drywall, food, toilet paper, and so on, and so on.
Ever get the sense that the world's exponential growth engine is peaking? I do. I thought I was stagflationary but it is very difficult to embrace the commodity story right now.
Just look at that growth in cement production. Is it our intent to just pave over the entire planet? Look at aluminum. It's even worse. I thought we recycled that one.
These were the prices as of 2008. Gold was already the clear winner at $28 million per metric ton. It now trades at $37 million per metric ton ($1151.70 per troy ounce). That puts it at well over double its average inflation adjusted price from 1950 to 2008. Some say it will even reach its previous bubble's peak. It's certainly in striking distance. Then what? Everyone panics again?
Short-Seller Jim Chanos: Red Flag Over China
What are you shorting?
There are ways to play Chinese companies outside of China. Either they trade in Hong Kong or New York. Probably more important from an investment point of view, this has implications for the people selling stuff to China—cement, glass, copper, steel.
Source Data:
US Census Bureau: World Population
USGS: Historical Statistics for Mineral and Material Commodities
Dennis Kneale (CNBC) just said that he thinks our economy is stronger than it was a decade ago.
ReplyDeleteForehead. Desk. Whack. Whack. Whack.
Whats with all that aluminum? I am a diet coke addict but I do not think that cans make up all that bulk?
ReplyDeleteGYSC,
ReplyDeleteAluminum Uses
In modern planes aluminum makes up 80% of their (unladen) weight, and a normal Boeing 747 contains about 75 000 kg of the metal.
Buildings made with aluminum are virtually maintenance free due to the strength of aluminum's corrosion resistance. Due to this and its light weight it is used in cladding, windows, skylights, gutters, door frames, and roofing.
Not one mention of aluminum foil hats though! I'm therefore not entirely sure we can trust the source. ;)
Oh, and let's not forget aluminum hoarders. By current estimates, I won't need to buy aluminum foil again until 2040. Not entirely sure that was a great plan of mine, but if the US ever defaults on its debt at least I'll have something.
One more thought.
ReplyDeleteIt isn't like the blue line in that last chart (aluminum) made it all that bad of an idea. In the grand scheme of things, it wasn't like aluminum was seriously overpriced. It was well below its average inflation adjusted price and it is energy intensive to produce, even if it is abundant.
If we could just get the tin foil hat types to switch to gold foil hats, we may finally get the blow off top metal bubble!
ReplyDeleteGYSC,
ReplyDeleteRumor has it that the hats will be made in China from here on out.
Expect paper mache!
Paper Mache
Using paper mache techniques, you can create almost anything...
Mark,
ReplyDeleteOnce again I'm off topic but was wondering if you would field a question.
After studying the China situation would you feel comfortable venturing a guess as to when they might go 'boom'?
1-3 years?
3-5 years?
10 years or over?
I'm not asking you this to throw it back into your face if your wrong.
I'm just curious to see if you have ever thought about it, and whether or not you feel like putting on your Johnny Carson 'Carnac the Magnificent' hat and taking a stab at it.
watchtower,
ReplyDeleteI first started to think dotcoms would crash in 1998/1999. I was at least a few years too early.
I first started to think real estate would crash in 2004. I was at least a few years too early.
I first started to think that China's stock market would crash about the time I started this blog in 2007. Until that point, I hadn't really thought about whether or not China was in a bubble though. I might have heckled sooner had I known.
Savvy Chinese Know Exactly When Bubble Will Burst!
SSE Composite Index
My guess is that even if I am right, things can go on longer than one would think. It could easily be a few years. I wouldn't guess more than 3 though. That's assuming I am even right of course.
Keep in mind that I thought gold was expensive at $1000, at least compared to toilet paper. It's quite a bit higher. It's not like I've done any "Savvy Gold Investors Know Exactly When Bubble Will Burst" posts though. I'm not snorting and chuckling with conviction. Let's just put it that way.
Here's the thing stopping me. I'm just as worried about savvy treasury investors and I'm one of them! I don't feel comfortable parking my money anywhere these days, be it gold, stocks, TIPS, or cash. It has to be somewhere though.
Gold could be very unpredictable if China's economy crashes. Part of me thinks it could crash with other commodities. The other part of me cringes if I am wrong on that.
More and more people want to sleep well at night. I posted this as a response to one such person.
Re: Be Careful What You Wish For
Thanks Mark!
ReplyDeleteYour reply went into more detail than I could have hoped-for.
watchtower,
ReplyDeleteYou are welcome.
Just keep in mind that more detail doesn't necessarily mean more accuracy. You are asking me to predict the future after all. ;)