Commodity `Supercycle' Not Over, Morgan Stanley Says

Since Morgan Stanley agrees with me, I think they're geniuses (LOL!) Really, they do have some good points here, though they don't think the bottom will come until next year. And you know what? I'm seeing short-term bearishness all over the place. That's one of the best contrary indicators I can think of that the next leg up is coming sooner than anyone thinks.

Anyway, here's the Bloomberg story...

Oct. 5 (Bloomberg) -- The commodities ``supercycle'' isn't over and prices may rise because of production shortages next year, said Morgan Stanley, the world's biggest securities firm by market value.

Global supplies, which are three to five years behind demand, may test record lows in 2007, the New York-based bank wrote in a report today. ``The next leg upward in the commodities cycle'' will happen in the next 12 months, it said.

``The best-ever fundamentals for the sector remain fully in place,'' analysts led by Wiktor Bielski said in the report. ``We believe that we may not yet have seen the highs for commodity prices and therefore the commodities supercycle is just pausing for breath.''

The Reuters/Jefferies CRB commodity Index has slumped 19 percent from its May 11 record, ending a rally in prices that began in 2001, because of concern that rising interest rates and slower global economic growth may curb demand for raw materials.

``We believe these fears are overdone,'' Morgan Stanley said. Consumers in Europe, Japan and other Asian countries will replace the slowdown in U.S. consumer spending, the bank said. An increase in company expenditures and the effects of globalization will limit the slowdown in U.S. housing.

Economic expansion in China, the world's most populous country, a shortage of mining supply and investor demand for commodities will drive prices higher for a ``number of years, although we of course expect pauses and bumps in the road,'' the bank said. Pension and mutual funds have invested $120 billion to $150 billion in commodities, it said.

read the rest at...http://tinyurl.com/gtzr5

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