Thursday, February 10, 2011

Marc Faber: Commodities Have Gone Parabolic, Ready To Fall

"Faber is concerned about commodities, as they are currently very overbought by almost any measure. He goes on to say that commodities seem to have reached the parabola stage--going straight up, which is usually the very end of the move. Yes, it could last longer than anyone expects, but at some point prices will collapse again, as they did back in 2008.

This cycle, Faber notes, always occurs as higher prices lead to an increase in supply, which eventually overwhelms the market causing prices to fall. The cycle is longer for industrial commodities compared to agricultural prices as it is harder to build a new copper mine than it is for a farmer to plant more soybeans.

This cycle will play out even with the Fed's money printing. Investors should prepare for some downside volatility in commodity prices."


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