Opening Statement from the September 2016 Intelligent Investor

Opening Statement from the September 2016 Intelligent Investor

Originally published on September 8 (premarket), 2016

In late 2010 we reported our view that there would be a significant meltdown in the commodities market in coming years. We provided additional analysis in February 2011. Our timing was spot on, as it turned out to be the peak period in commodities (the Continuous Commodities Index made a high of around 660 in January 2011). Since then, the commodities market has declined by around 50%.¹

As we first discussed in early 2010, the global economic stimulus released in early 2009 was expected to be depleted by the first half of 2011. This was one of the factors we considered prior to concluding that the commodities bubble would deflate in coming years. By mid-2011 the currencies of resource-exporting nations peaked and had begun a downward trend. Weakness in these currencies was largely mirrored by pricing in several commodities.

For several years during the commodities bubble price correction we have been warning about global disinflation leading to deflation. We believe the globe continues to face the growing threat of deflation. Specifically, we continue to believe Europe and Japan are headed for even lower interest rates.

In late 2014 (Intelligent Investor) we warned investors about a new period we expected to begin within one to three years. Since then we have witnessed several historic events strengthening the argument that this new period has commenced. A brief list of these events is as follows: