PROJECT M
 

Our rare earth

Drawn by the lure of a “super-cycle,” pension funds have been investing in commodities. But are rising prices a given? Throughout the 20th century, metals trended downward; this century they whiplashed upward. So, do rising prices indicate a secular bull run? If so, is it due to resource scarcity or just bottlenecks caused by a lack of investment. Or could it indicate the next bubble?

© Project Triangle

Our rare earth

Drawn by the lure of a “super-cycle,” pension funds have been investing in commodities. But are rising prices a given? Throughout the 20th century, metals trended downward; this century they whiplashed upward. So, do rising prices indicate a secular bull run? If so, is it due to resource scarcity or just bottlenecks caused by a lack of investment. Or could it indicate the next bubble?

Betting on the future

Paul Ehrlich once paid $576.06 to Julian Simon after losing a famous wager. In 1980, Simon had Ehrlich choose five commodity metals and bet that their prices would be lower at any date more than a year away. Ehrlich believed humanity faced a demographic catastrophe in the near future, with the population outstripping growth in supply of food and resources. In the 10 years between the bet and payment, the world’s population rose by an estimated 800 million, the largest ever increase in one decade, but the price of all chosen metals dropped significantly. Simon argued that despite continuous population growth and finite physical resources, lasting benefits would be achieved into the future through ingenuity, substitutes and technological progress. Julian Simon died in 1998. The price of the five metals trended downward before rising in 2002. Copper, for example, set a record of $457.95 in February 2011.

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