Charles Nenner: Commodities Bull Market is Over for Couple of Years
Charles Nenner, executive director of the Charles Nenner Research Center, was interviewed on Bloomberg regarding his views on the economy, Euro crisis, stock and bond markets, the current status of the commodities cycle, and China. Nenner commented that the German bond yielding between 1.45 and 1.5 was amazing.
Nenner said his cyclical work shows that prices do not move at random. He brought in an example of a chart showing 30-year cycles for U. S. bonds going back to the year 1780 (see below).
Nenner said the current cycle of low rates is almost over and he predicts it will end in September of this year. Nenner said rates would not rise because of a strong economy or inflation, but because of fear. Governments selling bonds will have to give more premium because people don’t trust them, according to Nenner.
Nenner’s work indicates the economy will slow in the U. S. this year, but will pick up again in 2013 – 2014. He added investors should be careful with stocks and be ready to sell fixed income.
Nenner said he was still out of gold after selling at $1,900. Nenner said there were no safe haven investments. He indicated that investors could buy real estate because “at least you’ll have something.”
Regarding the dollar, Nenner said it could drop in 2014 leading to an inflationary situation. He said the Euro dropping below 128.50 would lead to much lower levels with a target of 110 (since this interview the Euro has plunged to about 124 to the dollar). Nenner said if some of the weaker countries exit the EU, the euro could become a much more stable currency.
Nenner said he thinks the commodities bull market is over for a couple of years. Nenner added that he was short copper and crude oil.
Regarding China, Nenner said it was an interesting case. In 1900 it was the second largest economy in the world according to Nenner. He added that it is not a given that China will be the big power people are expecting it to be. He said because of Chinese Taoism they don’t have a western way of thinking. He wouldn’t buy Chinese stocks at the moment.
When asked about future policy responses, Nenner said most people don’t understand the difficulties of the situation. Nenner commented on the supercycle in capitalism which he claims lasts 250 years. It’s been kept going by printing money and giving credit to people, but the supercycle is coming to an end, according to Nenner.
Nenner mentioned Kondratiev in Russia who in the 1920’s predicted capitalism would go under. Stalin and others didn’t like him because he said the downfall would take 100 years, so they put him in jail because they wanted to prove immediately that communism was better.
The supercycle has been postponed since the U. S. went off the gold standard, according to Nenner.