By Stephen Blumenthal, CEO, CMG Capital Management Group
All cycles eventually come to an end. In the case of commodity bulls, 16 years is the average duration. The longest lasted 24 years (1896–1920), the shortest lasted 8 years (1972–1980), and the most recent secular bull ended in 2011 after 12 years.
What ends a commodity bull cycle? Success. Success invites increasing amounts of capital—oil is a prime example. High prices over a number of years invite competition; capital races in, with more drilling, new technology, fracking, shale, natural gas, and alternatives. High prices drive the need for improved fuel efficiency. Supply and demand imbalances force corrections, but in commodity cycles, those corrections tend to take time. Producers need to cut production, but no one wants to.