In 2002, when Don Coxe first addressed the audience at BMO Capital Markets' Global Metals & Mining conference, he predicted that the greatest ever commodity boom was on its way.
"A lot of the audience thought I was stark raving mad," the keynote speaker told this year's conference, in Hollywood, Fla., yesterday.
Eight years later, Coxe, BMO's global portfolio strategist, hasn't changed his tune. Commodities, including metals and fertilizers, remain absolutely necessary for the "growth, maturity and prosperity" of 2.5 billion people in the world, he said, and we can either choose to take part in that or lose out.
In the past, people dismissed mining stocks, saying they were short-cycle stocks and lousy investments.
"That was true as long as you were talking about the OECD countries," Coxe said.
"All the forecasters had gotten used to the idea that you tied the growth in demand for metals with growth in OECD economic activity. That was the wrong place to be looking. Why? Because starting in 1971, the OECD stopped reproducing itself."
The U.S. tried to compensate for its declining demographics by creating synthetic demand, Coxe says, enabling people who could not afford it to become first-time home buyers.
That "house of cards" collapsed in 2008, but in doing so, it obscured the very real demand that still exists and is growing in China and India.
In contrast to the shrinking industrial nations, 50 to 80 million people a year are joining the middle class in the developing world, creating a historic demand for indoor plumbing, electricity, basic appliances, cars, and meat.
"We've seen with the worst that could be thrown at us - with trillions and trillions in financial assets being destroyed, we got copper at US$3, we got oil at US$79, you go through the list. We have had the worst possible set of circumstances to maintain commodity prices -- and they didn't collapse and stay down."
A historian as well as an investment guru, Coxe takes the long view, saying the commodity story is not just a blip, but a change in history itself linked to the industrialization of ancient civilizations China and India.
Another reason he likes commodities investments is that, unlike the technology sector, they can't be replaced with the new, next big thing.
"We don't have synthetic oil, we don't have synthetic gold, we don't have synthetic copper; somebody has to actually find it and produce it and deliver it," he said. "It can't be created mindlessly by people with PhDs in physics..."
He urged the audience not just to look at the latest GDP numbers, but to also look at where the world is going to be in a few years, and to be part of that story.
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