According to legendary hedge fund manager Stanley Druckenmiller, the commodity party’s over and the decline is just starting.

In his Sohn Investment Conference presentation, Druckenmiller said the 2002-2011 gains for commodities were an anomaly and that the declines of the past couple of years are the norm.

Why? China, he said, which embarked on an unprecedented investment program that caused the spike in commodity prices; in one slide, Druckenmiller suggested that 50% of all global demand from 2002 to 2011 came from china.

But now that level of investment has abated, the downside is underway, he said. What’s worse is that commodities producers have ramped up production expecting high demand to continue. Even if they realize their mistake quickly, said Druckenmiller, production lags mean it will take three to five years before they can adjust output. The supply/demand situation for commodities is “deadly” he added.

Druckenmiller says short Australia on commodity bust. “We think australian dollar will come down and come down hard.”

This implies that the end may also be nigh for the Brazilian Real and Canadian Dollar.

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One Response to Druckenmiller: “It’s not just a correction, commodity super-cycle is officially over. Short commodity currencies!”

  1. Rodrigo Rodrigues says:

    We can solve this on going bubble after bubble, by removing commodities from the stock market. Human lives are not poker chips. Housing,gasoline , Alcohol and food prices shouldn’t be based on speculators whims, artificially drive up prices, while sucking on the hind tit of the hard working people, If you want to gamble that’s fine, buy a corporate stock or Index fund, go to vegas or Montecarlo ,but stop stealing from hard working people!
    As in past commodity cycles, inventories will move quickly from low to excess levels as demand falls and Brazil will get hit hard, Manteca will try to pull another Chris Angel stunt on foreign investors, but at this time they will run like rabbits.
    China attempted to replicate the American boom with their own metropolitan extravaganzas on the last decade, but now they starting to wake up to reality,
    The Chinese government is faking the numbers, instead of having a market driven sustainable economic model, whereby those who work hard, are rewarded with the ability to invest and spend at market rates, and thus to maximize the efficiency of balancing the economy between consumption and exports and maximize the efficiency at which the remaining poor are lifted up, China instead chose to force all billion of its people to be dependent on cheap labor exports– a mono-economy, there s no middle class in China
    The effect of this was to cause the economy to be unbalanced and for much of the work and savings to be wasted, because it could not seek market driven best opportunities .Instead those with savings either had to accept negative REAL interest rates in savings accounts (Yuan debased faster than interest paid) or they had to chase bubbles like the real estate bubble. This was a vicious cycle, with the banks lending that money out to the entities that helped drive the investment in real estate, thus feeding the bubble.
    The wise Chinese know this and thus the corruption is rampant. They know their system is doomed, and so they get what they can. Stealing everything they can, and taking money out of the country.
    The dumb masses are duped into nationalism ( Hello Dilma lovers!)and the concept of Communist Party is God.

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