Great Investments

After the biggest weekly decline in commodities in more than 25 years, and with analysts coming out of the woodworks declaring an end to the "commodities bubble," readers may be wondering what to do with their commodity stocks, if they have any and haven't already sold.

We at Great Investments agree with PIMCO, who says there is no bubble in commodities. Our thinking is more in line with those analysts saying the current selloff in mining stocks means we're "heading towards a buying opportunity of a lifetime here" and a "speculative frenzy" is coming for junior mining stocks in the second half of 2006 and especially 2007. Also, investment guru Jim Rogers will no sell any commodity, despite the fall.

We believe, as renowned analyst Marc Faber explains:
"in real terms, commodities are still relatively low compared to equities and therefore, also given the length of the cycle - the cycle for commodities lasts usually 45 to 60 years peak to peak or trough to trough - in other words the upward wave in commodities lasts around 22 to 30 years and we are now in year 2006. The bull market started in 2001 so we are five years into the bull market. I do concede that the markets are overbought and there is a lot of speculation and I expect a correction but I think longer term from here onwards commodities will outperform the Dow Jones and financial assets."

While the current correction in commodities could last a few more months, we believe some commodity stocks have already bottomed and most will bottom before the underlying commodities because they already discount much lower commodity prices. We view this correction as a tremendous buying opportunity in select commodity stocks for the long term.