Big Cycles Lead to a Big Boom!
What Nikolai Kondratieff called “The Long Wave” — later named the “Kondratieff Wave” in his honor — shows that the economy moves through cycles.
Additionally, each cycle has four “seasons”:
1. Spring: Innovation and an increase in productivity signifies an economic boom.
2. Summer: Greater affluence leads to changing attitudes toward work, resulting in a slowing of economic growth.
3. Autumn: A stagnating economy further curtails growth, while the gulf between the “haves” and “have nots” increases dramatically.
4. Winter: A debilitating depression tears at the social fabric.
Panics and crises mark periods of decline in the K-Wave, followed by economic troughs.
Notable events include:
The Panic of 1819 … the “Long Depression” of 1873 … the “Great Depression” that began in 1929 … and the stock market crash of 1973, when the market lost 46% of its value, ushering in a period of “stagflation.”
The last peak of the K-Wave was in 2000 when the dot-coms fizzled. The economy has been in the declining phase ever since. (“Winter” began with the Great Recession of 2008.)
Then, the Coronavirus pandemic tipped the economy into depression in 2020.
But at every K-Wave peak, something else happens:
Public influence prevails over private influence in an economy.
The government intervenes by printing more money … manipulating interest rates … and increasing welfare and public works programs.
So where are we now?
DEAD CENTER in a K-Wave trough!
And do you know what that means?
It means we’re at the NEXUS of peak government spending …
… at the same time the economy is showing signs of turning up!
And that, my friend, is why we’re in the middle of a COMMODITIES BOOM.
Unprecedented government spending on infrastructure …
Combined with unprecedented economic stimulus …
Plus, pent-up consumer demand ready to explode …
… equals unprecedented wealth opportunities for investors.
I know. I’ve been pounding the table like a madman about this lately, but here I go again …
Commodities are where it’s at, my friend!
An easy way to ride this big cycle, and this potentially even bigger boom, is to buy the Materials Select Sector SPDR Fund (NYSE: XLB).
This fund has an expense ratio of just 0.12%, and it’s stuffed with the biggest basic materials names, both in the U.S. and internationally.
Companies including Linde plc (NYSE: LIN), Air-Products and Chemicals, Inc. (NYSE: APD), Newmont Corp. (NYSE: NEM), Ecolab Inc. (NYSE: ECL) and Freeport-McMoRan Inc. (NYSE: FCX).
Looking at the chart, you can see that last month, the XLB pushed through overhead resistance. Now, it’s stepping higher.
My intermediate-term target is $91 a share. But as the money printing shifts into higher gear, this fund could go much, much higher.
All the best,
P.S. What comes after winter? That would be spring … and new innovation and economic boom times into the SIXTH Kondratieff wave! (But that’s a subject for a future article.)