Chris Holden

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Stansberry Research Outlines The One “Law” For The Resource Sector

by Chris Holden - April 20th, 2018.
Filed under: Investment Publication.

According to Stansberry Research, the resource sector is the area to watch an a great way to diversify some money outside of the traditional asset management terms most people are familiar with like stocks, real estate and bonds. With all that said, there is an important law everyone needs to know about the resource sector before investing a single penny, commodities are cyclical.

Headquartered in Baltimore, Maryland, Stansberry Research is a privately owned publishing company. Their specialty is investment research and generally their publications include natural resource, oil, mining and power investments as well as biotechnology and healthcare. The company was created in 1999 as an independent investment research firm. The company’s founder, Frank Porter Stansberry, also writes opinion pieces for many other financial publications where he discusses financially diverse topics. Prior to creating Stanserry Research, Frank Porter Stansberry was the editor of The Fleet Street Letter.

In a recent article published by Stansberry Research, they outlined how the resource sector could be a big winner for some, as long as they are willing to understand the law of that particular sector, commodities are cyclical, meaning they go through a cycle of booms and busts. Like other free markets, the resource sector is driven by the simple laws of supply and demand. When one of the two gets out of balance, ,the market is quick to react and that, in turn, generally will correct the imbalance over time. In most markets, supply and demand stay fairly well balance, but the resource market is quite different. It generally takes longer for the markets to react when they become imbalance. For example, once an oil company has spent millions to drill a well and begin producing oil or gas, they are quite hesitant to pull back on production simply because the price begins to drop. This allows for larger imbalances between supply and demand which in turn creates larger swings in the resource sector in both directions. In turn, this also means that these types of commodities are not correlated to other assets and stocks which gives them an opportunity to be more valuable than other stocks when traditional stocks become too expensive.

If this sounds like a risk you are willing to take, and according to Stansberry Research it can be a lucrative one if you are buying the right thing at the right time, then take their advice and look into coffee. Not gold or oil, coffee. Coffee is experiencing a dead market, as it has been twice over the past five years, and both previous times it rapidly turned the other direction and soared up a 45% gain in 2015 and 92% in 2014. According to a recent piece in Stansberry Research, there is an expectation that it is likely that coffee will repeat that pattern in the next year or less.

 

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