"You basically see a commodity supercycle in embryonic form, but it's going to grow very fast.  [If geopolitics gets more complicated] you set the stage for a big bull run."

In Zoltan Pozsar's most recent interview pursuant to his missive entitled War and Peace, he spoke with Resource Talks in mid March. During this conversation, he laid out rather concisely  the main points of that report. So we listened and wrote a follow up to that piece outlining Zoltan's key interview points, which were tangentially different than War and Peace.

Contents:

The Two Commodity Narratives

Three Things Governing the Second Narrative

Rate Hikes in the New Narrative

G7 Government Spending's Themes

There are Two Outcomes from This

Rate Hike Recession Effect Summarized

How Long a Supercycle?

Attached is a blow by blow of key concepts broken out, to be used as a follow-along while listening or as a stand alone post. It is Pozsar's points broken out chronologically in what should be easier to digest.

The Two Commodity Narratives

There are two competing narratives surrounding commodities when rate hikes commence right now.

Narrative One:

High prices combined with rate hikes will crash them, as the Volcker era demonstrated

Supportive of this was what happened in the 1970s when you also had the market responding to higher prices incentivizing more supply growth.

2008 was a similar effect due to supply side growth and liquidity collapse.