This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

In this video we talk about why India (INDA) and commodities in general are the next huge investment trend. To understand why, we need to understand the S-curve. Macro Ops has a detailed article on this topic that I’ll link to in the comments. Be sure to check it out!

As people’s wealth increases, they buy more nonessential goods. As they do so, they consume a lot more commodities, including oil, gas, wheat, copper, and livestock. The growth in commodity consumption is exponential at this point.

We can actually predict when this will happen by tracking the GDP per capita of a country. Once the country hits a certain level, which is around $2,300 to $3,300 GDP per capita, their commodity consumption takes off. This happens in energy, but also in agriculture, where populations begin to increase their meat consumption. Raising livestock is over seven times more grain-intensive than producing for a simple plant based diet. That’s why we also see agriculture explode as well.

We’ve already seen this S-curve phenomenon happen in China (FXI). The last secular bull market in commodities which started in the early 2000’s and ended in 2011, occurred as China hit the S-curve take off point. If you bought the commodity index in 2000, right as the tech bubble was bursting, you would have compounded your money at over 20% annually over the following decade.

India is about to hit that point. Their GDP is exactly where China’s was in 2001, right before the last commodity bull market began. The country also has a population of over 1.3 billion people, just 60 million shy of China’s. Because of this, we think we’re about to enter the largest period of commodity demand growth the global economy has ever experienced.

Watch the video above for more!

And as always, stay Fallible out there investors!