Commodity capital expenditure booms historically occur during high-rate environments, not low ones. High rates signal an undersupply in the physical economy, indicating that capital must be deployed into 'asset-heavy' industries to meet demand, which in turn leads to a broad repricing of physical assets.

The oil industry's boom-bust cycle is self-perpetuating. Low prices cause companies to slash investment and lead to a talent drain as workers leave the volatile sector. This underinvestment, combined with natural production declines, inevitably leads to tighter markets and price spikes years later.

Major investment cycles like railroads and the internet didn't cause credit weakness because the technology failed, but because capacity was built far ahead of demand. This overbuilding crushed investment returns. The current AI cycle is different because strong, underlying demand is so far keeping pace with new capacity.

Despite record-high commodity prices, mining and energy companies are hesitant to invest in new production. Shareholders, scarred by past value destruction from over-investment, are demanding capital discipline. This investor-led constraint stifles the natural market supply response.

Historical commodity supercycles are not smooth upward trends but are characterized by a series of distinct, sharp price spikes. This "bubbling cauldron" nature, driven by investor fear and subsequent underinvestment, can mislead participants into thinking the cycle is over prematurely.

For 20 years, pension funds and endowments shunned investment in mining and resources due to political and social pressures. Now, a confluence of geopolitical necessity and reshoring is creating a demand shock that institutional capital is unprepared for, forcing them to chase a supply-constrained sector and exacerbating the rally.

This supercycle is a direct result of three global policy shifts. The 'war on free trade' forces resource stockpiling. The push for energy security drives electrification. Finally, fiscal transfers to lower-income groups (redistribution) boost demand for physical goods.

The current commodity supercycle is intensified because traditionally asset-light tech companies (hyperscalers) are now massive consumers of physical resources. They are building data centers and competing for materials like copper, fundamentally altering their business models and commodity demand.

Decades of underperformance, driven by government policy favoring other sectors, have left the commodities space (metals, oil & gas) without a new generation of "rockstar" investors. This talent and capital vacuum means that even small inflows from passive strategies could trigger outsized price moves as capital rotates.