Harry How
Who can resist a research note that combines commodity prices and hockey?
Dave Harder, a technical analyst and consultant with Montreal-based Phases & Cycles, found what he believes is a strong connection between the two. He looked at previous market cycles in commodities and found that not only did bullish phases lift the Canadian dollar and the Canadian economy, but they also boosted the fortunes of Canadian hockey teams.
His evidence is persuasive. During the 1966-1981 bull market in commodities, for example, the National Hockey League added three Canadian teams: the Vancouver Canucks joined the NHL in 1970, the Winnipeg Jets in 1972 and the Quebec Nordiques in 1979.
The decline in commodity prices and the loonie by the mid-1990s had the opposite effect, hitting ticket sales (at least outside of Leafs Nation, in Toronto) and hurting the financial health of Canadian teams whose players were paid in U.S. dollars.
"Conditions were so bad that the Quebec Nordiques were sold and relocated to Colorado in 1995 to become the Avalanche," Mr. Harder said in his note. "The beleaguered Winnipeg Jets were sold in 1996, moved to Phoenix and became the Coyotes. The Canucks struggled to meet its payroll for many years until the value of the loonie finally improved after 2002."
With the start of the new commodities cycle in the late 1990s, the NHL in Canada has experienced something of a rebirth - and not just with this year's success of the Vancouver Canucks in the playoffs. More important to the commodities connection, a new NHL team is relocating to Winnipeg, after being moved from Atlanta.
"There could not be clearer evidence of the powerful financial and psychological impact of the 16-year resource cycle on Canada and the United States," Mr. Harder said.
However, keep in mind that professional hockey seems to be a lagging indicator, which means that the arrival of the NHL in Winnipeg should not be taken as a pound-the-table "buy" signal for commodities and commodity producers. Indeed, it has coincided with a noticeable retreat in some commodity prices, with crude oil down nearly 15 per cent from its recent high at the end of April and nickel down more than 20 per cent from its high.
Still, Mr. Harder is sticking to his belief in 16-year cycles, arguing that the new Winnipeg team is a sign that the cycle is in full swing and commodity prices should remain strong for another four years of so. Even better, his research suggests that the biggest gains in commodities come near the end of their bull-market runs.
"We should rise another 80 per cent," he said in an interview. "In January of this year, we were at the same part of the commodities cycle as we were in the 1970s when the markets took off."
And hockey fans take note: The Montreal Canadiens won the Stanley Cup six times in that decade.
David Berman