Morgan Stanley has turned bullish on commodities… Regular readers know commodity prices are extremely low right now. In August, the Bloomberg Commodity Index, which tracks 22 different commodities, hit its lowest level since 1999. The commodities crash has hit everything from energy prices to metals to “soft” commodities like sugar and oats. The price of oil is down 42% since its June 2014 peak. Oats and coffee prices are both down more than 40%. On top of that, silver recently hit a six-year low…but is now rebounding sharply. In a note on Wednesday, Morgan Stanley (MS) said it expects commodities to have a “sharp reversal from the experience in the last 18 months.” It expects commodity prices to rise 14% next year and another 19% in 2017. • Morgan Stanley expects commodity demand from China to pick up… Regular readers know China’s economy has been growing at its slowest pace since 1990. This has created big problems for commodities. That’s because China is the world’s biggest commodity consumer. It accounts for half of the copper, aluminum, nickel, steel, and coal used every year. Fear that China’s economic growth might continue slowing is a big reason why commodities prices have crashed over the past 18 months. In its note on Wednesday, Morgan Stanley said China would “remain key to commodities demand.” China’s economy is growing slower than it was before…but it’s still growing faster than most of the rest of the world… The International Monetary Fund (IMF) expects the Chinese economy to grow by 6.8% this year. That’s twice as fast as it expects the world economy (3.1%) to grow…and almost three times as fast as it expects the U.S. economy (2.6%) to grow. • Morgan Stanley also turned bullish on mining stocks… The firm says mining companies are a once-in-a-generation bargain right now. In fact, it sees 19% upside in its favorite miners…and not just because it sees commodity prices rising. Regular readers know that falling commodity prices have slammed mining companies. Glencore (GLEN.L), one of the world’s largest mining companies, has been hit especially hard. Glencore’s sales dropped 25% during the first half of the year. The company posted a $676 million loss for the period. Glencore’s stock price plummeted 54% over the past year. It hit an all-time low last month. Other big mining companies have plunged, too. Australian mining giant BHP Billiton Limited (BHP) is down 33% over the past year. And U.K.-based mining company Rio Tinto (RIO) is down 19%. Morgan Stanley says miners are now cheaper than they’ve been in three decades. Business Insider reports: “Valuation is attractive in a historical context both at sector and company level,” Morgan Stanley wrote. “That means a change in perception around commodity prices can have a significant impact on the shares in our view”… “The sector’s absolute trailing P/B of 0.85…is the lowest level since the global recession of 1982,” it said. Price-to-book (P/B) is a popular way to value stocks. It compares a company’s stock price to the “book value” of its assets. If a P/B ratio is under 1.0, this often means a sector is undervalued. The mining sector’s P/B ratio of 0.85 suggests mining stocks are extremely cheap. On Wednesday, Morgan Stanley upgraded its ratings on BHP Billiton and Rio Tinto from “equal weight” to “overweight.” Both stocks jumped on Morgan Stanley’s bullish comments. BHP Billiton rose 4.6% yesterday, and it’s up another 1.2% today. Rio Tinto rose 1.62% yesterday, and it’s up another 2.4% today. • Global commodity stocks are rallying this week… This morning, Bloomberg Business reported that commodities are headed for their biggest weekly gain since 2012. As we write, the Bloomberg Commodity Index is up 3.5% this week. Meanwhile, Glencore’s stock price has nearly doubled since hitting an all-time low last month. And Canadian energy stocks hit a seven-week high, Bloomberg Business reports. Regards, Justin Spittler Delray Beach, Florida October 09, 2015 We want to hear from you. If you have a question or comment, please send it to [email protected] We read every email that comes in, and we’ll publish comments, questions, and answers that we think other readers will find useful. Recommended Links — Goldsmith: Why I Work For Doug Casey Now—Eye-Opening Report from Former Stansberry Director Sean Goldsmith recently left Stansberry to work alongside one of the most influential economists in the world today, Doug Casey. There’s probably not another American alive today who has done as many international deals and learned as much about global economies, currencies, and the inner workings of foreign governments. “Now,” says Casey, “we’re on the cusp of a new and major crisis here in America, one that’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009…” Goldsmith explains the full details here.