Commodities' Best Month Since 1974 - Is This Supposed to Be Good News? 23 comments
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As HAL9000 and the program traders jump from theme to theme, commodities has struck a fire - not 60 days ago deflation was all the scourge - now it is inflation. Notice how the stock market has become like a fantasy football game? Each and every economic report or data point (much like an injury or trade) completely changes the game. Themes that used to take years or at least quarters to reverse, now can reverse in days... based on the last data point.
Well this month's theme has been commodities; indeed the group is headed for its best month since (wait for it...) 1974. Considering the huge surge in commodities in 2007 and through summer 2008 that is saying a lot. But in a thin market, where program traders dominate - this is the sandbox they've chosen for the time being. Oh Hugh Hendry, what say you?
Mmm... the 1970s. I do believe I've been reading somewhere we'll be having fond memories very soon of the fun times of that decade.
Via Bloomberg
- Commodities headed for the biggest monthly rally in 34 years, led by energy, as the slumping dollar boosted demand for raw materials as a hedge against inflation.
In May, the Reuters/Jefferies CRB Index of 19 energy, metal and agricultural prices has gained 14 percent, the most since July 1974. The dollar was poised for the biggest monthly drop since August against a basket of six major currencies.
- Crude oil was set for the biggest monthly gain in a decade. Gasoline has soared more than 30 percent in May. Gold & copper surged, while corn and soybeans reached the highest since September. (all excellent things for the nascent "green shoot" consumer recovery)
Ironic quote of the day comes here
- Investors are seeking a “safe haven from a weaker dollar,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago.
A safe haven FROM the weaker dollar? Just 60 days ago the dollar WAS the safe haven. But in the A.D.D. era of computer trading dominance where we change our minds on a weekly basis, that whole story is over and now we're back to fleeing the dollar. That's just how the short term oriented casino now works. Boo Yah.
But Australia and Canada (resource dominant countries) are seeing the exact opposite.
- Canada’s currency headed for the biggest monthly gain since the Korean War as commodities surged, global stocks rallied and the U.S. dollar tumbled. The Canadian dollar rose 8.8 percent since April 30, the most since at least October 1950.
“This does seem like a historic move,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. “The biggest driver has been the decline in general fear, compounded by an increase in specific fear for the U.S. dollar, which might or might not be appropriate.”
- The loonie, as Canada’s dollar is known, dropped a record 18 percent last year on plummeting prices for commodities, which generate more than half the nation’s export revenue.
- The dollars of New Zealand and Australia, which like Canada’s tend to trade in tandem with stocks and commodity prices, added 13 percent and 10 percent respectively this month against the greenback, as the prospects for global growth improved.
They did hide this guy at the bottom of the article...
“I don’t know where all the optimism for the economy is coming from,” said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York. “When you look at housing and autos, all of those things are still weak. There is a disconnect between what the reality for the economy is and what people think.”
Please Mr. Groenwegan - please don't rain on our parade with facts. We have liquidity out the wazoo per our central banks and it has to go somewhere. We just put an additional $55,000 of debt onto each American household and it's right that speculators deserve to get their just rewards off the backs of taxpayers. It's bubble time 4.0.
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This article has 23 comments:
Most notably high gasoline will be back to kick the American consumer while they're already down. The dollar is weaker and certainly we will be looking at commodity inflation. But last I checked, employers don't give cost of living wage increases when unemployment is at 10%. The unemployed will gladly work your job for less if you're not happy about your compensation.
So the spending power of the American consumer will continue to decline. Is that a green shoot?
The production of fantasy assets requires nothing more substantial than a digital delusion and a willingness to embrace ever more elaborate public policy falseholds. The production of real assets requires real resources, work, entails taking real risk and providing tangible value in exchange for compensation. No surprise that that it takes more and more fantasy assets to procure real assets. Commodities are yet another market that is marking down our national delusion. They are telling us, if we choose to listen, that reality trumps illusion.Commodities are not the bubble: Government decit is.
We cannot avoid paying for our debts. We can do it directly via interest rates and a lower national credit rating rating or we can do it indirectly via rising commodity prices and a manifestly declining standard of living . Pay we must.
On Jun 01 08:01 AM User 353732 wrote:
> The rise of commodities versus the dollar simply reflects that there
> is yet another shift in the global economic balance of power between
> fantasy assets such as the dollar and pound( ie. vapor currencies)
> and real assets. As the supply of fantasy assets continues to grow
> explosively ,their exchange rate versus real assets must continue
> to deteriorate.
> The production of fantasy assets requires nothing more substantial
> than a digital delusion and a willingness to embrace ever more elaborate
> public policy falseholds. The production of real assets requires
> real resources, work, entails taking real risk and providing tangible
> value in exchange for compensation. No surprise that that it takes
> more and more fantasy assets to procure real assets. Commodities
> are yet another market that is marking down our national delusion.
> They are telling us, if we choose to listen, that reality trumps
> illusion.Commodities are not the bubble: Government decit is. <br/>We
> cannot avoid paying for our debts. We can do it directly via interest
> rates and a lower national credit rating rating or we can do it indirectly
> via rising commodity prices and a manifestly declining standard of
> living . Pay we must.
Name something that the government actually produces that people want? or what services does the government export?
So the overall trend is expansion of the money supply at the government level...which will eventually lead to a larger base of money to expand the money supply through bank loans ON TOP of decreasing economic productivity.
Talk about inflation.
Besides - isn't this what the Fed wanted - to prop up prices by inflating the money supply? They've tried to steer $$ to real estate by colluding with Congress through tax credits and pushing housing lending. Unfortunately for them, the intended inflation is occurring in commodities which will tax consumers and producers alike. More people should go in commodities to at least offset some of the costs they will face filling their tanks in the future.
Once again, government intervention shows unintended consequences and the creation of malinvestment. You can't blame people for covering their own a...
Pain and anger will mount and hopefully voters get off the couch and use that PC and Internet to research why this is happening to them and vote out the corrupt, crooks and inept in Washington. History tells me this occurs four years after the start of a depression. Q4 was the beginning of depressionary numbers, so 2012 should represent a large sea change in politics.
On Jun 01 09:11 AM MinAkkar20 wrote:
> I agree entirely that the public is viewing commodities as the only
> real store of value right now. With the Fed artificially holding
> interest rates low, why would anyone want to put their money in dollar-denominated
> savings at negative real returns?
>
> Besides - isn't this what the Fed wanted - to prop up prices by inflating
> the money supply? They've tried to steer $$ to real estate by colluding
> with Congress through tax credits and pushing housing lending. Unfortunately
> for them, the intended inflation is occurring in commodities which
> will tax consumers and producers alike. More people should go in
> commodities to at least offset some of the costs they will face filling
> their tanks in the future.
>
> Once again, government intervention shows unintended consequences
> and the creation of malinvestment. You can't blame people for covering
> their own a...
And, as Dave Cohen notes, the additional drops in consumption from the major industrialized countries since the start of 2008 have been quite remarkable. U.S. oil consumption in the first three months of this year averaged 18.8 million barrels per day, almost 2 mb/d below the value for 2007:Q1. Japan’s real GDP fell at a 15% annual rate in the first quarter, and its overall oil product output for April was 14% below year-earlier values, though the April measure of Japan’s industrial production showed a sharp gain. GDP declines in Europe also exceed those in the United States.
So to the extent that oil speculators see any green shoots, perhaps they’re in the nature of Asian bamboo rather than American prairie grass. Chinese oil consumption was up 4% in April, though that was the first year-on-year gain for them in 6 months. India’s oil consumption also seems to be growing. But so far those gains are well below the drops seen in the U.S. and elsewhere."
---As James Hamilton 5-31-09
www.econbrowser.com/ar...
Chinese "real" economy is still imploding so it's only a matter of time before reality catches up with the stock market.
seekingalpha.com/user/...
11:22 AM China's top energy official suggests oil's recent rally may be hard to sustain as brimming oil inventories push down demand. Oil +1.6% to $67.36.
online.wsj.com/article...
The so-called "grocery store inflation" as it is condescendingly referred to is just part of the natural process and it is being driven by a rising commodity bubble. Gold, silver, oil, uranium and (what have you) will rise as the dollar falls defying any basis for a relationship to declining asset values in America. We will be punished with higher consumption prices while our basic assets lose value. An inflationary depression is underway. I am not making this up. It is happening now.
And so it goes with equities. We should expect them to continue climbing as long as the dollar weakens. Only a reversal of that trend will bring on the much anticipated market collapse. There is a balance between rising domestic equity values versus losses in the dollars value compared to other currencies. It cannot be any other way in this environment. Expect to see the Dow increase as long as the dollar declines. The Wizard behind the curtain will not have it any other way.
On Jun 01 06:35 AM tedfoo wrote:
> Why is nobody talking about the negative implications of high commodity
> prices on the US economy? (Don't answer that it's a rhetorical question)
>
>
> Most notably high gasoline will be back to kick the American consumer
> while they're already down. The dollar is weaker and certainly we
> will be looking at commodity inflation. But last I checked, employers
> don't give cost of living wage increases when unemployment is at
> 10%. The unemployed will gladly work your job for less if you're
> not happy about your compensation.
>
> So the spending power of the American consumer will continue to decline.
> Is that a green shoot?
PS: I love that term "vapor paper".
On Jun 01 08:01 AM User 353732 wrote:
> The rise of commodities versus the dollar simply reflects that there
> is yet another shift in the global economic balance of power between
> fantasy assets such as the dollar and pound( ie. vapor currencies)
> and real assets. As the supply of fantasy assets continues to grow
> explosively ,their exchange rate versus real assets must continue
> to deteriorate.
> <br/>We
> cannot avoid paying for our debts. We can do it directly via interest
> rates and a lower national credit rating rating or we can do it indirectly
> via rising commodity prices and a manifestly declining standard of
> living . Pay we must.
long: China, India, and massive inflation
short: the LIES from the Obama administration and all the lemmings that just go on day-to-day without any facts impacting their lives. No matter how people feel, they are about to lose a TON OF PURCHASING power. Well..they already have. Time to lose more. DBC and GCC is a rocking that means the inflation bug is a coming a knocking.