Commodities Are Killing It Right Now

by: Kevin McElroy

I’m disappointed and a little bit angry.

I’m disappointed that my prediction for QE2 has not come to pass. I’m angry at Tim Geithner. More on Geithner in a second, but first: more on why I’m disappointed...

It’s still early to tell what the wholesale effects of $600 billion worth of Quantitative Easing (QE2: Electric Boogaloo) will be.

But as with many highly anticipated events, the actual result was something less spectacular than my imagination had built it up to be.

If you don’t recall, I’ve been so bold as to predict that a number less than $1 trillion would disappoint the markets, rally the dollar and cause dips in the price of nearly every major asset class.

But, to recap, Ben Bernanke’s $600 billion QE has so far achieved the opposite effect of slightly emboldening the market, devaluing the dollar and causing the rally in assets of nearly every stripe to continue onwards.

Since I’m in the commodity business, take a look at this list of the most commonly traded commodities and their day-over-day gains since Bernanke announced QE2:

Only cattle feeder futures are down as of this writing, and many commodities are up over 2%.

That’s huge movement for an entire asset class. It seems as though commodity investors can’t and won’t be disappointed by $600 billion of new QE, even though many folks were expecting much more.

All told, the Federal Reserve has pumped trillions of dollars into the banking system via Treasury purchases, and as I’ve been saying, that action can only be long-term bullish for commodities and long-term bearish for the dollar.

In any event, it appears as though for now we won’t see much, if any, correction in the prices of commodities as I was hoping for.

Perhaps it was wishful thinking. I’m always looking for a chance to buy commodities at a discount. It’s not timing the market so much as it is seizing opportunities when they appear.

I plan on buying more gold and silver, probably sometime within the next 30-60 days. I will look for dips as strong buying opportunities.

In the meantime, I’d like to point out something that’s been swept away from the collective attention of the mainstream media by the election, QE2 and the steady tide of new stories to cover.

That is: Tim Geithner’s proclamation less than three weeks ago. Quoting CNBC:

“U.S. Treasury Secretary Timothy Geithner vowed on Monday [October 18th] that the United States would not devalue the dollar for export advantage, saying no country could weaken its currency to gain economic health.

In light of the FACT that the dollar has been devalued since his comment, this ‘vow’ from our Treasury Secretary beggars the dilemma: is he a liar, or is he a fool?

I’m leaving out a third option: he could certainly be a foolish liar.

If that’s not enough of a slap in the face to encourage you to abandon the familiar bosom of the dollar and leap into the reliable arms of gold and silver, then I don’t know what would encourage you to do so.

From the U.S. Department of the Treasury website, here is the official function of the Secretary of the Treasury:

The Secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies that have general significance for the economy, and managing the public debt.

The man is a liar or a fool or both - and yet he’s responsible for developing some of the most important policies that we entrust the Federal Government to oversee.

I don’t know whose interests Tim Geithner is looking out for. Contrary to popular belief, Mr. Geithner has never worked for an investment bank. But over the course of his career, he’s done everything possible to make life easy for bankers.

The New York Times wrote a really great article on the many and sundry ways that Geithner has pandered to the banking industry.

Of note:

As late as 2007, Mr. Geithner advocated measures that government studies said would have allowed banks to lower their reserves.

So even as Rome was beginning to burn, this guy was trying to throw gasoline on the fire.

Even worse, when the financial system began to unravel further in 2008, he advocated for President Obama to ask “Congress to give the president broad power to guarantee all the debt in the banking system.”

So a year after he advocates for banks to be allowed to take on more debt, he tells the President to back-stop all of their debt.

I could go on - but I already have a bad taste in my mouth.

It’s clear to me that neither Ben Bernanke nor Tim Geithner has my best interests in mind. If you’re not a Wall Street banker, he’s not looking out for your interests either.

Invest accordingly: trade in your dollars for physical gold and silver, as well as shares of companies that will profit from higher priced commodities.