Second Worst Month For Commodities Ever

Commodity investors were probably just as happy to see July end as equity investors were to see the end of June.  During the month, the CRB Commodities Index recorded a decline of 10.0% which is the worst monthly decline since March 1980 (10.5%) and the second worst decline ever! 

Below we highlight a long term chart of the CRB commodity index since 1960 with each of the red dots indicating the only two monthly declines of 10% or more.

click to enlarge

Comments

[Matthew Bra...:]

If we are truly in a bull market in commodities shouldn't investors be scaling into longs on this dip??

2008 Aug 01 09:25 AM

[Hefaistos:]

Please draw long-term charts with log scale, you don't give a correct representation of data with a linear scale.

2008 Aug 01 12:35 PM

[spudnugget:]

It's probably just my brain finding patterns that don't exist but it's interesting that the average CRB value between 1972 and 2002 was roughly 200 compared to 100 between 1960-1972. Will the new equilibrium go to 400 (a full doubling) or will commodity hawks be content with a increase to 300 (the next multiple of 100)? :)

2008 Aug 01 01:23 PM

[NOWHEREMAN:]

Using just what is presented, I see a break above the old high, a test of that breakout and a punch to new highs. If this were a stock chart, you would be taking positions for the next leg to the upside.

2008 Aug 02 09:34 AM

[adamn111:]

Log scale sucks. Truth is better seen as shown.

2008 Aug 02 10:12 AM

[User 6666:]

Yea, log is silly and would be so here

2008 Aug 02 12:39 PM

[JimG:]

Semi-log charts show true percentage changes in value. A 50 point move at 200 is a 25% change, at 400 a 50 point move is 12 1/2 %. A linear chart is the better way to go!

2008 Aug 02 12:58 PM

[sorgmot:]

Douglas Adams, Hitchhikers Guide to the Galaxy say the answer is 42.

The long credit cycle would be at about 1938 now.

The big difference is that the British pound was then under pressure as is the USA dollar now. The pound settled to one fifth of its former value against the US dollar (that is pound at one US dollar)and has only recovered to 2 US dollars since the US doller has strarted to fall against foreign currencies and gold.

All that doesn't give a precise US dollar to gold ratio so why not go for 42 times 32 or 1250 per ounze.

And look for the dollar to keep on declining against gold and the currencies of countries that are not borrowing credit from abroad using their own currencies.

2008 Aug 02 01:37 PM

[surgcare:]

To MB Wealth .How do you know that smart investors aren't buying commodities on dips .

2008 Aug 02 04:02 PM

[NOWHEREMAN:]

The dollar has wandered around 80 for a couple of decades. It strengthened to 120, And only recently spiked below 80, it did so very convincingly.

I'm in the Sine Wave camp and believe the amplitude will include 40 before all is said and done.

With that in mind, my view remains steadfastedly bearish on the Dollar and the US stockmarket. I include US oil companies in the mix since they will be the first to take the hit as the US continues to go through its Denial Phase.

2008 Aug 02 04:08 PM

[leh:]

A 10% one month haircut on stocks that have vaulted 100-200% over the past year or two--so what? Why do these routine corrections always have to be sold as
"end of the earth" events (or at least with headlines to that effect) when it seems obvious it's just a quick violent round of routine profit-taking? Sorry, I don't see the demand for coal, steel, and fuel going away tomorrow, no matter a slowdown in US and Europe.

2008 Aug 02 04:28 PM

[QVM Group:]

Arithmetic versus Log Price Scales for Charts:

Here is a link to visual examples arithmetic and logarithmic price charts of a simple 15% long-term growth, and of a real life long-term chart of the MSCI Brazil index.

It may help those on the fence about choice of formats go one way or the other.

qvmgroup.com/LogCharts...

2008 Aug 03 12:08 AM

[sivleyd:]

What seems strange to me is
1) how long it stayed flat at 100
2) how long it held in the 200-250 range
Seems we were due for some serious catching up.

2008 Aug 03 05:20 PM

[ussmls7:]

Egg shells break , so has your charts,good luck,in a bad way!

2008 Aug 03 09:12 PM