Will Rahal

Commodity Bubbles and Valuation: Imperfect Together

Run ups in commodities is not something new.
As a part of a complicated puzzle, you have to determine where it fits into your investment pieces..
Sometimes the spike in commodity prices denote the peak of economic activity.
I have posted on Crude Materials a PPI component.
Ratios and acceleration are at extremes, suggesting a correction in commodities is in the works.

Where's the Bursting Commodities Bubble?

Commodities will correct.
I have shown that economic indicators tend to improve at the wrong time, giving investors a sense of false security.
This improvement tend to coincide with peak economic activity.

As the economy sours, commodities will weaken.

Fed Easing: No Free Lunch for Dollar, Oil and Commodities

We import 10 million barrels of oil a day. This means $1 Billion a day at $100/barrel.
When the price of oil declines net imports will decline also recursively making the US Dollar stronger.

Commodities, China Selloff Based On Need For Liquidity, Not Growth Concerns

I have taken a look at YTD Retail Sales and CPI.

CPI is increasing at an annual rate of 4.8%.
In an credit crunch panicky environment
Inflation is still tying Mr. Bernanke’s hands.

Real Retail Sales is at .9% indicating a weak economy.
The weakness in the US will have repercussions in the
stronger overseas economies.

The US slowdown and the unwinding of the Yen carry trade will cause massive liquidations of assets, including commodities.