Commodities crater on inflation outlook, economy
Posted on 03/19/2008 5:28:32 PM PDT by SeekAndFind
In his recent letter to shareholders, Warren Buffett quoted a Silicon Valley bumper sticker: "Please God, just one more bubble.” Well, that driver got his wish, but the bubble is in commodities this time around — not tech.
From wheat to gold to copper, commodity prices have exploded over the past five years. Many experts say a bust is imminent.
"We’re seeing bubble-like trading activity from speculators that has sent markets to levels that basic fundamentals probably don’t justify in the near term,” Bill O’Neill, former director of commodity research for Merrill Lynch and now a partner at LOGIC Commodity Advisors, tells MoneyNews.
Take the case of sugar. India has enough sugar to turn all its citizens into diabetics — more than 20 million metric tons in storage. Brazil has stepped up production amid the ethanol craze, exporting record amounts, according to reporting in the U.K. newspaper, the Daily Telegraph. That’s a pretty strong case for falling sugar prices, right? But they have soared more than 40 percent since December — up to 14.18 cents a pound for the current month contract.
"Investors have made far too much of the link between sugar and biofuels,” commodity consultant Judy Ganes-Chase tells the Telegraph.
"We’ve had one massive surplus after another, yet people still keep planting more cane. Brazil is the only country where ethanol is actually viable in cars. Everywhere else is building up sugar stocks in mere hope.”
Of course, fundamentals do account for at least part of the gain in commodity prices. Demand for basic materials has surged in India and China as their economies experience explosive growth.
Every year, 73 million more people need to be fed. Production of oil, coal and other commodities has been interrupted in various spots by political and economic turmoil.
But that hardly seems to justify the more than 100 percent gain in the benchmark CRB commodity index over the past five years.
Some individual commodities have jumped a lot more than that.
Oil prices have quadrupled since President Bush declared victory in Iraq more than four years ago, wheat prices tripled during that period, and copper prices have quadrupled.
Helene Meisler, a technical analyst for TheStreet.com, points out that a graph of PowerShares DB Commodities, an exchange-traded fund that tracks commodities, for the period from December 2006 to the present almost exactly mirrors a graph of the Nasdaq Composite from the period of January 1999 until its peak in March 2000.
The tech-driven Nasdaq dropped almost 80 percent in about two-and-a-half years that followed as investors fled technology stocks looking for safe havens.
"If it looks like a bubble and acts like a bubble, chances are it is a bubble,” Meisler writes. "The only question is when it will pop.”
The key to the latest surge in prices is demand from investors trying to get in on the trend. Hedge funds and sovereign wealth funds are piling into commodities.
Even a conservative investor like the the California Public Employees’ Retirement System, the country’s largest pension fund, said recently it may increase its commodities investments 16-fold to $7.2 billion by 2010.
"We have seen a number of non-traditional players coming into commodities as an asset class,” O’Neill says.
While he, like others, sees commodity prices moving higher in the long term, he cautions that "it has gotten over-speculative now … and inevitably these things will come down.”
Interesting!
Most of the talk show host on the business radio network here in DFW believe that Oil is way over speculated. Their belief is once the institutional investors feel the Real Estate/Finance mess is over that they will switch back leaving all these speculators holding the bag.
Of course that means you would have to agree with these talk show host that the current Finance is in close to be over. One stated that the recovery actually began last October and that currently the correction in just now showing up in the market.
The farmers perpetual problem, overproduction.
That’s why the Cheap Food for Consumers Programs, often refered to as The Farm Program, have been so important .
They keep farmers in business, just barely, and food prices stable, and low.
$2,000 an ounce gold is in the cards
MarketWatch | March 18, 2008 | Chuck Jaffe
Posted on 03/19/2008 7:05:57 PM EDT by george76
http://www.freerepublic.com/focus/f-news/1988429/posts
2 posted on 03/19/2008 7:08:28 PM EDT by narses
http://www.freerepublic.com/focus/f-news/1988429/posts?page=2#2
[snip] Other commodities also traded lower, with crude oil, silver, copper and agriculture futures all falling sharply as part of a broad commodities sell-off... the Fed’s move fell short of the full one-point cut many investors had hoped for, propping up the battered dollar Wednesday and sparking a huge sell-off of hard assets from heating oil to platinum and soybeans... Jon Nadler, analyst with Kitco Bullion Dealers in Montreal, said in a note. “Once the dollar started eaking out small gains this morning and crude oil started losing serious ground, the sell-off in precious metals gathered steam and left a wide swath of damage in its wake.” Gold for April delivery plunged $59 to settle at $945.30 Wednesday on the New York Mercantile Exchange. The 5.9 percent decline was the largest one-day loss since June 2006. Gold soared to an all-time high of $1,033.90 Monday... [end]
Commodities crater on inflation outlook, economy
Gosh, it’s too bad we’re burning food in our cars, huh? ;’D :’D :’D
Thanks Ernest.
Coleman Powermate Bankruptcy?
Posted on 03/19/2008 3:34:51 PM EDT by doc390
http://www.freerepublic.com/focus/f-chat/1988316/posts
okay, and this one just seems to belong here:
High-Tech Roller Coaster Will Hover Over Heads At Orlando Theme Park
local 6 via Drudge Report | March 19, 2008 | not specified
Posted on 03/19/2008 10:38:13 PM EDT by RDTF
http://www.freerepublic.com/focus/f-chat/1988563/posts
Having huge Federal Wheat, Rice and Dairy programs are important, but I would wish the rest of agriculture was left out and treated just like the small farms that cater to the farmer’s markets. There are plenty of farmers making a decent living with a farm that is no bigger than 1-10 acres. There are essentially two consumer groups here. One that just wants food no matter where it came from, how it was grown and it must be cheap. The other wants to know the farm, how it was grown and don’t mind paying a little higher price. The second consumer group is growing and allowing small local farms to be successful.
99%+ of our crops and foods are produced too far away from the consumer for there to be any contact between the framer and the consumer.
While some truck farmers near a city are able to make a living on just a few acres, most cannot. In the Midwest a farmer needs a thousand acres to just get by, and two or three thousand to be successful. In the west they might need about 5,000 to 50,000 acres. Many of those folks live 40 or 50 miles from the nearest small town, with no chance of selling anything directly to the consumer.
Also, what is a consumer going to do with raw wheat, for example? The farmer doesn’t want to mess with less than 800 bushels ( a semi truck load) which is more than the consumers whole family will directly use in their lifetime and would fill the family room downstairs!
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