Seems that the bubble has burst--for some commodities. This has implications.
Cotton has pulled back 17% from the all-time record set in early March, and sugar is down 34% from its multidecade high in February. Lead and zinc have tumbled in recent weeks after shooting up in the second half of 2010. Copper has shed 6% this year.
The declines came amid a wild April in which other raw materials continued to climb. U.S. oil prices rose 7% for the month, while gold set fresh records in nominal terms 13 times and silver neared its all-time high. --CalcRisk quoting WSJ
1) One should be very careful in betting on continuing gold increases.
2) Apparently, copper-pricing was influenced by speculation, as opposed to 'big demand' from PRChina. If copper is the "old farts' economic predictor," then we can expect industrial activity to moderate towards the end of this year--just as ECRI has been predicting.
3) "Moderation" is not necessarily bad, although it is not necessarily good, either.
4) US economic activity can be monkey-wrenched by petroleum prices, which still remain high. However, that can change if the copper-signal is accurate.
"Cotton has pulled back 17% from the all-time record set in early March, and sugar is down 34% from its multidecade high in February. Lead and zinc have tumbled in recent weeks after shooting up in the second half of 2010. Copper has shed 6% this year."
ReplyDeleteSo what are you telling me Dadster? Are you telling me that commodities are volatile? Are you telling me that commodites are not a very good indicator of inflation expectations because they are influenced by things like speculation and global demand variables?
Nope.
ReplyDeleteDo you eat cotton? Lead? Copper?
Do you use them as fuels?
Perhaps you should check the latest ISM report which details serious input-component price increases (April.)
And, of course, if you want to have fun, Struppster, simply stop spending at the grocery when you've hit last year's total grocery expenses.
That way you can lose a helluvalotta weight beginning around 10/1/ this year.
I was sitting in a meeting in AZ a couple weeks ago when someone mentioned record gold prices. They were all positive about buying gold until I mentioned that 2007 would have been a good time to buy Arizona real estate. You know, back before prices dropped 60%.
ReplyDeleteCan you eat sugar? Does crop yield (or the lack thereof) impact agricultural commodity volatility?
ReplyDeleteI'll take it that you ARE still holding firm to the idea that commodities are a good indicator of inflation expectations, which is what I asked.
Thanks.