Commodities Bubble Bursting

I agree. Now that the worst housing bubble in the history of the world has popped, things have miraculously corrected in no time flat. It's up-up-and-away for our economy!!

dsfsdf wrote:

I agree. Now that the worst housing bubble in the history of the world has popped, things have miraculously corrected in no time flat. It's up-up-and-away for our economy!!

Yeah....but "Gold futures plummeted to TWO week low." A bit premature wouldn't you say?

Daddy Warbucks wrote:

dsfsdf wrote:

I agree. Now that the worst housing bubble in the history of the world has popped, things have miraculously corrected in no time flat. It's up-up-and-away for our economy!!

Yeah....but "Gold futures plummeted to TWO week low." A bit premature wouldn't you say?

Just the beginning. Gold is super risky to begin with. Take ANY gains you may have gotten and get out NOW. 2009 is going to be SWEET! Now's still a GREAT time to buy those stocks -- not as good as a few months ago when I told you all to be buying stocks, but it's still good. Have faith in the s tock market. There is less and less talk now of The Fed cutting rates more. Two weeks ago there was a greater than 50% chance they would cut 50 basis points. Now it's 6% they will do that. Their rate cutting is slowing and will stop. This will be the bottom of the major problems with the US economy. Inflation will stay in check, the dollar will strengthen and oil and gold will drop.

Man am I glad I've continued to dump money into stocks this whole time. That's when you do it people! When most are fearful, that's when you buy and buy and buy.

Can you point to anything in the economy (not the markets) that makes you optimistic?

Jobs, real wages, credit availability are all crappy now. Consumers are tapped out. Job growth in the last few years was primarily housing-related and now that's gone. What is going to drive this miraculous expansion you speak of?

I can't explain the market's optimism. However, there's no good news out there. Your knee-jerk contrarianism (if people are pessimistic, time to buy!) isn't particularly compelling to me. Got any facts?

Jobs, real wages, credit availability are all crappy now. Consumers are tapped out. Job growth in the last few years was primarily housing-related and now that's gone. What is going to drive this miraculous expansion you speak of?

I can't explain the market's optimism. However, there's no good news out there. Your knee-jerk contrarianism (if people are pessimistic, time to buy!) isn't particularly compelling to me. Got any facts?

During a recession, the market tends to start rallying long before the economy starts to pick up since the market is forward looking. For example in August of '82 when the economy looked absolutely awful and unemployment was hitting 10% the market started exploding to to the upside even though the recession lasted through the end of the year and the economy got worse for a several months before it got better.

That said, the recent 1000 pt run-up could also just be a bear market rally. Those tend to happen at least once during a downturn in the stock market associated with a recession. Too early to tell, but typically the stock market bottoms out 4-6 months before a recession ends.

I trade futures professionally for a living: commodities, interest rates, stock indices, currencies, softs, etc. Got my start trading the "physicals" in the soy complex over twenty years ago.

Why anybody should bother to listen to me or any other semi-anonymous poster on a running board is an open question, but here goes:

Nobody knows nothing.

Think for yourself.

Trust your method rather than make predictions.

One method might be to dollar cost average in stock indices, another might be to trade volatility, still another might be trend-following, the carry trade, or whatever. I'm not necessarily recommending any of them. The idea is simply to test something to ensure that you know exactly HOW it works so that you know WHEN it works (or dosen't).

There is one similarity with running, though. It's more fun for most to talk about research (training programs) & execution than to actually do it.

Good luck!

Flagpole wrote:

Just the beginning. Gold is super risky to begin with. Take ANY gains you may have gotten and get out NOW.

You've been writing the same crap since gold was $600/oz. Citigroup takes a 13.9 BILLION dollar asset write-down and posts a 5.11 BILLION dollar first quarter loss and this is looked at as dollar and market positive because it wasn't quite as bad as your 'experts' had predicted. Whacky times. Good luck to ya, Flagpole.

skepticofflagpole wrote:

Can you point to anything in the economy (not the markets) that makes you optimistic?

Jobs, real wages, credit availability are all crappy now. Consumers are tapped out. Job growth in the last few years was primarily housing-related and now that's gone. What is going to drive this miraculous expansion you speak of?

I can't explain the market's optimism. However, there's no good news out there. Your knee-jerk contrarianism (if people are pessimistic, time to buy!) isn't particularly compelling to me. Got any facts?

Sure! (except I will point to the markets because that is part of the economy). The fear in the financial sector is baked into the stock prices. Citi just went way UP today. Bank of America is supposed to have results on Monday that aren't that bad; results from both companies proving that the worst of the financial mess may have passed. JP Morgan Chase hs done well, and Washington Mutual and some others didn't do as badly as thought. Google just posted a huge quarter. Caterpillar just posted a big gain. IBM and Intel just this week had good financial news. Microsoft and Apple also had recent great financial news. Gold has plumetted and the dollar is showing signs of rebirth (as mentioned in a story I linked at the beginning of this thread).

Now, lets look at the problems you mentioned:

1) Jobs -- we're still at 5.1% unemployment. That's still very good. In the economic slowdown of 2001, it was above 7%. Baby boomers are older too and starting to retire. It's good to be after them.

2) Real Wages -- Sure wages have slowed the last couple years, but inflation hasn't been that bad, and with the drop in housing prices (the BIGGEST monthly expense for most people), you could make a GOOD argument for deflation for a person buying a house today as opposed to 3 years ago.

3) Credit availability -- that's the fault of consumers there. I've minded my Ps and Qs even in times of bounty, so I can go get any loan for the best rate if I wanted to (but I'm in no hurry to go borow money for anything -- I'll pay cash). BUT, for those who don't have the credit available to them that I do, with The Fed lowering rates like they did, they have helped a bit there.

4) Housing related jobs -- well, dude, housing won't stay down forever. There are signs that it is starting to turn. When Caterpiller posts good profits in a quarter, it's time to start looking at construction picking up again.

You are wrong about there not being any good news out there. Do you read financial news at all? One of the reasons people are now saying there's a commodity bubble is because that's where some (not me) put money when the economy is doing poorly -- they take it out of stocks and put it there. Investors are starting to take money out, and the bubble will burst. The benefit will be to stocks. The last week has been the brightest week since about October for the economy in general.

We have a good run on stocks over the next 12 months and Baby Boomers who had put off retirement will retire, and that will open up not only more jobs for younger people but more good jobs, and the baby boomers will start spending their money.

We haven't even seen the rebate stimulus package money yet, and I don't care if 100% of the people say they will pay down debt with it, I call BS on that. MOST people let money burn a hole in their pockets, and this time will be no different. The money will get spent and it will help a little.

Take the negative blinders on that the liberal press is feeding you (they just want a Democratic President). There is GOOD financial news RIGHT NOW. (I'm a Democrat by the way, but what the networks are doing this time with regard to trying to make Bush look bad on every front is deceptive at best).

Oh yeah, and why is money in stocks better than money in commodities? Because people put money in commodities to hedge against a dropping stock market, NOT to make spendable money. Investors WILL however do profit taking when the stock markets are good, and they will SPEND that money. A falling gold price is GREAT for the economy. Fall gold, fall! And it WILL.

That's a poor argument Flagpole. We are only a few months into the recession. The jobless rate usually begins to spike toward the end of a recession and even in the months after a recession has ended. March is probably only the 4th month of this recession. In 2001, July was the 4th month of the recession and the jobless rate was only at 4.5%. You need to compare apples to apples. The peak of unemployment in the last cycle didn't happen until June 2003 (and at 6.3% not above 7% like you said below). If this is like any typical recession, you will start to see the jobless rate spike during the 2nd half of the year and the unemployment rate is likely to keep rising into 2009.

Flagpole wrote:

Now, lets look at the problems you mentioned:

1) Jobs -- we're still at 5.1% unemployment. That's still very good. In the economic slowdown of 2001, it was above 7%. Baby boomers are older too and starting to retire. It's good to be after them.

Flagpole wrote:

Take the negative blinders on that the liberal press is feeding you (they just want a Democratic President). There is GOOD financial news RIGHT NOW. (I'm a Democrat by the way, but what the networks are doing this time with regard to trying to make Bush look bad on every front is deceptive at best).

Yup, and the war in Iraq is going great.

1) Jobs: they have changed the definition of unemployment rate so many times, that it is useless to compare today's unemployment rate with any other era.

2) Real wages: median income has not increased over the past 8 or so years. The public measure of inflation is useless, since it doesn't include energy or food (gee, what have they done lately?). The housing expense argument is a farce, since that does not change very often. If you bought a house 8 years ago, your house payments probably haven't changed since then.

3) Credit: the only people getting the low rates from the Fed are the large banks and other financial institutions. This, in my opinion, is just to unwind the wildly leveraged financial institutions. Until that unwinds, credit will not be readily available. And it seems credit is what has driven the economy over the past decade.

4) Housing: housing is not going to pick up in the next six or so years. Maybe longer. Housing prices will eventually fall back to pre-2002 levels, unless the government gets overly involved. This will just bring housing in line with historical trends. All of this will probably only result in immigration reform becoming a non-issue. If the desire for cheap labor in the construction industry dries up, illegals won't be so willing to come here.

I do think that commodity prices will come down, maybe precipitously. My confidence in the US economy is not very high however.

because I trade commod's for a a living, I'll tell you that GOld doesn't really vount. Its a hedge against inflation. GOld is always going to circulate. We don't mine it anymore like we used to, but it doesn't deplete. So the real commodities bubble would be within crude, soft, ags, etc. As long as there is enough money out there it isn't going to burst. It will correct hard and will nail a lot of weak buyers, but we will never see $30 crude. There just isn't enough supply. It might retrace back to 80-90, but unless the stock market crashes its not going to burst. a 20-30 dollar correction doens't mean a bust in markets these days. If the stock market crashes all the funds will have to liquidate on margin calls and then pull money out of commod's in order to pay for their loses.

soy, corn, cotten, etc. we'll, I've heard a 10 year bull market for the ags. But, those are more lickly to come off in price because we can regrow that stuff. pretty simple. But there is so much fund money pumped in them and their all index long(most). so eventually shorts keep getting squeezed out. As long is there enough money around, the commod's aren't going to bust. Its until the stock market craps out, then we might see it happen.

hope this helps a bit.

Californian wrote:

That's a poor argument Flagpole. We are only a few months into the recession. The jobless rate usually begins to spike toward the end of a recession and even in the months after a recession has ended. March is probably only the 4th month of this recession. In 2001, July was the 4th month of the recession and the jobless rate was only at 4.5%. You need to compare apples to apples. The peak of unemployment in the last cycle didn't happen until June 2003 (and at 6.3% not above 7% like you said below). If this is like any typical recession, you will start to see the jobless rate spike during the 2nd half of the year and the unemployment rate is likely to keep rising into 2009.

1) The rate for unemployment was 6.3% like you said in 2003, not above 7%. I was thinking of 1991-1993, so my bad. Still, the "recession" (not everyone agrees there was one) in the early 2000s was shallow.

2) The unemployment rate will likely rise from where it is right now before it gets better, but as someone already said, the markets are future looking, and they have started to get back to positive territory. No worries mate. The slowdown is almost over. Still no recession as of yet -- though someone somewhere later on may decide we were in one, it's really not that bad right now; not that it's great, but things are improving.

3) Some are predicting that the last quarter ended will be the worst. Jobless claims should tail off next quarter, adn then improve from there. Haven't had so much good economic news in one week in months as we just had. The tide is turning brother.

I agree flagpole willy with your last statement. some saying this DOW rally is a bear trap. But I tell ya, Just when you think they got this market down, it just rallies. but again, nothing last forever, so at some point we could see the market down a lot. Its all about timing from trying to profit from it. Could take 5 years, who knows. But the numbers point downwards. In the grains market for instance, prices have never been this high. Its a new time in the business, were in uncharted territory, so it becomes hard to rationalize things.

trada wrote:

In the grains market for instance, prices have never been this high.

Yep. Grain, oil, gold. All high because they were used as a hedge against a poor stock market. Investors PREFER the DOW and S&P 500. They go back to it in droves when they think the economy is about to head north atain. It is all starting to turn.

Flagpole wrote:

Man am I glad I've continued to dump money into stocks this whole time. That's when you do it people! When most are fearful, that's when you buy and buy and buy.

I seem to remember you telling us in one of your financial posts to never buy individual stocks because it was too risky.

Apparently you don't follow your own advice.

Buzzed wrote:

Flagpole wrote:

Man am I glad I've continued to dump money into stocks this whole time. That's when you do it people! When most are fearful, that's when you buy and buy and buy.

I seem to remember you telling us in one of your financial posts to never buy individual stocks because it was too risky.

Apparently you don't follow your own advice.

Stocks in mutual funds brother. You are correct, I don't buy individual stocks.

Buzzed wrote:

Flagpole wrote:

Man am I glad I've continued to dump money into stocks this whole time. That's when you do it people! When most are fearful, that's when you buy and buy and buy.

I seem to remember you telling us in one of your financial posts to never buy individual stocks because it was too risky.

Apparently you don't follow your own advice.

'Dumping money into stocks' doesn't just mean individual stocks. FPW has most likely been purchaseing mutual funds, which are a group of stocks. I have also been dumping my money into "stocks." I have been buying funds from Vanguard in a furry. I could have just as easily purchased bonds, commodities, heck even kept the money in a savings account.

Good try, junior.

tohisaid wrote:

Good try, junior.

Thanks. I followed Kent Harvey's advice and invested heavily in coal. I'm up 31% since February.

Now that commodities are crashing and individual stocks are bad, I'll sell off and move my funds into a bond fund.