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Bloomberg: "Waiting for the Crash in Commodities"

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Bloomberg: "Waiting for the Crash in Commodities"

Unread postby tokyo_to_motueka » Tue 16 May 2006, 22:30:21

Waiting for the crash in commodities

$this->bbcode_second_pass_quote('', ' ')May 17, 2006
By Saijel Kishan

$this->bbcode_second_pass_quote('', 'T')he bull market in commodities, now in its fifth year, is beginning to challenge the laws of physics. Prices as measured by the Reuters/Jefferies CRB Index have not staged a rally this long in more than 50 years.

Copper quadrupled in the past five years, gold more than tripled and oil doubled. The Morgan Stanley Commodity-Related Index of 20 stocks has risen 58 per cent in the past year.

From New York's oil markets to Russian mining shares to trading in Thai sugar, investors say the speculative rally is overdone - something which the markets appear to be agreeing with as they come off their commodity-driven highs.

Robert Shiller, an economist at Yale University and author of Irrational Exuberance, says commodities markets resemble the technology-stock bubble of the 1990s.

"It's the same phenomenon. When you have something that has glamour value, it opens up the possibility of a speculative bubble."

Analysts, including Citigroup's Tom Fitzpatrick in New York and John Noyce in London, say crude oil prices may have peaked at the April 21 record of US$75.35 a barrel. Societe Generale analysts, including Frederic Lasserre in Paris, say oil may have reached a "tipping point" that will send prices lower.

Tony Dolphin, at Henderson Global Investors in London, said: "A speculative bubble is forming. It may be sensible for some investors to get out of these markets now and return once there has been a correction."

$this->bbcode_second_pass_quote('', 'G')oldman Sachs analysts sent crude prices soaring when they said in March 2005 that the price could eventually reach US$105 a barrel.

The forecast is reminiscent of former analyst Henry Blodget's prediction of late 1988 that Amazon.com shares would hit US$400 each. The stock did climb, only to tumble 80 per cent over two years, signalling the end of the technology bubble.

$this->bbcode_second_pass_quote('', 'M')an Group's executive president and head of global metals, Fred Demler, believes a stronger US dollar will cause prices for most commodities to decline. "And when prices do fall, it will be the correction of all corrections."

:lol:
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby mattduke » Tue 16 May 2006, 22:43:31

They are still waiting for the commodity crash in Zimbabwe too.
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby Zardoz » Tue 16 May 2006, 22:48:10

"Stronger dollar"? Huh?
"Thank you for attending the oil age. We're going to scrape what we can out of these tar pits in Alberta and then shut down the machines and turn out the lights. Goodnight." - seldom_seen
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby auscanman » Tue 16 May 2006, 22:48:14

Economists' inability to grasp the finite nature of non-renewable commodities never ceases to amaze me. While it may be true that some of the current high price of commodities is due to inflation, to compare commodities to the dot com bubble is just ludicrous.

I love the statement that oil may have peaked at just above $75! Thankfully it won't take too long before that statement is exposed for the BS that it is.

Post PO economists will be the most thoroughly discredited group on earth.
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby DantesPeak » Tue 16 May 2006, 22:55:19

$this->bbcode_second_pass_quote('', 'G')oldman Sachs analysts sent crude prices soaring when they said in March 2005 that the price could eventually reach US$105 a barrel.



I find it funny that those that quote GS probably did not read that report. GS did not predict $105 - only that it could hit that level in a period of instability before 2008. I don't even remember that report being very bullish.

My own feeling is that a conflict with Iran brings $200 oil. Even without one, selling oil in terms of Euros and rubles soon is about to force the dollar lower and oil/gold higher.
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby pogoliamo » Tue 16 May 2006, 23:26:01

$this->bbcode_second_pass_quote('Zardoz', '"')Stronger dollar"? Huh?

"Stronger dollar" sounds like a joke. However, after watching them for a while I think the key word here is "Volatility". The Fed is hoping to hide the weakness of the dollar by making it more volatile and thus pretend a downward trend is occasional.

Forget the fundamentals and play on "technical analysis", and of course, more ups and downs means more speculation, what else would you expect from Bloomberg itself.
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby Free » Tue 16 May 2006, 23:40:48

I have the feeling that this is the mainstream thinking among investors out there, just recently I read an article that warned from buying gold because "it's a bubble".

In the short term they are maybe even right, I wouldn't be surprised to see a crash back to 500, or oil back to 60 and below for that matter.
But in the longer run (2 years plus), the geopolitical tensions (there is never a shortage of them) and supply issues will make it a paradise for gold bugs and energy bulls...

It seems inherently impossible somehow for mainstream economists to get their head around supply shortages and away from past market cycle patterns, this could turn out to be a great advantage...
"Democracy means the opportunity to be everyone's slave."
Karl Kraus
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby green_achers » Wed 17 May 2006, 00:20:21

I think it's very plausible that there could be a major correction in commodities in the next few months. Market forces are still real. How much of the current run-up is due to real shortages, and how much is due to speculation? At this point, we have not really begun to see the effects of real resource depletion. People are reacting to some of the more dire warnings, but they are also reacting to a lot of other things. Remember, the ride up the Hubbert curve was bumpy, and the ride down will be, as well.
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby zed » Wed 17 May 2006, 01:35:02

Reports seem to be that China remains very interested in buying as many raw materials as possible. As long as they keep buying, the fundamentals would seem to be there.

Regarding gold, it would be interesting to know what the central banks of the world are doing...
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby Zardoz » Wed 17 May 2006, 02:33:35

$this->bbcode_second_pass_quote('zed', '.')..Regarding gold...


A forty-dollar drop on Monday, but now it's right back up around $716 again. Some "correction".

These guys are looking at a whole new ball game, but some of them don't know the new rules yet. They'll learn them, soon enough.
"Thank you for attending the oil age. We're going to scrape what we can out of these tar pits in Alberta and then shut down the machines and turn out the lights. Goodnight." - seldom_seen
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Re: Bloomberg: "Waiting for the Crash in Commodities&qu

Unread postby DantesPeak » Wed 17 May 2006, 07:25:23

Well I think the whole story of a gold bubble is completely wrong. Russia and China are buying gold like crazy as they convert foreign exchange reserves.

Even the WSJ says speculators are pushing prices down not up. Got gold?

Fast Money Cools on Commodities

$this->bbcode_second_pass_quote('', 'H')edge Funds Take Risk Off Table,
Defying Notion That Their Bets
Are All That's Driving Markets
By GREGORY ZUCKERMAN
May 17, 2006; Page C1

Despite the criticism being leveled at hedge funds for driving up commodity prices this year, many of the large funds have actually been cautious, or downright bearish -- costing them money in the process.

The prices of gold, copper, silver and other commodities have weakened this week and energy prices have eased, so some of these skeptical funds and other large speculative investors are seeing gains.

"A lot of macro hedge funds have taken a lot of the profit and risk off the table in these markets, and some have shorted commodities," says David Smith, chief investment officer at London-based GAM, referring to those funds that make bets -- particularly bets on a price decline -- on global trends. GAM invests about $23 billion in hedge funds. "The buying has gone from hedge funds to individuals and others" in the past year, he says.


Wall Street Journal (subscription required)
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby max_power29 » Wed 17 May 2006, 11:37:12

$this->bbcode_second_pass_quote('auscanman', 'E')conomists' inability to grasp the finite nature of non-renewable commodities never ceases to amaze me. While it may be true that some of the current high price of commodities is due to inflation, to compare commodities to the dot com bubble is just ludicrous.

I love the statement that oil may have peaked at just above $75! Thankfully it won't take too long before that statement is exposed for the BS that it is.

Post PO economists will be the most thoroughly discredited group on earth.


What's ironic is that the very definition of Economics is something like "the study of how people deal with SCARCE rescources. but then again, they do not use the word finite, so perhaps the irony isn't there. Using the word "finite" instead of "scarce" to define economics would probably elevate the field of economics to a much higher level.
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby thor » Wed 17 May 2006, 11:56:42

$this->bbcode_second_pass_quote('max_power29', 'U')sing the word "finite" instead of "scarce" to define economics would probably elevate the field of economics to a much higher level.


Economics is the only "science" capable of having 2 Nobel Laureates with completely opposing theories.
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby max_power29 » Wed 17 May 2006, 12:10:42

$this->bbcode_second_pass_quote('thor', '')$this->bbcode_second_pass_quote('max_power29', 'U')sing the word "finite" instead of "scarce" to define economics would probably elevate the field of economics to a much higher level.


Economics is the only "science" capable of having 2 Nobel Laureates with completely opposing theories.


Good Point. I majored in Economics in college. I used to be a true bleiever in it until abou 2 years ago when I started waking up. I can't believe I thought that stuff like globalisation was great, everyone can live the American dream etc. etc.

College was a huge waste of time and money for me. What a rip off. I am currently a security guard, basically treated like a temp. at work. they need warm bodies here to get their insurance discounts. This is the type of job that is currently available to young college graduates. Happy Job hunting Grads!
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby airstrip1 » Wed 17 May 2006, 18:06:05

$this->bbcode_second_pass_quote('Zardoz', '
')These guys are looking at a whole new ball game, but some of them don't know the new rules yet. They'll learn them, soon enough.


The 'new ball game'. Where have I heard that before ?
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby ohanian » Wed 17 May 2006, 18:17:40

$this->bbcode_second_pass_quote('Zardoz', '
')A forty-dollar drop on Monday, but now it's right back up around $716 again. Some "correction".



A correction that only lasts one microsecond is STILL A CORRECTION.
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Re: Bloomberg: "Waiting for the Crash in Commodities&am

Unread postby ohanian » Wed 17 May 2006, 18:20:28

$this->bbcode_second_pass_quote('thor', '
')Economics is the only "science" capable of having 2 Nobel Laureates with completely opposing theories.


Economics is the only "science" capable of having 2 Nobel Laureates with completely opposing theories that are both CORRECT.
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