by threadbear » Sat 22 Mar 2008, 01:02:27
$this->bbcode_second_pass_quote('shortonoil', '[')b]threadbear said:
$this->bbcode_second_pass_quote('', 'A')dd to this the possibility the govt could have goosed commodities down, leading with gold, by dumping a bunch on the market and it's surprising they didn't drop further.
It looks to me like a classic case of hedge funds and mutuals deleveraging. Look at the money flows in the market last week, and the up, down volume ratios. Typical pump and dump. The spread between 90 and 180 day T-bills tells us that it is market in a state of terror. In a week or two I expect to see gold being shoveled into vaults with both hands and a shovel.
Oil I’m not sure of. I expected it, for fundamental reasons, to peak at $90. Could be I was right, maybe I was wrong. Maybe the hedges dumped it to raise cash. We’ll know in a month.
Very solid reasoning. It will be really interesting to see what oil does. The Brits and French have just inked a deal to work jointly on nuclear infrastructure, using French technology. Looks like they're going to go the plug in route, transport wise. They're hoping to launch a massive campaign to export this technology around the world.
"The Guardian" front page today. If this is the case, oil isn't a good long term commodity play.
by americandream » Sat 22 Mar 2008, 06:51:45
$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('RonMN', 'Y')up, gold rose over 50% then came down 10% & all I hear from my brother is that the price of gold is
CRASHING 
This is where Joe Sixpack goes out and buys more stocks.
BTW I heard a rumor that foreigners think Americans are religious. I wonder where that came from?
I think it's going to take much more than "TRUST" to stop inflation.
Must have to do with all those movies bout you Meri-cans attending church in ya bedsheets.
by wisconsin_cur » Sat 22 Mar 2008, 07:17:27
CNBC
$this->bbcode_second_pass_quote('', 'A')nalysts had expected a general retreat from the speculation-fueled runnup in commodities prices, but the extent caught some off guard.
"We're seeing a really dramatic pullback to the point of ridiculousness," said Kevin Kerr, commodities analyst and editor of Resource Trader Alert. "A lot of these commodities like gold reached parabolic levels very quickly.
We expected some type of correction, but this is maybe overdone to the downside."
I wouldn't mind if it went down for a while. In a few months I'll be done with a lot of my purchases and be at a point to finish paying off debt and putting some money away.
http://www.thenewfederalistpapers.com
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by anarky321 » Sat 22 Mar 2008, 10:47:12
$this->bbcode_second_pass_quote('cube', '
')There is no credit implosion. What we have is a return to sanity in lending standards.
I find it sickening that Joe Sixpack actually wants the fed to run up the printing press even more.
1) there is a credit implosion compared to what credit was like 1-2 years ago, and we've now passed the point of 'normalcy', or what normalcy was, with even banks afraid to lend to each other, the credit crunch is much more serious that just consumer lending, but J6P doesnt see the other aspects of it, he only seeds harder home and auto and student loans
2) show me any evidence the fed is running the printing presses, they're not, the dollar isnt weak because the fed is running the presses its weak because the US economy growth for the last decade was based on debt and now that credit is tightened there is no hope for growth, and indeed no hope for anything but severe contraction
the fed borrows money it doesnt create it out of thin air, if they ran the presses foreign investors would send treasury yields soaring to 20%+, its not going to do that
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by anarky321 » Sat 22 Mar 2008, 11:16:07
$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('anarky321', 't')he fed borrows money it doesnt create it out of thin air, if they ran the presses foreign investors would send treasury yields soaring to 20%+, its not going to do that
We recently had a whole seperate thread just on this subject.
There are few main reasons for low Treasury rates:
1. Save haven status for US treasuries
2. US treasuries are the only reliable hedge against mortgages and many other derivavtive contracts based upon interest rates
3. Foreign central banks have no alternative but to keep their accumulated trade surplus dollar in treasuries
In addition, the intrinsic drop in the actual value of the dollar is forcing other countires to rapidly expand their money supply and devalue their currencies to keep up with the depreciation in the dollar. Or in other words, money creation is outsourced.
You missed the memo that all European central banks expanded their monetary base rapidly this week.
i disagree with 3. there are most certainly alternatives to US treasuries as far as foreign banks are concerned...gold
if the US was debasing its currency there would be a rat race for foreign CBs to start quietly liquidating their treasury stockpiles and convert into other assets/currencies
if ECB wanted to inflate its currency all it would have to do is drop rates to 0% at its next meeting
how would US treasuries be a safe haven is the US was running the presses? that would make them a risky, rapidly devaluing financial instrument and it would command rates accordingly
you said the ECB expanded the currency base - how? by lending to primary dealers? buying up treasuries? banks are afraid to lend and afraid to borrow, thats why the credit markets are frozen
if the EU is desperately trying to devalue the Euro against the $, bond rates on Euro paper would rise significantly forcing the ECB to raise rates to attract investment capital
this has not happened, bond yields are indeed going up in several countries of the EU, but that has nothing to do with monetary expansion and everything with how vulnerable each individual country is to the coming slowdown, since the treasury bonds are issued on an individual basis
spain, italy, england, greece come to mind as the top in the most-f*cked list as far as EU is concerned, their yields will rise due to the increased risk of major economic crisis
i just dont see how you can have monetary expansion when J6P cant get a mortgage, auto loan, appliance loan or student loan and the banks are afraid to lend because of the rapidly rising risk of default on all of the above
this process invariably ends in deflation and severe contraction in the economy
the CBs can offer all the money they want but they cant FORCE people to borrow and they cant FORCE people to lend, and therein lies the key, as long as people dont want to borrow and lend this is going to spiral down in a vicious cycle
Tyler_JC:
"I love how every conversation on this website, given enough time, will turn into a discussion of cannibalism."
““Life is on the wire…the rest is just waiting””
by DantesPeak » Sat 22 Mar 2008, 11:59:13
$this->bbcode_second_pass_quote('anarky321', '')$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('anarky321', 't')he fed borrows money it doesnt create it out of thin air, if they ran the presses foreign investors would send treasury yields soaring to 20%+, its not going to do that
We recently had a whole seperate thread just on this subject.
There are few main reasons for low Treasury rates:
1. Save haven status for US treasuries
2. US treasuries are the only reliable hedge against mortgages and many other derivavtive contracts based upon interest rates
3. Foreign central banks have no alternative but to keep their accumulated trade surplus dollar in treasuries
In addition, the intrinsic drop in the actual value of the dollar is forcing other countires to rapidly expand their money supply and devalue their currencies to keep up with the depreciation in the dollar. Or in other words, money creation is outsourced.
You missed the memo that all European central banks expanded their monetary base rapidly this week.
i disagree with 3. there are most certainly alternatives to US treasuries as far as foreign banks are concerned...gold
I am not sure how you can disagree with the facts about what is happening.
Even though I sometimes disagree with Mr. Bill, a well known poster here, his statement that the foreign central banks and funds are showing no signs of dumping the dollar is true. If anything, they are buying more dollars over time.
Don't get me wrong, that could change over night but my best guess is that foreign central banks/funds have bought $400 to $500 billion worth of dollars over the last year.
Here is what Europe is doing with its money:
$this->bbcode_second_pass_quote('', 'E')uropean Banks Try to Inject a Bit of Calm
By CARTER DOUGHERTY
Published: March 21, 2008
FRANKFURT — Central banks in Europe injected cash into the financial system Thursday in an attempt to bolster nervous banks through the Easter holiday weekend.
On top of adding more liquidity, the governor of the Bank of England, Mervyn A. King, brought British bankers together to discuss ways to restore “more orderly” market conditions.
The European Central Bank surprised markets with a 15-billion-euro infusion of extra loans that banks can use to firm up balance sheets over the holiday weekend. It is also a prelude to end-of-quarter accounting, a time when demand for cash typically rises.
The European bank also went through with a $15 billion cash auction, part of previously scheduled currency swap agreement with the Federal Reserve.
For its part, the Bank of England lent £5 billion ($10 billion).
by evilgenius » Sat 22 Mar 2008, 12:19:01
$this->bbcode_second_pass_quote('watercut', 'E')vilGenius;
I don't know how you can say that "deflation" is currently winning at the moment. I work for a large paper company and our costs have increased exponentially that past 8 months. Our frieght, fiber and boiler fuel costs are all up over 15% from last year. Coal has moved from $75/ton delivered to $104 in the past 3 months alone. Our freight fuel surcharges are 6.5% higher than 2007Q4. Recycled fiber costs in 2007Q1 were $110/ton vs. our current $155/ton (41% increase) due to the higher Chinese demand for U.S. wastepaper. The Chinese are bringing new paper machines at an unprecedented rate and have no local fiber to supply the mahinces so you can guess where they are going to get it!
My brother works for GE and we were just taking during his Easter visit about how the cost of turbine manufacture has increased at move than 10% in the U.S. and 24% in Europe where the more advanced turbines are built requiring more advanced metaliergy(sp).
I will save you the lecture about my grocery bill as I am sure that you have experienced the same. Could you please point me in the direction of something that has experienced deflation so I could go buy it before it goes up in price.
You have to understand what I mean by deflation. It is simply the destruction of money in the money supply. It does not mean that any underlying commodity supply realities (peak oil) will be effected. When deflation and inflation both work in an economy it doesn't, I think, mean that we will see any clear winner either, only a majority winner. Oil prices can continue to rise because they have an underlying fundamental that drives their rise. Food prices can do the same in a deflationary environment because their supply, given the wrong macro-economic policy choices, is also diminishing. Gold may not benefit from the same dynamic, especially if there is far less money left to chase after it. The best example of how deflation is afoot in the US economy is house prices. They are dropping and will continue to drop mostly because there is less money available to chase after houses. As the lack of a housing ATM becomes even more evident in the US economy the effects of deflation will become even more pronounced. Whatever used to command a high price merely because of demand and not due to scarcity will drop in price, all the way from already cheap Walmart goods, which could cease to be produced because they become uneconomical, to other things that seemed previously to be truly valued.
Industrially the cost structure could be evened out if the dollar recovers when the contagion has fully spread to the rest of the world. Once the BoE and the ECB have to drop rates to save their economies and there is no longer much of an interest rate spread between the dollar and those currencies then the dollar could come back. Of course, this is contingent upon what the yuan and yen are doing at the time and whether there still exists enough of a financial system to take advantage of the situation. I think Bernanke and Paulson are counting on it.
When it comes down to it, the people will always shout, "Free Barabbas." They love Barabbas. He's one of them. He has the same dreams. He does what they wish they could do. That other guy is more removed, more inscrutable. He makes them think. "Crucify him."
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by Heineken » Sat 22 Mar 2008, 14:22:31
$this->bbcode_second_pass_quote('anarky321', 'i') think at least half the people on this board need to read the 'infation' entry on wikipedia again
supply and demand and inflation are completley different things, but many people cant seem to tell the difference
fractional banking lending is inflationary, rising demand for oil and gold and food because of supply shortages is supply/demand, DIFFERENT THINGS
the Fed doesnt give a sh*t about inflation, just as long as it stays within a 'normal' range, which is funny because there's nothing normal about inflation, it was created by fractional banking, if the Fed didnt want inflation all it would have to do is revert back to a traditional banking system
no, what the fed is really scared of is DEFLATION, inflation is a wealth tranfer from the bottom to the top, deflation is the opposite, thats what scares the fed
there's no inflation-deflation battle going on right now, its a bloody credit implosion!
this is deflation and commodities ARE in a bubble and WILL bust, so go ahead, buy the dips and get screwed
food and oil and gold going up is NOT inflation its supply and demand
inflation is expansion of money/credit in the financial system, what is happening now is rapid DEFLATION due to the wiping out of hundreds of billions of available credit and the reluctance of investors to lend due to uncertain economic conditions
the only way this is going to end is severe deflation just like the GD, and if you thnk commodities are going to stay at their present levels in a deflationary cycle your out of your mind
here's an example, orders for metal goods from the US are down over 50% year-over-year in china, guess what this will do to prices of metals
car sales are plummeting, what is this going to do to the prices of rubber, metal, plastics, etc etc
housing construction is plummeting...lumber prices?
i cant think of a single commodity thats going to go up in price in the next 2 years from its current level, EXCEPT of course fossil fuels and possibly gold depending on how long it takes the goldbugs to understand that there's no inflation (which could be a while)
Commodities are real things that real people have to have. Given the world's still-exploding population, the industrialization of Asia, and the growing scarcity of a lengthening list of commodities, there is a very strong floor under the price of commodities. There could be some temporary, recession-related drops in commodities prices, but I believe the long-term price trend must continue to be up . . . until total collapse occurs, which it eventually will.
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"Things have entered a stage where the only change that is possible is for things to get worse."
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