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Dr House

Fears Of A Commodity Crash Grow

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http://www.telegraph.co.uk/money/main.jhtm.../cccomms104.xml

Ambrose today highlights the large speculative element in the commodity boom. Basically yes it is in a supercycle but there will be a mammoth correction en route and we are heading for it right now.

In particular I liked this bit - sums up what a lot of us feel when we read the Gold Rampers.....

Mr Steel said inflated oil prices were automatically spilling over into gold, since energy makes up 65pc of the index baskets. The funds have to buy non-oil commodities to keep the weighting constant. Gold would normally fall in February for seasonal reasons. There is a 'buyers strike' for jewellery in India. Yet gold hit a record $984 an ounce yesterday.

If oil tumbles we will find out whether gold really has regained its status as a hard currency, a haven for investor flight from discredited paper in a world of sub-prime wreckage, or whether it is still a cyclical commodity like the others.

They are also blaming the bubble right now on ETFs - a classic short term vehicle - I like them, but they are probably another rash speculator tool, especially ETCs. :blink:

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I buy this. A commodity "correction" is a highly possible thing, and like everything it will undershoot once it gets going.

On the assumption that we're heading into recession of course. $50 bbl doesn't look unreasonable, but I wouldn't bet either way, there are just too many unknowns.

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http://www.telegraph.co.uk/money/main.jhtm.../cccomms104.xml

Ambrose today highlights the large speculative element in the commodity boom. Basically yes it is in a supercycle but there will be a mammoth correction en route and we are heading for it right now.

In particular I liked this bit - sums up what a lot of us feel when we read the Gold Rampers.....

Mr Steel said inflated oil prices were automatically spilling over into gold, since energy makes up 65pc of the index baskets. The funds have to buy non-oil commodities to keep the weighting constant. Gold would normally fall in February for seasonal reasons. There is a 'buyers strike' for jewellery in India. Yet gold hit a record $984 an ounce yesterday.

If oil tumbles we will find out whether gold really has regained its status as a hard currency, a haven for investor flight from discredited paper in a world of sub-prime wreckage, or whether it is still a cyclical commodity like the others.

They are also blaming the bubble right now on ETFs - a classic short term vehicle - I like them, but they are probably another rash speculator tool, especially ETCs. :blink:

Can't see a large correction happening anytime soon with Bernanke talking of more IR cuts.

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I buy this. A commodity "correction" is a highly possible thing, and like everything it will undershoot once it gets going.

On the assumption that we're heading into recession of course. $50 bbl doesn't look unreasonable, but I wouldn't bet either way, there are just too many unknowns.

I also agree, however no doubt the market will also "irrationally" overshoot on the way up as well, so it may continue for a while yet.

I don't see any problem with using EFTs/ETCs as a short term bet, as long as you don't wait too long to sell. ;)

IMO in a recession we will see oil prices below $30 per barrel.

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Ambrose today highlights the large speculative element in the commodity boom. Basically yes it is in a supercycle but there will be a mammoth correction en route and we are heading for it right now.

Fears? Fears that they won't be able to gouge so much easy cash out of the hands of the needy?

This world needs to change fast, before the sheeple turn wolf.

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We have already 'irrationally overshot'. $104 oil is about as irrational as it is possible to get with the economic outlook we face.

Oil will collapse very soon, that much is sure. The interesting question, as stated in that article, is whether it takes gold with it.

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Can't see a large correction happening anytime soon with Bernanke talking of more IR cuts.

The markets appear to have accounted for these cuts though. They're already way ahead of themselves. Once they're in I think the chances for this large correction will increase dramatically. Ditto dollar weakness, ditto Euro strength. Is new speculative money going to flood in as fast with rates down at 2.25%? I struggle to see it myself.

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We have already 'irrationally overshot'. $104 oil is about as irrational as it is possible to get with the economic outlook we face.

Oil will collapse very soon, that much is sure. The interesting question, as stated in that article, is whether it takes gold with it.

I think Gold has become the new global BTL almost - at least half the increase is mindless speculation from people who know no more about gold than how to spell the word (just), and have haerd on the street it is a good bet. They will evacuate in a 24 hour period if they see prices dropping.

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We have already 'irrationally overshot'. $104 oil is about as irrational as it is possible to get with the economic outlook we face.

If my prognostication is correct (and it probably isn't, so Marge, don't be the farm on this) - the USD quote should spike further, directly reflecting the Fed's attempt to defibrillate through inflationary shock.

I fully agree that it has already irrationally overshot. But for it to fall, we need to see TWI basket compositions change. And that political process hasn't started yet.

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The USD is of course a big factor in all this.

Rather unfashionably, I think that there will come a point in a global economic crisis (which we are still yet to hit face on) where interest rates, balance of payments will become irrelevant simply because the US is still the only global superpower. If everything around you is falling apart who do you turn to?

It is on this basis that I expect the USD to start strengthening, beginning on clear evidence of declining Asian economies.

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The USD is of course a big factor in all this.

Rather unfashionably, I think that there will come a point in a global economic crisis (which we are still yet to hit face on) where interest rates, balance of payments will become irrelevant simply because the US is still the only global superpower. If everything around you is falling apart who do you turn to?

It is on this basis that I expect the USD to start strengthening, beginning on clear evidence of declining Asian economies.

10% agree. US were into the decline first and they will be out first. The US consumer still calls the shots across our capitalist world. I think China esp is very vulnerable.

Once the US stabilises the powers that be will thrash Gold back into its box.

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I agree, gold is in a classic speculative bubble.

Last time I looked (summer 07), gold wasn't very high in inflation-adjusted sterling terms though - only a little above the 25 year median.

I'll try to look up my chart when I get home.

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The interesting thing I'd like to know more about is what might trigger any change. At the moment we're still into a bull run.

Any chartists out there?

I did read a comment (somewhere, can't find it now of course) that painted a picture of hedge and pension funds diving into the commodities market to protect against the devalueing (?sp) dollar, which is clearly happening. However, the article went on to suggest that, if the economy continues to worsen, these same hedges will eventually get stung for margin calls - driving them to sell commodities quickly. This could happen even as the Fed is still dropping rates and printing money. The turn could be quick and nasty.

Of course, much of the rampant speculation is an attempt to offset dollar losses. Was just thinking about it - the contrived fall of the dollar will enable dollar loses to be repaid more easily if earnings/investments are in any other currency or commodity. Maybe this is part of the plan.....

The more I think about it, the more I feel we're heading for a nasty recession, and the more I feel that commodities will eventually bust hard.

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We have already 'irrationally overshot'. $104 oil is about as irrational as it is possible to get with the economic outlook we face.

Oil will collapse very soon, that much is sure. The interesting question, as stated in that article, is whether it takes gold with it.

Agreed, but the markets may be more irrational than we are. ;)

The house price boom reached lunatic proportions, which very few would have predicted.

Therefore I would not bet against oil prices continuing upwards.

IMO gold is in no way immune to a commodity bust. As many have pointed out, the big speculative money behind oil is the same money behind gold.

I agree, gold is in a classic speculative bubble.

This doesn't mean there isn't money to be made of course, it just means you might want to get out before the crash.

As a short term option, well monitored, I fully agree.

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Last time I looked (summer 07), gold wasn't very high in inflation-adjusted sterling terms though - only a little above the 25 year median.

I'll try to look up my chart when I get home.

Is this what you mean?

http://goldprice.org/inflation-adjusted-gold-price.html

You have to project the line up to just short of $1000 of course.

From this angle, inflation adjusted gold price looks like it is equal to the second biggest bubble ever. There again, I suppose the chart, stopping at 2005 still has a bit of inflation to factor in...

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We have already 'irrationally overshot'. $104 oil is about as irrational as it is possible to get with the economic outlook we face.

Oil will collapse very soon, that much is sure. The interesting question, as stated in that article, is whether it takes gold with it.

Agree. Agree.

We are in that classic place where the herd are saying certain investments cannot go down. IMO, its where Warren Buffett would be saying to slip quietly out the back door.

I still think Warren B was right over a year ago when he said the world was heading for a commodity price meltdown. The biggest recession this side of the Big One in 1929 is brewing with the greatest house price crash in world history. Its going to affect spending folks! When people see their portfolios tumble and their ATM machines (houses) shut down they are not going to be investing in anything other than stuff you buy at Tescos (Warren B has a huge stake in Tescos BTW).

Al Greenspan had a good word to describe the current irrational exuberance for gold and oil: froth.

Or, as Warren would advise: observe the herd and don't follow them.

However, in the final analysis there is only one 100% certain bet today: house prices are going down--hard.

Edited by Realistbear

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Ambrose today highlights the large speculative element in the commodity boom. Basically yes it is in a supercycle but there will be a mammoth correction en route and we are heading for it right now.

i disagree.

with a so messed up world, with so much capital ********, commodities are the only thing left of real value.

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I think Gold has become the new global BTL almost - at least half the increase is mindless speculation from people who know no more about gold than how to spell the word (just), and have haerd on the street it is a good bet. They will evacuate in a 24 hour period if they see prices dropping.

And how exactly did you arrive at this figure of 'at least half'?

From what I can see gold is still not on the radar for the man on the street.

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I still think Warren B was right over a year ago when he said the world was heading for a commodity price meltdown. The biggest recession this side of the Big One in 1929 is brewing with the greatest house price crash in world history. Its going to affect spending folks! When people see their portfolios tumble and their ATM machines (houses) shut down they are not going to be investing in anything other than stuff you buy at Tescos (Warren B has a huge stake in Tescos BTW).

However, in the final analysis there is only one 100% certain bet today: house prices are going down--hard.

House prices are going down hard nd the yanks will stop buying but dont underestimate the growing consumer in Asia. WB might not think the meltdown will be in the short term over there though as he has just invested in POSCO a major Korean steel producer, also Coca Cola the water commodity supplier

China currently has 11 working reactors that generate 8.8 gigawatts of electricity (1.5% of China's total power capacity). The Chinese government has stated that it plans on increasing its nuclear energy production to 4% (generating 40 gigawatts of nuclear power by 2020. And it expects another three-to-four-fold increase to 160 gigawatts by 2030 whcih should help the demand side for uranium.

China is opening the equivalent of two coal-fired plants a week and will double its coal consumption within ten years to three billion tons annually. To put that into perspective, the U.S. uses slightly more than a billion tons of coal a year.

Not forgeting all the commodities that will be required for the constrution of these facilities and associated infrastructure.

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The Chinese government has stated that it plans on increasing its nuclear energy production to 4% (generating 40 gigawatts of nuclear power by 2020. And it expects another three-to-four-fold increase to 160 gigawatts by 2030 whcih should help the demand side for uranium.

China is opening the equivalent of two coal-fired plants a week and will double its coal consumption within ten years to three billion tons annually.

Yes, but why? And why wait 'till now to do so? They've had the technology for several decades, after all.

Edited by ParticleMan

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Yes, but why? And why wait 'till now to do so? They've had the technology for several decades, after all.

Not sure about your question but the why is because they need to as part of their development to support there economic growth and why now I dont know only that this is when they have said they will do it. I guess you are suggesting a more sinister motive ?

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  • 293 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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