Beginning in March 07 through July 08 we saw one of the greatest commodity bull markets in history with prices rising to record highs. The prices of oil, grains and precious metals went wild. This in turn drove up the price of food and gas to over $4.00 per gallon. The culprit at the root of this dilemma was our weak dollar. Investors felt that it was more profitable to hold tangible commodities than declining dollar assets.
Now, in December we are faced with another very similar dilemma.The March dollar contract has dropped from 89.25 to 82.68 over the past few weeks. Correspondingly, forward contracts for oil have jumped from 40.81 to 54.09. Wheat has followed the trend rising from $4.71 per bushel to $5.24, soybeans from $7.79 per bushel to $8.75, corn from $2.93 per bushel to $3.59 and gold from $681.00 per ounce to $827(these latest prices were taken at the start of trading 12/15/08).
Whether of not this trend will continue is up for discussion. Could it be that we could have deflation in the general economy and commodity inflation at the same time? I don't know. This could be just a bear market rally or it could be the resumption of the upward trend that started in March 07. The best way to get a sense of what is happening is to follow the prices. In the end, it is the price that determines the trend.
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Reader Comments (Page 1 of 1)
12-15-2008 @ 6:34PM
Iridium said...
The dollar doesn't have much to do with it at all. It is all market manipulation to grow fortunes, not create a better economic enviroment. The dollar fell because traders pulled out of cash assets to cash in on the big commodity payday.
Do not call it a bull market. It was a fraud market. There was nothing based on consuption or demand from the supplier and consumer side. It was all trader demand. Messing with a little tech company to drive the stock price up 10 times past earnings is dishonest but it doesn't cause widespread problems. Messing with commodities to drive them up 10 times the dmeand based price causes nothing but financial disaster.
You cannot have deflation of you have commodity inflation. That is impossible without causing massive bankrupcy. When core materials go up so do prices.
All commodity trading should be suspended right now. The market cannot be trusted to set a fair price. All regulations that were removed from the commodity trade should be put back in place and then trading can resume.
This needs to happen with no discussion. Thee price of oil should be set at $35. Corn at $2.50, wheat at $3.50 and gold should be taken off the market as well. Screw investors, all they have done is throw the economy in turmoil because they got greedy and thought they could drive oil to $147 a barrel with no problems. That they could drive the cost of corn sky high and people would just pay the price.
Wall Street needs to be taken down. It is one giant Ponzi scheme and it needs to end. All corporations should be forced into privatization and the US Treasury should be forced to close.
12-15-2008 @ 10:41PM
superbob said...
It is called hyper-inflation and it's coming to a city near you!
12-16-2008 @ 1:48AM
lou said...
Iridium: I sure wish you were in charge. You sound like you know what is going on, and I wish you could have your way.