Parabolic Commodities: The End is in Sight

Risky assets will continue to lose value. Not necessarily because they all deserve to, but because they must. The entire financial system is de-leveraging. Yes, that means that even commodities will face the wrath of the margin clerks... Eventually. They’ve all gone parabolic. That NEVER ends well. EVER… and it ALWAYS signals the beginning of the end.

Equities in general (I'm using the S&P 500 here to represent) peak BEFORE commodities do. Commodities in general (I'm using the CRB Commodities Index to represent) then follow through to new highs before correcting just as aggressively.

I posted on the subject a while back.

This is all you need to know: PARABILIC = END IS NEAR.

First: When The Momos Go Parabolic…
Second: When The Momos Lead The Way Down
Thirdly: Life After Things Go Parabolic, This Bounce Too Will End.
Most importantly: All Bubbles Are The Same

Oil is at $109+ this morning… U.S. crude-oil inventories rose 1.75 million barrels last week, according to the median of responses in a Bloomberg News survey. Stockpiles increased in seven of the previous eight weeks, Energy Department figures showed.

Crude Oil Rises Above $108 to Record as Returns Outpace Stocks:

“The grab for hard assets is on due to the lack of confidence in the rest of the markets at the moment.” –John Kilduff

“The perception in the financial community is that the oil market is the one safe harbor. The speculation that's moving oil higher will eventually undercut some of the safety they seek. As prices rise, the economy will weaken and eventually hit demand.” –Rick Mueller

“We're witnessing an ongoing flow of fund buying, which isn't particularly motivated by the particulars of the petroleum market. Prices have rallied to such an extent where sellers have backed off. Any time prices go lower the buyers come right back into the market.” –Tim Evans

“Clearly the fundamentals don't matter at this point. We've seen bubbles in other markets over the years and eventually they end. It's impossible to see when that will be the case here.” –Chip Hodge

“The golden days of oil moving between $15 and $25 a barrel are clearly in the past, but it's hard to justify oil over $100, given the fundamentals. There are longer-term concerns about supply, which would justify a price in the $70s.” –Rick Mueller

Persian Gulf Oil-Tanker Rates May End Declines on Cargo Backlog: “The cost of shipping Middle East crude to Asia may be steady, after falling the most in three months yesterday, because a backlog of cargoes is building up.”

Unrelated, but just as important:

BOE Offers Further Three-Month Loans to Ease Tension (Update1): “The Bank of England said it will hold two more auctions of emergency funds, joining the Federal Reserve in stepping up efforts to ease renewed tensions in money markets.

The U.K. central bank will offer 10 billion pounds ($20 billion) of three-month loans on March 18 and will hold a further auction on April 15, according to a statement. The size of the second auction will depend on the outcome for the first.

The Bank of England and other central banks are struggling to restrain an increase in money market interest rates after about $190 billion of losses from the U.S. subprime mortgage slump made financial institutions reluctant to lend to each other.

While central banks damped market rates in December when they announced joint measures to counter the credit shortage, conditions have tightened since then. The cost of borrowing pounds and euros for three months rose to a two-month high today.”

I’ve been mentioning the spikes in LIBOR and EURIBOR since last week. This does not bode well for risky assets.

Bear Stearns Shares Fall on Liquidity Speculation (Update6): “Bear Stearns Cos. denied that the firm lacked sufficient access to capital, after speculation about a liquidity crisis pushed the stock down 11 percent in New York trading, the most since the 1987 stock market crash.”

Of course Bear Stearns says it ain’t so… but if it is, look out below.