Custom Search

Monday, June 30, 2008

Commodities Seeing Demand Destruction, Canada Rolls Over

Even as oil continues its parabolic blow off, the commodity heavy Canadian market put in what appears to be a significant top. The MACD rolled over long before prices did. Now that prices are oversold, any strength can and should be used to build short positions.

Toro’s Running Of The Bulls caught this early in Canada Rolling Over.

With the world’s emerging economies now in full monetary tightening modes, with the ECB in full inflation fighting mode and with the US Fed in no position to loosen the spigot any further, expect a significant turning point in commodities.

Commodities Signal Bubble Bursting as First-Half Ends (Update2): “Commodities are heading for their best first half in 35 years. The next six months may not be as rewarding because record prices for oil, copper and a dozen other raw materials may crimp consumption and encourage growth in supply.

The 19 commodities in the Reuters/Jefferies CRB Index jumped 29 percent this year, the most since 1973 and more than any second-half gain in at least five decades, data compiled by Bloomberg show.

High costs are slowing the pace of demand for gasoline in the U.S., and gold purchases in India, the biggest buyer, plunged 50 percent from a year earlier. Producers are expanding supplies of wheat in the U.S. and steel in China.”

Demand destruction is accelerating, while supply growth has reached furious levels as large projects start to go online. Demand destruction in the US is clearly evident in $200 Oil: World Economy Would Collapse. But more importantly, the real demand destruction will come from when Oil Drops on Subsidy Cuts in China, India, Malaysia, Taiwan.

“Demand is slowing for copper after the metal jumped 28 percent this year and reached $4.2605 a pound May 5, the highest ever, partly because of temporary supply disruptions in Chile, Peru and Mexico. China said June 10 its copper imports fell 19 percent last month to the lowest since August. Buyers in China, the world's biggest metals importer, are “price sensitive,” according to Freeport-McMoRan Copper & Gold Inc., the world's second-largest producer.

Gold demand from jewelers, the biggest users, has stalled since September, London-based UBS AG analyst John Reade said May 29. After reaching a record $1,033.90 an ounce March 17, gold will average $850 this year and $750 next year, he said. The World Gold Council said May 20 that first-quarter demand fell to a five-year low.”

A slumping global economy will viciously slash ALL demand for ALL commodities as a period of unsustainable ‘super, hyper’ growth comes to a sudden end in ALL emerging economies from Brazil to China.

European Prices Rise More Than Forecast as Oil Surges (Update2): “Inflation in Europe accelerated more than economists forecast, eroding consumers' spending power and adding to pressure on the European Central Bank to increase borrowing costs even as economic growth cools.

The inflation rate in the euro area rose to 4 percent this month, the highest in more than 16 years, from 3.7 percent in May, the European Union statistics office in Luxembourg said today. Economists had forecast a 3.9 percent rate for June, according to the median of 38 estimates in a Bloomberg survey.”

Put it all together, and it is finally time to build larger short positions in commodities for the longer run through some inverse ETF’s.

17 comments:

Anonymous said...

nice post.

you think there is still more bleeding/damage to be done in the financial sectors?

SKF has been good to me over past 3 months...but don't want to get too greedy.

Ben Bittrolff said...

A bounce is possible in the financials.

Anonymous said...

Ben, what does the demand destruction for commodities do to the markets in the next 6 months? How low will oil prices go before demand grows again? If high prices stagnate demand, the lower prices you predict should increase demand and stimulate the markets.

Anonymous said...

I think the demand destruction you speak of is making many equity investors nervous. Since they dumped way more than they should have into hedges.... I think you will hear a few more spout off about supply and demand a few more times to keep prices up until they can find something else to put all this money in. No matter what happens next....the credit mess moved this bubble around and eventually it has to pop altogether.

Ben Bittrolff said...

Want to see demand destruction?
Go read 364. THE OTHER "PEAK OIL"

Anonymous said...

isn't it about time to move from DIG into DUG? Oil pricing needs to let some steam off at some point, no?

richard said...

Prevailing systemic risk breakdown suggests the wisdom of investing in gold over short selling.

Granted a slumping global economy and termination of subsidies will slash usage demand, but an investment demand for gold is coming from a financial breakdown stemming from the one or more of following factors:
1) bond insurers failure, MBIA, MBI, and Ambac, ABK,
2) mortgage insurers failure PMI Group, PMI, and MGIC Investment, MTG,
3) commercial lending gridlock failure, CIT Group, CIT, and Capitol One Financial, COF,
4) mortgage GSE failure, Fannie Mae, FNM, Freddie Mac, FRE,
5) run on home loan savings and loans and banks Wachovia, WB, or Washington Mutual, WM,
6) run on money center banks, Bank of America, BAC

In other words the immediate potential of chaos is going to be a greater investment mover than a bursting commodity bubble.

A systemic risk event or risk events will soon cause an immediate investment demand for gold: gold will likely gap limit higher in price for many days.

When the systemic risk event occurs, that is when the financial system breaks down, one may not be able to have access to one's wealth, I recommend that one dollar cost average an investment in gold in the gold ETF, GLD, in a trust account over the next two weeks, as well as a dollar cost average purchase of gold at both BullionVault.com and GoldIsMoney.com.

Anonymous said...

The analysts quoted on gold are speaking as if investment demand does not exist. Notice the word "users". These analysts are just another set of people talking up their book: jewelery, which suffers during times of high gold prices.

Toronto real estate agent said...

Nice post. It is interesting to see demand destruction. I am still more and more surprised about demand for oil. It looks it is totally non-flexible and it makes a strong pressure on inflation. I am dealing with Toronto condos so I can see another consequence. Mortgages still need to lower key rates to make them more affordable but lowering key rates it’s quite inconsistent with higher inflation then expected.

Toronto real estate agent said...

Nice post. It is interesting to see demand destruction. I am still more and more surprised about demand for oil. It looks it is totally non-flexible and it makes a strong pressure on inflation. I am dealing with Toronto condos so I can see another consequence. Mortgages still need to lower key rates to make them more affordable but lowering key rates it’s quite inconsistent with higher inflation then expected.

replica rolex said...

$75 Replica Rolex Watches sale, Our site provides Rolex replica, replica Rolex Watches, replica breitling, replica Cartier, replica Omega, Tag Heuer Watches. . .more than 100 famous rolex brands"
rolex air king
rolex datejust
rolex day date
rolex daytona
rolex gmt
rolex submariner
rolex yachtmaster
a lange sohne watches
alain silberstein watches
bell ross watches
breguet watches
breitling watches
bvlgari watches
cartier watches
omega watches
patek philippe watches
ロレックスレプリカ
ロレックスコピー

Sneakers hobbies said...

nice post!!
We do kinds of casual clothing wholesale online, welcome to visit!!
Polo Shirts On Sale
Cheap Polo Shirts
Burberry Polo Shirts
ski jackets
The North Face Clothing
Mens ski jackets
Womens ski jackets
Ralph Lauren Polo Shirts
men's down jackets
cotton polo shirts
polo shirts
cheap polo shirts
discount polo shirts
polo shirts wholesale
womens polo shirts
mens polo shirts
polo clothing
polo long sleeve shirt
short sleeve polo shirt
long sleeve polo shirts
embroidered shirts
discount north face jackets
winter jackets
short sleeve polo shirt

Anonymous said...

replica louis vuitton bags
are an important allotment of fashion, the blazon of louis vuitton replica bags
that a adult carries will affect the way her apparel looks, accustomed cheap louis vuitton purses
fabricated by accepted artist labels has been actual fashionable.

shoppingugg said...

hermes handbag have become popular because of the actress it was named after. 35 birkin has gone on to become one of the most popular brands of handbags throughout the world, especially among the rich and famous. The manufacture of hermes replica is said to take several weeks and the exterior of the bags can be made up of an assortment of leathers.




Now, the aggregation is captivated to advertise a new aberration of the alarm dressed in 18-carat white or rose gold – the Breitling Watch . The new Navitimer World affiliated the readability and functionality from Montbrillant Datora acclaimed predecessor. Its artful address lies in an awful originaldiamond-set motif, a new affection alien into Breitling Avenger design.

ryan said...

Examine the soles of your shoes. Note where UGG Mini wear has occurred. Most people seem to be amazed that their shoes wear at the rear outer corner. Most UGG Mini boots rearfoot strikers will wear at this part of the shoe. The reason for this, which someday, somewhere a funded study will prove, is that for most heel strikers it is the point Mini ugg boots of first contact of the shoe with the ground. Most people walk and run with their feet slightly rotated from center. Runners, however, also have what is called a narrow base Mini uggs of gait. A narrow base of gait means that the feet contact close to the midline of your body. This creates additional varus (tilting in) of the limb. This results, for the rearfoot striker, in the first point hitting the ground being the outer corner of your shoe. Forefoot wear ugg 5854 may point to an individual who is a sprinter, runs fast, contacts the ground with the forefoot first or all of the above. Uneven forefoot wear may show where one metatarsal is plantarflexed relative to the others or where one metatarsal may be longer than the others. In the presence of significant forefoot wear, you are at risk of stress fractures.

sad said...

Die Zeitmessung hat ein Ziel des Menschen von thomas sabo online Anfang an und eine Zeitleiste wurde Ihnen beim Verständnis helfen, wie wir wo sind wir mit Uhren bekam. Uhren haben so viele neue thomas sabo schmuck günstig Funktionen. Sie haben das Datum, die Zeit, mal über Zeitzonen hinweg, und angebote thomas sabo einige haben Stoppuhren. Die meisten Uhren haben eine Art von Alarm in ihnen. Die Möglichkeiten sind unbegrenzt und anhänger kette ich kann wirklich einen Dick Tracy Art zu sehen sein echt.Hier eine Chronologie der Geschichte zu sehen. Einige kette thomas sabo der Jahre möglicherweise nicht in chronologischer Reihenfolge aufgeführt werden, aber ich habe sie so nah wie thomas sabo kette möglich. Es ist sehr interessant zu erfahren, wie Uhren entwickelt haben. Es ist erstaunlich, wenn ich an den Köpfen der Menschen, die ihre Hand bei der Schaffung von Uhren, wie klug und schmuck thomas sabo ketten technische sie gewesen sein musste denken!Vor Das Hauptproblem war die thomas sabo ohrschmuck treibende Kraft der Uhren liefen wurden Gewichtungen. Dies machte es angebote thomas sabo ohrschmuck schwierig, sie herumtragen. Henlien war fünfzehn Gulden für eine vergoldete Moschus-Apfel thomas sabo ohrringe mit einer Uhr gezahlt.

每当遇见你 said...

Perhaps thomas sabo you’ve got thomas sabo uk your eye on a piece of jewelry. thomas sabo jewellery Who wouldn’t want a lovely thomas sabo charms diamond? Or maybe you want thomas sabo charms sale something else, like a cottage, a boat, or a vacation. What do you want? Does it seem like you’ll never own it? cheap thomas sabo charms It’s possible. Sometimes that happens to people: their income simply evaporates with bills, bills, and more bills!In fact, thomas sabo bracelet maybe you find that your income thomas sabo bracelets is just enough to make ends meet, charm bracelet thomas sabo with barely thomas sabo watches any extra left thomas sabo rings over to thomas sabo necklace put away for a rainy thomas sabo earring day. Perhaps thomas sabo you’ve got thomas sabo uk your eye on a piece of jewelry. thomas sabo jewellery Who wouldn’t want a lovely thomas sabo charms diamond? Or maybe you want thomas sabo charms sale something else, like a cottage, a boat, or a vacation. What do you want? Does it seem like you’ll never own it? cheap thomas sabo charms It’s possible. Sometimes that happens to people: their income simply evaporates with bills, bills, and more bills!In fact, thomas sabo bracelet maybe you find that your income thomas sabo bracelets is just enough to make ends meet, charm bracelet thomas sabo with barely thomas sabo watches any extra left thomas sabo rings over to thomas sabo necklace put away for a rainy thomas sabo earring day.