Where do you see the economy ending up (ie unemployment rate, duration of downturn, etc)?
Unemployment is headed for 7% within the next year. Case-Shiller housing index is headed down at least another 5%. Oil will be under $80 sometime this coming year. It might bounce around above 80 for awhile, but if the sell-off in commodities is any indication of how rapidly money is being pulled out of the commodities markets, oil can’t help but come down too.
For all those people who said “speculators aren’t the cause of oil prices!” - uh, care to explain why oil has crumped so rapidly this autumn, yet demand for finished products and inventories don’t indicate this level of price drop is warranted? The EIA data still shows finished stock investories near the low side of the band of average stocks. Crude supplies are picking up a bit, but it isn’t because demand has slacked off.
What you’re seeing are hedge funds pulling out of commodities as fast as possible. Ag commodities are selling off like crazy - and farmers are wondering “Hey! WTF?” because they’re not seeing fundamentals that justify these price swings.
So for all those people out there who were chanting “speculation isn’t the cause” — care to offer an opinion as to why commodities have sold off so hard since July? Other than hedge fund de-leverage, that is. I wanna hear about fundamentals causing this drop in commodity prices.
Duration of the downturn: very hard to say. A lot depends on if, how, when the financial sector is repaired. If the job were being done properly (which it isn’t here), we’d be looking at two+ years before you see a real upturn in investment.