Posted on 09/11/2006 9:18:01 AM PDT by staytrue
Commodities of all types are falling big today.
Oil down over a dollar.
Gold down 23 dollars.
Silver down a dollar.
Grains and meats are down.
sugar, cotton, orange juice, lumber down also.
Cocoa and live hogs are about even.
"I don't recall then, but this DROP in commodity prices would seem to indicate LESS danger in world politics."
That's one interpretation, one with plenty of historical backing behind it.
Another interpretation is that the market is anticipating an economic slowdown. At the risk of taking an example of one (half) day and one stock, consider CAT, who recently announced raising prices due to demand. OK, so if the steel/aluminum (X, AKS, SCHN, AL, AA) used to make those 'dozers is down...and if productivity is up....and we're entering a pretty bullish time for the markets...and if there's no inflation (ha) then why is CAT getting hit? But it's not so much an example of one if the base metals are being smacked, so there's that to consider.
Also, the precious metals aren't the "go to" thing on world political tensions they once were.
The third interpretation is that the stock market is Goldman Sachs', perhaps Mr. Poulson's random number generator.
The fourth interpretation is, since I've gotten about six cold calls from commodities brokers to go long energy, that was quite the clear sign. Didn't think it would infect the PMs so much, though.
I wouldn't say it's underrated. It was very popular when it was released. I remember because I did marketing for cable tv at the time, and when it premiered on our network (SHOWTIME - we had the exclusive cable rights at the time), it was a HUGE deal.
L-E-V-E-R-A-G-E
When LTCM started crashing, practically nobody outside the quant hedge fund industry and related traders had ever heard of it, and their actual capital base was less than $5 billion -- large, but hardly a behemoth. The blow-up was triggered by a default in Russian debt, none of which was even held by LTCM.
I'm not saying anything like that is going on here. Just that the ripple effect of leverage can be pretty powerful, in some cases (like LTCM) turning into a domino effect.
All-news-is-bad-news ping.
Buy the dip!
</sarcasm>
Commodity indices:
http://futures.fxstreet.com/Futures/quotes/gci/worldindices.asp
http://www.bloomberg.com/markets/commodities/cfutures.html
I got mine in Fredericksburg on Saturday, then came home and had to buy lawnmower gas.It was $2.74 at the local Shell station. Fairfax charges more for everything, just because they can.
Sugar down over 4%...
With both gold and platinum falling, it seems difficult to equate this with an expected international crisis. Energy is a different story - I don't believe that even a world-wide depression we would actually see a drop in demand (although the rate of increase would certainly do so). But I think we will see alternative sources come on line in just a few years - about the same timeline as new deep wells. Oil shale and tar sand extraction and coal liquefaction are all very competitive at current prices, and remain viable down to $40 per barrel or less. And by far the greatest reserves of these are in the West.
I do not believe that corn is a viable ethanol source for the long term, but am certain that cellulostic (switchgrass) ethanol will be, because it will be far less resource intensive (water, land, fertilizer, and cultivation) once the necessary enzymes are developed.
I believe that OPEC fully understands this threat, and is frantic to lower the price drastically in order to kill the development incentive for these alternate technologies - but dares not discuss it openly! I hate to say it, but I do believe that the Gub'mint should intervene, by providing a guaranteed subsidy for these alternative products for a few years in order to get the plants built.
Then we can tell the Saudis that our kids already have their sandboxes full and we don't need anything they produce.
Pulte, the largest homebuilder is up almost 3%.
So
Did China stop buying everything? Is someone expecting a terrorist attack?
Which once again proves you can't go wrong with chocolate or bacon.
Coal liquidfication is indeed looking more profitable. It takes five times+ rail cars to move the same amount of coal as it would with liquified.
Wow, a whole dollar? Oh...my....God!
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We're not talking gas price here we're talking a 1.5% drop in less than a half day. A lot of speculators got caught. But watch for the bounce when Iran puts the squeeze on supply, and winter sets in after people guzzle all the excess supply.
Oil needs a hell of a lot bigger correction than that. And it needs a competitor to keep it corrected.
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You are in denial. (smile)
Leading indicator of a major attack????
I'll bet the CEO of Stillwater mining's ready to open a vein.
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