Falling Asset Classes
Posted May 27, 2008
Meltdown In Base Metal Prices:
- Our index, including nickel,
set its rebound high at 2449 on March 5.
- The initial decline was to
1983 near the end of March.
- The next rally made it to
2123 in the middle of April.
- Today, the index was at 1754,
down 3.6% from yesterday, and 9.4% from last Friday.
- This is down 28% from the
March high and decisively takes out the interim low of 1983.
- The panic low in December
was 1763. The cyclical high was 3201 in May, 2007.
Grain Prices Are Toast:
- Our index of corn, wheat and
soybeans set its high at 3094 at the end of February.
- The initial slump was to 2393
on March 20.
- The rebound made it to 2646
in the middle of April.
- Yesterday's 2391 is down 23%
from the high and at the point of failure.
The talking heads on TV as
well as many commodity experts are still going on about soaring
prices, but these two important sectors have had their blow offs
and have failed.
In some cases such as copper,
lead, nickel and wheat their bull markets accomplished the biggest
percentage gains in over a hundred years. That is real terms
as deflated by the PPI and the gains were greater, by far, than
those with the typical bull market or even the best previous.
Some examples follow.
The game to load up novitiates
with commodities began some time ago and has come to fruition
on this business cycle.
"Pork Bellies in Your
"The bullish case is
being vigorously espoused. Goldman Sachs...one of the loudest
advocates of commodities has been urging large funds to keep
5% of their portfolios in commodities."
- Financial Times
November 7, 1994
Financial institutions "investing"
in commodities will eventually be seen as a great policy blunder.
While a breach of fiduciary responsibility, the blunder has been
in response to the most magnificent blunder in financial history
- the sure thing that central bankers will be able to depreciate
their currencies forever. This has been an ancient practice to
serve ambitious government, and an insidious breach of accountability--otherwise
known as policymaking.
When this writer started with
Canada's premier investment dealer in 1963, the notion prevailing
at the highest levels was that institutions should be mainly
positioned in high-grade bonds. This was safe as chronic inflation
was a disease that only afflicted Europe, or banana republics.
This could not happen in Canada, or the US, and high-grade bonds
would not increase in yield beyond 5%. The high was 15% in 1981,
when bonds were universally scorned.
What asset class will fail
BIGGEST BULL MARKETS
SINCE 1900 (ADJUSTED BY PPI)
BIGGEST BULL MARKETS
SINCE 1900 (ADJUSTED FOR PPI)
- This one was published in
May 2006 and that high in the real price still holds.
- The subsequent decline ran
into February, 2008 and amounted to 40%.
- The rebound in the nominal
LME price made it to 403 in early April.
- The current price is 375.
BIGGEST BULL MARKETS
SINCE 1900 (DEFLATED BY PPI)
- The October high still holds.
- The initial decline into January
amounted to 37%.
- In nominal terms the October
high was 3958 and the December low was 2340.
- The rebound high was 3399
- The current price is 1996.
- The table compares all of
the big bull markets over the past 100 years. It does not attempt
to analyse the technical or timing dynamics, but establishes
- At +715%, this bull market
has racked up the biggest gain, which is outstanding compared
to the previous best at +464% to the sensational high in 1980.
- Over the past year, similar
extraordinary gains, for example, recorded by wheat, copper,
lead and nickel.
- Often crude oil can make an
important seasonal high in March. If this doesn't work out there
are examples of an even bigger seasonal high in May.
in this report are solely those of the author. The information
herein was obtained from various sources; however we do not guarantee
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