View Full Version : Have the commodities bottomed?

02-05-09, 04:47 AM
Grain prices have been climbing for the past few weeks. Most of the industrial metals have stabilized. Silver has seemed to turned the corner. Gold is still rising. Have the speculators ran away and are we now at the bottom? I'm uncomfortable keeping assets in dollars and us treasuries so thinking this may be a good time to jump in. Droughts in Argentina, China, Chile, and CA will likely destroy grains supply. What do you guys think?

02-05-09, 10:20 AM
Baltic Dry Index is gaining again:


The Baltic Dry Index, the benchmark for freight costs for dry bulk commodities such as iron ore, coal and iron, extended its strong run on Thursday, taking its gains over two sessions to almost 30 per cent on signs of a recovery in the raw materials trade, particularly to China.

The London-based index rose on Thursday 14 per cent to 1,498 points, the highest level in 3½ months. The index is still well below last year’s all-time high of 11,793 points, but has recovered 125.9 per cent from its December 22-year low of 663 points.

The index jumped 14.6 per cent on Wednesday, the largest daily increase in almost 25 years.

02-05-09, 05:13 PM
All-industry PMI posts second straight gain (https://mm.jpmorgan.com/servlet/OpenPubServlet?skey=TU1SQy00OTA1OTUtMSw0MjAsT1ZFUl ZJRVdfRkVFRAA%3D&Name=MMRC-490595-1.pdf)

JPMorgan’s global all-industry PMI output index rose a solid 3 points to 40.3 in January. The increase was paced by gains in both sectors of the survey, with the manufacturing output index rising 1.3 points to 30.6 and the services output index rising 3.4 points to 43.0. Encouragingly, the increase in the all-industry output index was accompanied by a similar 2.5 point gain in new orders. The PMI employment index slipped 0.3 points, however.

The global PMI is sending a message that the pace of decline in global manufacturing and GDP either is bottoming near the 4Q08 rate or possibly easing somewhat in the current quarter. Back-to-back gains have lifted the PMI output index to 1.6 points above the 4Q average. If the current level holds in February and March, this would not necessarily indicate much change in the underlying pace of activity. On the other hand, if the PMI continues to move higher, then the odds are that 1Q09 will turn out to be a better quarter than 4Q08—i.e., activity would contract less rapidly. Key to this outcome is the next step in the new orders index. The orders index is a leading indicator of PMI output which, in turn, correlates well with actual economic activity. At this juncture, the PMI orders index is signaling a very rapid rate of decline in demand, and this is weighing heavily on production. In addition, companies appear to have sustained a rise in their inventory/sales ratios in 4Q, which is not surprising in the context of a negative demand shock. Even if the contraction in demand is waning somewhat, businesses probably intend to cut output at an aggressive pace for a few months in order to align inventory with sales.

02-06-09, 09:02 AM
CRB index deflated by US treasuries - time to reallocate, or dead cat bounce?


02-06-09, 10:01 AM
Every base metal spot price is below MOST of its cost of production, i.e. very few mines can operate profitably at these prices.

If you think credit can totally collapse and the world freeze, then there's more downside. Otherwise, yea, we've bottomed.

02-07-09, 03:18 PM
Well, I'm agnostic - and one first principle of investing is never buy the first bottom.

To my eye the chart shows a weak bounce after a major decline, which will probably soon be followed by a retest of the bottom, so no real hurry I think.

From a funnymental point of view - yes, things can get worse, even much worse, and costs can go lower, even much lower.

The joker is the potential of manic CB moneyprinting, but if that is to be the main driver of a coming inflation, I would prefer the gold to basic materials.