A 2014 Commodities Rally Isn't Carved in Stone
Baley
Posts: 22,660 ✭✭✭✭✭
-Liam Denning, WSJ C10, Tues. Dec 3 2014
If the market had its own Ten Commandments, near the top would be "thou shalt revert to the mean"--or, what goes up must come down and vice versa.
Commodities bulls betting on this lifting their favorite investment out of its funk need to ask themselves where that mean is, though.
It looks like commodities in 2013 will rack up their second consecutive year as the worst-performing asset class in terms of risk-adjusted returns, according to Deutsche Bank. The Dow Jones-UBS Commodity index is down 10% so far this year. But hope is one commodity that never runs out on Wall Street. As Deutsche Bank noted Monday: "Given the tendency of past losers to become future winners, this might imply a more constructive outlook" for next year.
There is little real support for a recovery, though. U.S. natural gas, oil, and related products, copper, aluminum, gold and silver account for 61% of the DJ-UBS index. Natural gas's dashing hopes for a recovery has become a cruel cliche' at this point. Continuing increases in production despite low prices suggest 2014 will bring more of the same. With oil, output is now rising so fast that the Organization of the Petroleum Exporting Countries may soon have to agree to output cuts to avoid infighting.
Meanwhile, aluminum is chronically oversupplied and copper looks set to join it at least for a few years as mining expansions reach fruition. As for gold and silver, 2014 will likely see the Federal Reserve rein in its bond-buying program, suggesting real interest rates will rise, pressuring precious-metal prices further.
Above all, in historical terms, prices for copper, oil, and gold aren't even that cheap-- they only look so compared to recent dizzy peaks. Somewhere in those alternative commandments is another instruction for investors: Thou shalt not catch a falling knife.
If the market had its own Ten Commandments, near the top would be "thou shalt revert to the mean"--or, what goes up must come down and vice versa.
Commodities bulls betting on this lifting their favorite investment out of its funk need to ask themselves where that mean is, though.
It looks like commodities in 2013 will rack up their second consecutive year as the worst-performing asset class in terms of risk-adjusted returns, according to Deutsche Bank. The Dow Jones-UBS Commodity index is down 10% so far this year. But hope is one commodity that never runs out on Wall Street. As Deutsche Bank noted Monday: "Given the tendency of past losers to become future winners, this might imply a more constructive outlook" for next year.
There is little real support for a recovery, though. U.S. natural gas, oil, and related products, copper, aluminum, gold and silver account for 61% of the DJ-UBS index. Natural gas's dashing hopes for a recovery has become a cruel cliche' at this point. Continuing increases in production despite low prices suggest 2014 will bring more of the same. With oil, output is now rising so fast that the Organization of the Petroleum Exporting Countries may soon have to agree to output cuts to avoid infighting.
Meanwhile, aluminum is chronically oversupplied and copper looks set to join it at least for a few years as mining expansions reach fruition. As for gold and silver, 2014 will likely see the Federal Reserve rein in its bond-buying program, suggesting real interest rates will rise, pressuring precious-metal prices further.
Above all, in historical terms, prices for copper, oil, and gold aren't even that cheap-- they only look so compared to recent dizzy peaks. Somewhere in those alternative commandments is another instruction for investors: Thou shalt not catch a falling knife.
Liberty: Parent of Science & Industry
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"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Barring some unforeseen black swan event, commodities will not rally until after the bursting of either the bond market or the stock market bubbles. See 2008 charts for expected repeat action. >>
Black Swan's will have to be postponed/rescheduled post 2017 Inaugural so as not to tarnish the current Zoo Keepers.
<< <i>
<< <i>Barring some unforeseen black swan event, commodities will not rally until after the bursting of either the bond market or the stock market bubbles. See 2008 charts for expected repeat action. >>
Black Swan's will have to be postponed/rescheduled post 2017 Inaugural so as not to tarnish the current Zoo Keepers. >>
Yup...I can wait till 2018.
I'll keep stacking all the while.
Just bought 50 more oz of silver today.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>
<< <i>Barring some unforeseen black swan event, commodities will not rally until after the bursting of either the bond market or the stock market bubbles. See 2008 charts for expected repeat action. >>
Black Swan's will have to be postponed/rescheduled post 2017 Inaugural so as not to tarnish the current Zoo Keepers. >>
They might not be able to stop a Black Swan but the stock and bond markets are a different story. With the current fiscal policy in D.C. there will be continued and unprecedented monetary support for key markets by The Fed.
<< <i> They might not be able to stop a Black Swan but the stock and bond markets are a different story. With the current fiscal policy in D.C. there will be continued and unprecedented monetary support for key markets by The Fed . >>
Well, with current fiscal policy, yes. However, those of us who remember the relentless rate hiking by Greenspan et al in 1999 to quell "irrational exuberance" know that those policies can reverse if inflation increases beyond the 2% target, if unemployment declines to well under the 6.5% target, and/or if the stock market gets too much more overheated (the current bull market is nowhere near, on a valuation-earnings-speculation basis, what it was in late 1999)
Liberty: Parent of Science & Industry
I will guess that the 2014 year end price of Gold will be between $600 and $3000, but would not be surprised if I were wrong.
<< <i>Never easy to predict metal or equity trends. Particularly difficult now as DC has run amok in deficit spending and monetary policy.
I will guess that the 2014 year end price of Gold will be between $600 and $3000, but would not be surprised if I were wrong.
Gutsy call comrade mg.
<< <i>I will guess that the 2014 year end price of Gold will be between $600 and $3000, but would not be surprised if I were wrong. >>
Now that is a reasonably safe prediction....
<< <i>
<< <i> They might not be able to stop a Black Swan but the stock and bond markets are a different story. With the current fiscal policy in D.C. there will be continued and unprecedented monetary support for key markets by The Fed . >>
Well, with current fiscal policy, yes. However, those of us who remember the relentless rate hiking by Greenspan et al in 1999 to quell "irrational exuberance" know that those policies can reverse if inflation increases beyond the 2% target, if unemployment declines to well under the 6.5% target, and/or if the stock market gets too much more overheated (the current bull market is nowhere near, on a valuation-earnings-speculation basis, what it was in late 1999) >>
Unemployment<6.5% isn't happening any time soon...even using the BS fake numbers they calculate now.
<< <i>
<< <i>I will guess that the 2014 year end price of Gold will be between $600 and $3000, but would not be surprised if I were wrong. >>
Now that is a reasonably safe prediction....
I'll go out on a limb by predicting silver prices between $5 - $50 per oz
I knew it would happen.
"JPM just wants their gold back before the current fractional reserve bullion banking system breaks, prices skyrocket again and a new global currency regime takes hold. And now, for the first time ever, they've cornered the Comex gold futures market in order to ensure that it happens."
Break out the hammer and chisel.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
Liberty: Parent of Science & Industry
I knew it would happen.