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Global Tactical Asset Allocation Q3 Update: Commodities

Tyler Durden's picture




 

Industrial commodity bulls may be advised to steer clear of the latest quarterly commodities update by Global Tactical Asset Allocation's Damien Cleusix whose conclusion is that "Most commodities remain deeply overvalued." Specifically, "As with other assets it does not really matter in the short-term (as long as the trend is positive) but it is paramount for longer-term projections. We have little doubts that commodity long-only who buy to hold are going to experience a > 50% drawdown (from current levels) on their industrial metals, crude oil and agricultural positions sometimes in the next 12-18 months." The catalyst: China. "Demand has been artificially boosted by China strategic reserve building, infrastructure intensive fiscal stimulus, booming demand from the rest of emerging economies and, as the trend persisted, by trend followers and money managers new attraction to the sector (you know it is not correlated so you should buy them to diversify your portfolio... sorry it WAS not correlated...). The introduction of physically-based ETFs is not helping in this matter as it represents a big short-term increase in marginal demand especially when the Fed was still busy implementing QE2." Agree or not, the cases for both the up and downside are compelling and well researched, with lots of supporting facts. Much more in the full presentation.

Third Quarter 2011 GTAA Commodities

 

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Wed, 07/06/2011 - 16:22 | 1430817 agNau
agNau's picture

Poles must be shifting, my compass is spinning! So what is direction this week?

Wed, 07/06/2011 - 16:40 | 1430848 adeptus
adeptus's picture

This week? Don't you mean this afternoon? Watch for strong buy signals by tomorrow morning.

Wed, 07/06/2011 - 16:47 | 1430857 adeptus
adeptus's picture

Actually, just look at the previous ZH post "UBS' Andy Lees Presents The Bullish Case For Crude".  It's no wonder ZH can be right 100% of the time, all you have to do is put out posts predicting every possible scenario beforehand. Then when you want bragging rights, you can just point back to whichever article supports reality and say "See, we told you about this in this article back then".  I really wish ZH would come up with unique aliases for each of their author/posters. That way we could actually track which ones to pay attention to and which ones to ignore.  I really do love ZH - visit it several times daily, but often I too get dizzy with the counter contrary alternative insider info that contradicts the opposite arguement that is also sure to play out.

Wed, 07/06/2011 - 17:06 | 1430900 mouthpiece
mouthpiece's picture

"our mission:

  • to widen the scope of financial, economic and political information available to the professional investing public."

It's all in the manifesto.  They present the information to you, from as many sources as possible, with a limited commentary as to how credible they think that source is.

"Zero Hedge is a financial news and information site, not an investment advisor.  Making investment decisions based on information published on Zero Hedge, or any internet site for that matter, is more than unwise, it is folly."

Analysis of said information, and what you do with it, is your job.

Wed, 07/06/2011 - 17:28 | 1430949 gmrpeabody
gmrpeabody's picture

+100

Wed, 07/06/2011 - 17:46 | 1430992 Herd Redirectio...
Herd Redirection Committee's picture

Key word: Industrial Metal Bulls.

I think he meant Platinum and Copper specifically, Gold and Silver are still being suppressed, I have not seen anything to the contrary. 

Their chart that shows USD vs Gold in 2010 says it all.  A clear and logical correlation every year basically, until 2010, when dollar debasement was not clearly correlated with gold price at all...  Hmmm, wonder if price suppression/speculation by big money players could have such an effect?

Wed, 07/06/2011 - 17:54 | 1431010 adeptus
adeptus's picture

Ok fine, but it would *really* help with my ability to analyze things and filter out unecessary info if the 10-30 people that post under the alias "Tyler Durden" could each get their own alias and post under that.

Wed, 07/06/2011 - 17:29 | 1430948 NotApplicable
NotApplicable's picture

Please read these excerpts and tell me just where Tyler is promoting this view?

Industrial commodity bulls may be advised to steer clear of the latest quarterly commodities update by Global Tactical Asset Allocation's Damien Cleusix whose conclusion is that "Most commodities remain deeply overvalued."

...

Agree or not, the cases for both the up and downside are compelling and well researched, with lots of supporting facts. Much more in the full presentation.

How can anyone form valuable opinions if they don't consider the opinions of others?

Wed, 07/06/2011 - 17:31 | 1430957 gmrpeabody
gmrpeabody's picture

+99

Wed, 07/06/2011 - 16:23 | 1430821 idea_hamster
idea_hamster's picture

well researched, with lots of supporting facts

Wrong planet, gents.

;-)

Wed, 07/06/2011 - 16:59 | 1430878 malikai
malikai's picture

Off topic, but check out American Democracy at work: http://www.informationliberation.com/?id=35835

What was it that Franklin said about Democracy?

Wed, 07/06/2011 - 18:13 | 1431048 magis00
magis00's picture

That was something else.  Holy shit.  Need more lead. More food. More PMs.  More private islands than the none I have . . .

Wed, 07/06/2011 - 16:27 | 1430829 DoChenRollingBearing
DoChenRollingBearing's picture

Gold and food should be OK.

Food ETFs (tickers): DBA, CORN, JJG

Wed, 07/06/2011 - 16:54 | 1430872 tiger7905
tiger7905's picture

Rob McEwen he notes the ETFs have cannibalized the miners, noted Barrick Gold has dropped from 2.2X NAV before ETFs to 1.1 X after ETFs.

http://goldandsilverlinings.com/?p=1406

Wed, 07/06/2011 - 17:07 | 1430901 rosiescenario
rosiescenario's picture

.and MOO

Wed, 07/06/2011 - 16:45 | 1430852 Soda Popinski
Soda Popinski's picture

WTF?  China is not slowing down anytime soon on commodities.  They currently have around 1.8 % (which was a lot) of their RMB backed by gold, with an ultimate  goal for chinese central bank of getting to 11%.

No gd way commodities see a 50% reduction in the next 12-18 months.  If anything it goes the other way.

Esp. with the global currency crisis that are taking place.  I get so sick of people trying to push this BS, of being bearish on anything with real value.

It's ok to come out sheeple.  Flee back into paper.  The water's fine.

Wed, 07/06/2011 - 17:02 | 1430887 macholatte
macholatte's picture

Somewhere, somehow the recent inflation in the dollar (and almost every other currency via QE, bailouts, etc) has to be taken into account. The roller coaster of prices might vary a bit but it will eventually have to come to grips with the simple equation of inflation = higher prices in commodities = lower purchasing power for currencies. The lying, cheating and deception of the PTB cannot escape this reality.

So the questions we need to ask are:

   what is the base point to start a calculation? (average prices 2004, 2005, 2006 or when?)

   what is the factor to use to estimate the "real" value of commodities today? (gold price 2002 x 300% or what?)

 

or did I miss something?

 

Wed, 07/06/2011 - 18:41 | 1431106 Herd Redirectio...
Herd Redirection Committee's picture

Exactly, we are not used to dealing with a rapidly depreciating currency, our linear time graphs don't represent it, and you always get people comparing the decline in the DXY to the depreciation of the dollar.  Uhhh, noooooo.  Because the Dollar Index is also a bunch of depreciating fiat currencies!

It is like we are measuring the distance between two people, on a sand dune, both just standing there but inevitably, slowly, drifing down the dune.  OK, so you can measure the distance between the men (currencies), and try to determine how far down the sand dune (sound money) relative to EACH OTHER they have slid, but that doesn't give you a good absolute answer to how far you have slid, how fast are you really sliding, etc.

US Dollars are not going to be scarce any time soon.  The end of reserve currency status (and resulting flood of dollars home, and likely into commodities/precious metals) will more than cancel out the debt destruction from personal/corporate bankruptcies.

Wed, 07/06/2011 - 16:46 | 1430853 kito
kito's picture

paging jim rogers, jim rogers....

Wed, 07/06/2011 - 16:47 | 1430856 nobusiness
nobusiness's picture

Why does SPY go to new highs after the market is closed almost every up day?? 

Wed, 07/06/2011 - 17:33 | 1430961 NotApplicable
NotApplicable's picture

Can't keep a good scam down?

Wed, 07/06/2011 - 16:51 | 1430863 The Count
The Count's picture

The future has not happened yet, and is thus not foreseeable. All we hear are various levels of gobble-di-gook mental masturbations from so-called experts that almost never foresee any real disasters.

Wed, 07/06/2011 - 16:51 | 1430864 poor fella
poor fella's picture

k e e p i n g p o w d e r d r y y y y y y!

Wed, 07/06/2011 - 16:51 | 1430865 mayhem_korner
mayhem_korner's picture

Any artificial boost of demand from China (or anywhere else) pales compared to the artificial boost in supply of currency.  And you can't model fundamentals of fiat supply, now can ya?

Wed, 07/06/2011 - 16:54 | 1430870 rocker
rocker's picture

Interestingly poster says in the next '12 to 18 months'.  Whoooo, Robert Prechter told readers that the big correction was coming shortly on February, 2011.  February, 2010.  February, 2009. 

My thought is simple. In the meantime, 12 to 18 months from now much can happen.  How much more will the FED devalue our dollar.  Who, (PIGS), will collapse next.  At least the poster gave himself some breathing time before the next bailout. 

Wed, 07/06/2011 - 17:08 | 1430904 Sudden Debt
Sudden Debt's picture

In 2008, 99,999% of all analists didn't see it comming.

All of them are wrong.

Sure it was comming! After the fact it all makes sense now and it was clear in some ways.

But the next crash can be tomorrow or in the next 10 years. Nobody really knows.

They are bending the rules like crazy these days so there are no more rules of engagement. That's why I think it will take a while before the real shit hits the fan.

 

Wed, 07/06/2011 - 18:50 | 1431127 rocker
rocker's picture

Can't disagree with your thinking. Nobody is sure right now.  When they are all sure in either direction, it just might be time to be a contrarian. 

Wed, 07/06/2011 - 16:54 | 1430871 fonestar
fonestar's picture

Another "expert" douchebag.  Has a suit, went to some school... somewhere... expert..

Wed, 07/06/2011 - 17:03 | 1430892 HITMAN56
HITMAN56's picture

+1000 nice comments fone

Wed, 07/06/2011 - 19:39 | 1431253 Central Bankster
Central Bankster's picture

If you didn't find anything of value in this report, you're probably an idiot.

Wed, 07/06/2011 - 17:03 | 1430890 Sudden Debt
Sudden Debt's picture

Yes, prices will go down and go up after that. If it doesn't it's Bush his fault or the Chinese.

 

Whew, I am tired now and need to rest before I pick up my next Nobel Prize.

Wed, 07/06/2011 - 17:06 | 1430897 DOT
DOT's picture

Acres planted vs. Acres flooded ?

 

I'll be watching CORN.

Wed, 07/06/2011 - 17:12 | 1430910 rosiescenario
rosiescenario's picture

China has a major problem and that is water. As Marc Faber pointed out a few years back, China will be forced to import more grain and other food stuffs due to the water issue they face. I forget his exact formula, but every bushel of imported wheat (for example) = 'X' gallons of water saved.....IMHO, a prime beneficiary of the weaker dollar and the water problem in China is going to be our ag industry. There are many ways to play that from equipment (Deere) to fertilizer companies to dry bulk carriers.

Wed, 07/06/2011 - 17:39 | 1430973 NotApplicable
NotApplicable's picture

I'd say China's support of the US ag market is transitory, as they are buying farmland directly, even relocating their own people to farm it.

Wed, 07/06/2011 - 17:23 | 1430929 zorba THE GREEK
zorba THE GREEK's picture

 There's nothin gooder than wooder.

Wed, 07/06/2011 - 18:48 | 1431121 Herd Redirectio...
Herd Redirection Committee's picture

Lumber, huh?  We still have some here in British Columbia, but no one wants the 2nd growth, the people who care only about numbers want to destroy the remaining Old Growth.   Hmmm... Do the math, buddy, if everyone else wants to cut the Old Growth down, then not only will it be valuable as lumber, but when there are even fewer forests worldwide than now, it will be a tourist GOLDMINE! 

 

Wed, 07/06/2011 - 18:55 | 1431136 Orly
Orly's picture

In my next life, I will be a hemp farmer...

Wed, 07/06/2011 - 19:21 | 1431205 Herd Redirectio...
Herd Redirection Committee's picture

If BC goes bankrupt, atleast there is one good thing that will come from it!  Of course they will try to tax individuals who grow their own, but only large growers can really be targeted efficiently.

Wed, 07/06/2011 - 20:05 | 1431309 Orly
Orly's picture

Actually, they will demand that landowners of more than three acres plant hemp...like old-school Virginia, US of A.

You will be allowed to pay your taxes with hemp, however.

Wed, 07/06/2011 - 17:46 | 1430990 Piranhanoia
Piranhanoia's picture

one ceteris paribus disclaimer, which might have been better as the first sentence. A passing mention of silver based on easy charts but neglecting mines, production totals, daily selling, "central banks net buying", lack of stock, devalutation of currency, an audit of vaults claiming to have it, investor demand high in all developing nations, uses for modern technology, price manipulation...

 And is it just me or would it have been too much to proof read it before they printed?  Maybe as was a google translate?

Wed, 07/06/2011 - 19:14 | 1431189 Herd Redirectio...
Herd Redirection Committee's picture

Its just the typical chatter, it makes  a good case, but not  a rock solid one, and ZH has just decided to pass it on, because it is contrarian to the general dollar-devaluation/end of reserve currency/scramble to tangible assets argument that is the majority opinion on ZH (for good reason).

If there was no one selling, who would you buy from?  So the market will always need people who invest/trade/speculate with different time horizons.

Wed, 07/06/2011 - 18:01 | 1431028 Pete15
Pete15's picture

But I thought yesterday Daytraders had 90% of the commodities?? Fucking with the new kids on the block I see 

Wed, 07/06/2011 - 18:09 | 1431043 Quinvarius
Quinvarius's picture

Garbage.

Wed, 07/06/2011 - 18:29 | 1431079 Downtoolong
Downtoolong's picture

money managers new attraction to the sector (you know it is not correlated so you should buy them to diversify your portfolio... )

Biggest cock and bull story ever perpetrated on naïve investors, especially since it wasn’t even physical, but rather commodity futures most of them were led into. The relatively short duration of contracts in these futures markets makes them inappropriate for a long-term investment and highly vulnerable to roll fees, commissions, and trading margin costs eating up any profit you can ever hope to make. The people who concocted and pushed this bogus investment strategy knew that from the beginning as they are the brokers and traders on the receiving end of the scam.  

Wed, 07/06/2011 - 18:58 | 1431126 Greeny
Greeny's picture

"We have little doubts that commodity long-only who buy to hold are going to experience a > 50% drawdown (from current levels) on their industrial metals, crude oil and agricultural positions sometimes in the next 12-18 months"

================================

What kinda crap is that? Joke? You wanna tell me that Gasoline

will be again at $2-3/gallon.. Who are those lunatics? Yeah,

whatever you say.. This is 1 star Article. Check you local food

store price labels and reply. Right hungry bitchez,

50% or more of earth

population is going to die all of the sudden, then we'll probably

see 50% drawdown in agriculture..I tell you what, in 2 years you

gonna pay double for what you paying now, - food I mean

and that's why i-pad not included :))))You wanna bet???

Be my guest.

Wed, 07/06/2011 - 19:20 | 1431203 gringo28
gringo28's picture

I'm sorry but Damien is a fucking retard if he thinks China is going to let their strategic stockpile devalue by 50% just so they can step in to buy more after all the miners shut down and capacity gets cut to the bone, so they can then try to "explain" to all those meandering masses why the Great Council has left them fucked and homeless......I wish these "technicians" would just shut up and stop littering the 'internets' with all this doomsday garbage.

Wed, 07/06/2011 - 20:28 | 1431353 notadouche
notadouche's picture

I predict that in the next 12-18 months commodities and currencies and the market in general will go down at some point, go up at some point and go down again and then maybe even up again.   I hope this helps.

Wed, 07/06/2011 - 21:59 | 1431511 rlouis
rlouis's picture

The author must be laughing his a** off that JPM paid such a high price for crude from the SPR

/sarc off

Thu, 07/07/2011 - 02:26 | 1431824 GtownSLV
GtownSLV's picture

The latest number being thrown around is $2.4T raise in the debt ceiling. Shits gonna implode and industrial metals (copper, aluminum...) are going to drop like rocks. Gold and Silver positions will go up big in the next few weeks as postions are taken into the debt raise. If the gov't is going to devalue the dollar by another 17% in one whack why wouldn't gold and silver go up by at least that much? 

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