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Rubber Hits An All Time High As Last R-Bubble Approaches Escape Velocity; Rubber Curve In Backwardation

Tyler Durden's picture





 

Now that the Rare Earth bubble has come and gone (and may well come back again depending on how much China wants to stretch its political muscle), the Rice bubble is in progress, and may see prices going back to the $24 range we saw last in 2008 when net CBOT non-commercial spec contracts were approaching the 8k levels, the last R-bubble prediction is coming true. Back in October, Zero Hedge said the next bubble are the 3Rs -Rare earths, Rice and Rubber. Lo and behold, rubber just hit an all time high on the Tocom, after returning 30% YTD. And far more importantly to those who care about such things, the rubber forward curve is in backwardation. No need to explain what that means.

Below is the 63% return since we predicted Rubber's imminent entry into bubble territory, in all its glory:

And the forward curve: the JRUN11 (July) is at ¥511, while the ^JRU is at ¥523.

 


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Sun, 02/13/2011 - 23:49 | Link to Comment Misean
Misean's picture

"the rubber forward curve is in backwardation. No need to explain what that means."

Is that one of those stunts where you gun the car backwards, yank the emergency break, spin around and go forward, a la Rockford Files?

Mon, 02/14/2011 - 00:08 | Link to Comment StychoKiller
StychoKiller's picture

Meh, it's more like putting your transmission in reverse, while going forward over 80mph -- looking in your rear-view mirror and seeing transmission parts scattering all over the road from underneath your vehicle. ;-(

Mon, 02/14/2011 - 01:08 | Link to Comment Misean
Misean's picture

Ah, yeah. Well there's Red Green when you run into that problem.

http://www.youtube.com/watch?v=E_b2xIEfj2Y&feature=related

Sun, 02/13/2011 - 23:54 | Link to Comment tellsometruth
tellsometruth's picture

reeeeaaalllllyy

Sun, 02/13/2011 - 23:56 | Link to Comment AUD
AUD's picture

Show us some other curves ZeroHedge.

For example wheat, rice etc.

Mon, 02/14/2011 - 00:02 | Link to Comment Tyler Durden
Tyler Durden's picture

Cotton and Cocoa are in modest backwardation. Only one majorly backed up is sugar (^SB, ^QW and especially ^KA):

Mon, 02/14/2011 - 02:09 | Link to Comment AUD
AUD's picture

Thanks.

Very interesting that various commodities including sugar & silver are in backwardation. Apart from gold & maybe oil, sugar & silver are some of the most marketable commodities, which is to say they are most like money.

Gold isn't showing backwardation but the theory is that as goes gold, goes everything else.

Mon, 02/14/2011 - 09:48 | Link to Comment H. Perowne
H. Perowne's picture

When gold does go into backwardation, it likely means that the ponzi has reached critical mass and meltdown is imminent.

Sun, 02/13/2011 - 23:57 | Link to Comment Mike2756
Mike2756's picture

Not surprising given the inventory drop, everything else is building.

http://www.bloomberg.com/news/2011-02-11/copper-stockpiles-in-shanghai-at-highest-since-june-update1-.html

 

Mon, 02/14/2011 - 00:01 | Link to Comment Mach1513
Mach1513's picture

Repeat after me, "There is no inflation. There is no inflation. There is no inflation."

I feel better already.

Mon, 02/14/2011 - 00:14 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Hah. I suppose the word snap-back takes on a whole new meaning here.

Interesting thing is a lot of furious research on rubber substitution going on through petroleoum derivatives, but tires? Belts (engineering). THose humble things that make our world go around.

I suppose one too many bungee jumps and the chord will snap. Back...

ORI

http://aadivaahan.wordpress.com/2010/12/24/where-do-we-fit/

Mon, 02/14/2011 - 00:18 | Link to Comment props2009
props2009's picture

Morgan Stanley, James Gorman Interview says

http://dawnwires.com/investment-news/james-gorman-morgan-stanley-we-can-...

"We can potentially argue that Trees can grow to Skies" when asked about whether there is another crisis hitting US later on. 

This guy is stunningly stupid. I mean Jim O Neil can be argued to atleast have invented BRIC foolish as that might sound, Gorman is more like 2 nd year analyst who think roses can be of only one color. 

 

 

 

Mon, 02/14/2011 - 00:18 | Link to Comment JW n FL
JW n FL's picture

There is no spoon... just a lobby who controls the spoon.

Mon, 02/14/2011 - 00:22 | Link to Comment JW n FL
JW n FL's picture

if backwardation is coming into its own.. then it is only a matter of time before the ignorant masses will be forced to pay (pun intended) attention... I like it, scratch that. I LOVE IT!!!

 

Reality v. Paper Pretend Land...

 

I will gladly pay you tomorrow for a hamburger today! http://www.youtube.com/watch?v=HmNBAA0n2Js&NR=1

 

 

Mon, 02/14/2011 - 01:51 | Link to Comment delacroix
delacroix's picture

tuesday

Mon, 02/14/2011 - 00:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

This tune is dedicated to Benjy Bernankenstein and his brain trust of big money bankers:

 

"Bubble Man"

To the tune of "Nowhere Man", by The Beatles. Very apropos today along with "Revolution"

 

He's a real Bubble Man,

Sitting in his Bubble Land

Making all his Bubble Plans for nobody

 

Doesn't have a point of view, 

Knows not where he's going to

Isn't he a bit like you and me? 

 

PS: I've said before, pretty soon the Bailout monster with the trumpet nose will suck up everything on earth, then the land and sky and finally its own arse. Psychedelic! 

Mon, 02/14/2011 - 00:24 | Link to Comment RobotTrader
RobotTrader's picture

I really wouldn't worry much about inflation, unless gold takes off and blows past 1,400.

So far, no price increases yet at my Starbucks, McDonalds, Pizza Hut, or any of the other places I frequent.

In fact, Subway is now running its $5 sandwich specials again for the entire month of February.

Mon, 02/14/2011 - 00:25 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

I can tell you really like to lead a healthy lifestyle.

Mon, 02/14/2011 - 00:38 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

Agreed.  

Bernanke's has done a pretty amazing job parallel parking our $14T economy between a cliff on one side and another cliff on the other side - during a financial hurricane, no less. That's not sarcasm for all you doom/gloom libertarians who are incapable of seeing the world for what it really is.  

In WalMart's 2010 annual report, they stated that gross sales declined in 2010 for two reasons: price deflation in many of its items and fewer items purchased at each transaction.

Maybe the CFTC should allow speculators to create derivatives of WalMart's inventory so prices can shoot up 100% in mere months on items with true supply/demand inequities.     

 

 

Mon, 02/14/2011 - 05:22 | Link to Comment EscapeKey
EscapeKey's picture

One would think all the government Kool-aid they sell to certain individuals would more than make up the shortfall.

Mon, 02/14/2011 - 06:53 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Not what I read. Walmart doesn't gve monthly sales guidance but their quarters were showing them reaching their revenue numbers with higher costs of gas.

Mon, 02/14/2011 - 07:38 | Link to Comment Ricky Bobby
Ricky Bobby's picture

Red Neck ... Boot licking camp guard.

Mon, 02/14/2011 - 09:20 | Link to Comment The Profit Prophet
The Profit Prophet's picture

Hey Red Neck...how much do you and Robot Troller get paid to spout your insanity? (I bet you insist on being paid in PMs!!!!)

Mon, 02/14/2011 - 00:32 | Link to Comment tao400
tao400's picture

There's no way you got that set of knockers eating at those places. They would be flabby and fat otherwise.

Mon, 02/14/2011 - 00:36 | Link to Comment JW n FL
JW n FL's picture
by RobotTrader
on Sun, 02/13/2011 - 23:24
#958848

 

***** "So far, no price increases yet at my Starbucks" *****

**************************************************************

Bullshit! $2.00 bucks a cup up for me... since 7 - 8 months ago.

Mon, 02/14/2011 - 00:39 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

<$5.00 sandwiches>

Only because they use lower margins to attract customers who now carry their own lunch. Good time to loose some excess around the waist.

Mon, 02/14/2011 - 00:57 | Link to Comment tmosley
tmosley's picture

Have you actually READ any of the articles about margin collapse?

Take your head out of the sand.

Mon, 02/14/2011 - 00:57 | Link to Comment Bad Asset
Bad Asset's picture

go buy a set of tires.  it's costing me $200 more per vehicle.

Mon, 02/14/2011 - 01:10 | Link to Comment cbaba
cbaba's picture

Last time i got a large pizza from Papajohn, it was the any large pizza for $10 deal. (normal price is $15)

I selected a large pizza and asked to add extra cheese on it.

while eating i figured that there was little cheese on the pizza.

The trick here is , they are reducing the cheese, the biggest costly ingredient in the pizza and call it a deal.

So i decided not to buy anymore from Papajohn.

But the problem here i guess is everybody doing little tricks to adjust prices so that you don't see any cost increase.

 

 

 

 

Mon, 02/14/2011 - 00:24 | Link to Comment Bill Lumbergh
Bill Lumbergh's picture

Chairman Bernanke on February 15, 2007:  "The Federal Reserve takes financial crisis management extremely seriously, and we have made a number of efforts to improve our monitoring of the financial markets to study and assess vulnerabilities, and to strengthen our own crisis management procedures and our business continuity plans."

In other words all is under control so don't worry about these trivial matters.

Mon, 02/14/2011 - 00:30 | Link to Comment Mike2756
Mike2756's picture

Yeah, you'd think he'd be using the price index that MIT came up with.

Mon, 02/14/2011 - 00:27 | Link to Comment blunderdog
blunderdog's picture

Man, I wish I'd read this a few months ago.  I was all giving that chick a great line about "rubbers" and "backwardation" but she still said no. 

Dayam.

Mon, 02/14/2011 - 00:40 | Link to Comment DeltaFunctionToronto
DeltaFunctionToronto's picture

Just Dimon stocking replacement wheels for his Bentley

Mon, 02/14/2011 - 00:54 | Link to Comment Misean
Misean's picture

Top Gear's not going to be able to afford Stig segments anymore.

Mon, 02/14/2011 - 01:05 | Link to Comment JW n FL
JW n FL's picture

how dare you say anything about that show or my beloved stig, watch your mouth! or this will be fight club for realz!

Mon, 02/14/2011 - 01:19 | Link to Comment Misean
Misean's picture

It's time to take that up with our lame printing master. Some say that he lives in an ivory tower, and that his sweat can be used to fill toner cartridges. All we know is, he's called The Bernank!

Mon, 02/14/2011 - 01:35 | Link to Comment JW n FL
JW n FL's picture

lmao! Luv it!

Mon, 02/14/2011 - 01:50 | Link to Comment Arkadaba
Arkadaba's picture

OT: But I love this band - I heard they won an award or something:

http://arkadaba.blogspot.com/2011/02/grammy-winners.html

And with Bowie a few years ago:

http://www.youtube.com/watch?v=z6c9Ejfu-iU 

and most recent:

http://www.youtube.com/watch?v=HklplrJxEOY

Mon, 02/14/2011 - 01:07 | Link to Comment Caviar Emptor
Caviar Emptor's picture

 

November 13th, 1998: TheGlobe.com, an internet startup which had never made a profit and was burning VC cash had its IPO. It priced at $9 however the very first trade was $87 and traded as high as $97 before closing at $63, a record first day 606% rise that has been topped only once. Bear Stearns was lead underwriter. The stock went on to collapse in less than 18 months (and a secondary offering) to under $1. 

The dot com bubble got started right after The Fed's LTCM liquidity injections and rate cuts. The value of the stock market in May, 1999 was 180% of GDP. In 1929 it had only reached 85% of GDP. Yet the Fed did not perceive that there was any kind of bubble. Even Paul Volcker said in a speech that month at American University "the fate of the world economy is now totally dependent on the growth of the US economy, which is dependent on the stock market, whose growth is dependent on 50 stocks, half of which have never reported any earnings"  

The Fed  has used the same playbook over and over since the 1980s. In spite of repeated bubble collapses (S&L/Real Estate collapse and rescue, dot.com bubble, sub-prime/real estate and credit/derivatives bubble) there's no sign that there's any intention to change the plan.  Ben has said very plainly that it's difficult to (read he can't) perceive bubbles until after they burst 

 

Mon, 02/14/2011 - 05:25 | Link to Comment EscapeKey
EscapeKey's picture

Hmmm... I thought the generally accepted day of the dot-com bubble initiation was the IPO of Netscape in 95?

Mon, 02/14/2011 - 07:42 | Link to Comment Ricky Bobby
Ricky Bobby's picture

Netscape was the first, August 9, 1995.

Mon, 02/14/2011 - 01:18 | Link to Comment WilliamShatner
WilliamShatner's picture

The rare earth bubble popped?

Really?  When?

Someone tell the owners of all the rare earth mining companies I own stock in, but wait a couple days so I can unload my shares and pocket the tens of thousands of dollars I've gained on them.

Tyler, you've gotta think twice before floating claims like this.

 

Mon, 02/14/2011 - 01:24 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Party's just getting started. Ben had to go out for more beer, but he'll be baaack! 

Mon, 02/14/2011 - 01:27 | Link to Comment WilliamShatner
WilliamShatner's picture

I'm a bit unclear as to your response to my post.

I'm not a regular poster here and don't follow the in-humor that much, so please clarify for someone who isn't an ZH insider.

Mon, 02/14/2011 - 01:38 | Link to Comment JW n FL
JW n FL's picture

Ben has a paper wieght he uses when he goes out for beer and / or insert other _______________<--- here.

(edit) Ben uses the paper weight so that the print button is always pressed... sorry, more inside ZH humor.

Mon, 02/14/2011 - 01:50 | Link to Comment WilliamShatner
WilliamShatner's picture

I see.

Well, I'm not sure how that has anything to do with rare earths being a bubble.  If you ask me, REs are just starting to take off as China tightens it's supply for itself and cleans up it's backyard so they don't turn their entire country into a toxic waste dump. 

REs will be a good investment opportunity for years to come, especially as western companies ramp up.  Gold and the other PMs are great, they comprise my largest holdings, but REs and uranium will be two stellar performers for the next few years.  They will outperform the PMs by a wide margin, taking into account that you invest in the right companies.

It's all good, I just think people are way to trigger happy when calling bubbles these days.  Hell, I think we've still got at least a couple more years to harp about the real estate bubble, that thing is still deflating and will cause way more damage than it already has.

 

Mon, 02/14/2011 - 03:29 | Link to Comment jimmyjames
jimmyjames's picture

REs will be a good investment opportunity for years to come, especially as western companies ramp up.  Gold and the other PMs are great, they comprise my largest holdings, but REs and uranium will be two stellar performers for the next few years.  They will outperform the PMs by a wide margin, taking into account that you invest in the right companies.

*************

I'm with you on the REE bubble call-

Also the Uraniums and PM's-

Who holds them? very few that i know of and now people look at the rapid price gains and see a bubble and think it's too late-so they never buy-

Nuclear is the future and a uranium fuel supply crunch lies ahead when the rest of the world catches on-

Ree's are absoulutly neccessary for military "purposes"

For PM's-fiat paper is on its way out and Gold never left-

 

 

Mon, 02/14/2011 - 20:59 | Link to Comment WilliamShatner
WilliamShatner's picture

Agreed, people are too wary of bubbles these days.

They missed the early signs of the internet and real estate bubbles and most got in to late and thus got a severe haircut. 

They'll likely do the same when REs, PMs uranium become bubbly, they'll sit watch it go up until they can no longer stand by and watch.  Most will buy in at the near peak and hold on to the near bottom. 

Can't tell you how many people I've met who sold stocks in March of '09 and have stayed out of this rally. 

When they start buying I'll start selling.

Mon, 02/14/2011 - 01:40 | Link to Comment Misean
Misean's picture

Perhaps Scotty can route the universal translator throught the Dilithium matrix...

Mon, 02/14/2011 - 01:52 | Link to Comment Lothar the Rott...
Lothar the Rottweiler's picture

Okay, I know it's not exactly correct (rubber vs. latex) but... go long (haha) Carter Industries.

Trojan condoms FTW! :-)

Mon, 02/14/2011 - 02:01 | Link to Comment props2009
props2009's picture

IS Nikkei the trade from Hugh Hendry. Trade with 75% upside and 1.5%downside?

http://dawnwires.com/uncategorized/currency-updates-and-medium-term-call...

 

Mon, 02/14/2011 - 05:49 | Link to Comment dearth vader
dearth vader's picture

Sonny, can you spare a rubber?

Mon, 02/14/2011 - 06:51 | Link to Comment topcallingtroll
topcallingtroll's picture

Please say something nice about natural gas.  The troll is underwater and fully margined again.

Mon, 02/14/2011 - 08:08 | Link to Comment topcallingtroll
topcallingtroll's picture

Couldnt all this backwardation mean less anticipated commodity demand in the future? Could it be deflationary rather than teotwawki? It seems similar to an inverted yield curve to me with greater marginal demand for short term money than long term money. Maybe some wonk could explain this.

Mon, 02/14/2011 - 08:26 | Link to Comment EscapeKey
EscapeKey's picture

If that was the case, then surely there would exist arbitrage opportunities for holders of the commodity in question, and the backwardation would disappear real quick.

Mon, 02/14/2011 - 10:51 | Link to Comment topcallingtroll
topcallingtroll's picture

I don't understand how that would happen here.  Someone be very concrete and go through this step by step for me!  I suppose you could short front month contracts and go long for later months, but if it is a fundamental future demand problem I don't see how the gap closes.  Or if it is the case the gold and silver are now being treated like a currency then backwardation is the general rule because current money is worth more than the same amount in the future.  Neither case implies a shortage, just that carry charges and real less rates (not nominal) have moved up.  It's not a slam dunk for pending shortage unless I am missing something or don't understand how the backwardation would disappear with arbitragers

Mon, 02/14/2011 - 11:00 | Link to Comment EscapeKey
EscapeKey's picture

Let's say coal goes into backwardation. I sit on a gigaton of physical coal, and can deliver. I am not worried about supply issues, in fact I'm sure any order will be filled.

1. I short March contracts, and go long June contracts.

2. I deliver my shorts in March, and take physical delivery in June.

3. Profit.

Mon, 02/14/2011 - 09:38 | Link to Comment chistletoe
chistletoe's picture

Is it too late for me to corner the market in condoms?????

 

Man, talk about large bubbles, which are extremely resistant to pop!!!!!

 

(captcha:  zero minus what equals what???????)

Mon, 02/14/2011 - 22:04 | Link to Comment 50 Cents
50 Cents's picture

Is there a leveraged rubber ETF that I can buy to invest in rubber long term?

Do NOT follow this link or you will be banned from the site!