On Buying The Commodity Dip

Tyler Durden's picture


With Gold, Silver, and Oil down quite considerably since the second LTRO from the ECB ended the immediate elevations in global central bank stocks and flows and now all marginally positive/negative year-todate, the question of the day is whether this is a dip to be bought or a liquidation to be sold into. Sean Corrigan, of Diapason Commodities, provides some guidance:

At this uncertain juncture, to use commodities primarily as a means of obtaining an element of inflation protection, of owning a call option on monetary and fiscal stupidity, seems to be the more pressing imperative, especially since it is one which also offers a growth kicker in a manner which more traditional instruments - such as index-linked bonds - certainly cannot hope to approximate given the ruinously negative real yields which attach to them in this Looking Glass world of deliberately falsified interest rates.


Each successive resort to the printing press may well bring less and less material relief to a world still trying to maintain the pretence that the pre-Crash reckoning of prosperity was a sound one and still striving therefore to return valuations to those that prevailed in that particular vision of El Dorado, but the repeated recourse to inflationism will teach people that they should seek out ways of protecting themselves from its malign effects.


As they do so, they will eventually act upon their newfound understanding and then, instead of assuaging the fever as they are today by holding money, they will begin to aggravate it by accelerating their purchases and building up their precautionary stocks of goods. It is against the dawn of that evil day, as much as for any other reason, that holders of predominantly financial assets should contemplate the need to buttress their existing investment framework with a few solid girders of good, hard commodities.


In other words: Nothing Has Changed; Central Banks have only one trick which they will use when necessary; normal assets will waver in risk-on/risk-off mode because of that; commodities offer protection from the profligacy with an upside growth cover.

Gold, Silver, and Oil post March 2009 lows...


and as far as those global REAL interest rates (courtesy of Gresham's Law):

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Tue, 05/08/2012 - 14:16 | 2407483 5880
5880's picture

Deflation before inflation

Tue, 05/08/2012 - 14:19 | 2407496 SilverTree
SilverTree's picture

Yep, its gonna hurt too. (For those who have no clue)

Tue, 05/08/2012 - 14:25 | 2407527 Dr. Richard Head
Dr. Richard Head's picture

Clue?  I love Clue.  It was Professor Bernanke in the Conservatory with the Printing Press.

Tue, 05/08/2012 - 14:31 | 2407559 CH1
CH1's picture

Keep stacking.

Tue, 05/08/2012 - 14:34 | 2407564 CPL
CPL's picture

And there is the RSI flip.


...then off like a no volume rocket to somewhere.

Tue, 05/08/2012 - 14:47 | 2407624 Levadiakos
Levadiakos's picture




....................................................I buy cash





Tue, 05/08/2012 - 14:54 | 2407660 SilverTree
SilverTree's picture

No, you really don't. You may exchange your labor or an asset for cash.

Tue, 05/08/2012 - 15:07 | 2407718 knukles
knukles's picture

Just ya'll fuckin' wait.
It's gonna get real hard, nasty and downright messy.
Austerity bites.
We're locked into a credibility trap that manifests itself as a liquidity trap.
The CB's have the only option at hand (supposedly) since TPTB will not reform the system.
In the not too distant future, like pretty damned soon, the data world wide is gonna turn to shit and the CB's announce another round of QE whateverthefuck.
Then the Commodity Complex will once again, Rise to The Liquidity and Inflations Expectations Occasion.

Nothing has changed.
Nobody cares.
It's all Ex Cathedra Pabulum and Horse Shit
So why would anybody expect anything different from the same madness?

Enjoy whatchu got while you gots it.

Tue, 05/08/2012 - 15:37 | 2407818 iDealMeat
iDealMeat's picture

Ahh but something has changed..  That something is Japan and is/was Fukushima.  As a result Japan has shut off its Nuke Plants. 

They're going to be buying Oil by the tanker load to keep the lights on..  That, with hints of QE is change..

and lots of it..


Tue, 05/08/2012 - 19:54 | 2408570 donsluck
donsluck's picture

Hmmm, maybe:

oil consumption in japan jan 2011: 4.3 mbpd
oil consumption in japan in feb 2012: 5.1 mbpd
oil consumption in US jan 2011: 18.7 mbpd

I see a 25% increase, still about 25% of US consumption. I think a recession in Europe and US would negate the effects of Fukushima on oil consumption, which is why oil dropped. Combined with the surge in natural gas in the US, going forward I see oil going down.

Tue, 05/08/2012 - 22:21 | 2408804 emersonreturn
emersonreturn's picture

donsluck, how far do you expect oil to drop, and how long do you believe it will remain down?

Tue, 05/08/2012 - 15:00 | 2407694 TrumpXVI
TrumpXVI's picture

Buy it cheap.

Stack it deep.

Tue, 05/08/2012 - 15:52 | 2407913 HarryM
HarryM's picture

Another big comeback today

We are just flies on their windshield


Tue, 05/08/2012 - 15:35 | 2407831 DoChenRollingBearing
DoChenRollingBearing's picture

@ CH1,

+ 1

Out of town bearing made a special trip to the bank to fund his BTFD just today.  I wonder if TSA will want to grope my coins...?

Tue, 05/08/2012 - 15:12 | 2407738 New American Re...
New American Revolution's picture


Wed, 05/09/2012 - 08:02 | 2409461 PrintingPress
PrintingPress's picture

I don't run by myself. 

Tue, 05/08/2012 - 15:15 | 2407746 Random_Robert
Random_Robert's picture


Tue, 05/08/2012 - 14:39 | 2407577 Spitzer
Spitzer's picture

Ok Mish...Or is that Prechter...

How did that DOW short go over the last 3 years ?

Tue, 05/08/2012 - 14:50 | 2407637 jimmyjames
jimmyjames's picture

How did that DOW short go over the last 3 years ?


It went about as well as the long real-estate trade-

Thu, 05/10/2012 - 18:29 | 2415115 MeelionDollerBogus
MeelionDollerBogus's picture

went pretty good shorting dow as long as you saw the obvious - short at peaks - 2011-7-06 spy price curvatures 01 | goldpricemodel

dow price prediction ivars zerohedge tfmetals adjusted by goldpricemodel

Tue, 05/08/2012 - 18:43 | 2408451 DosZap
DosZap's picture

Deflation before inflation

Totally what we have said here time and again,I have fully expected to lose fiat worth on PM's when we got to this point.

And, when it really hits in earnest, the prices will drop even more.And ask me if I care, NO.

I did not purchase my first once, with any intent of making a profit,I am doing this strictly to retain value.(somethng fiat can never do, esp over time).And any more I may purchase will be for the same reason, preservation of capitol,v.s. paper.(insurance)

Because the way I see it is the longer they dick with the paper world,its like they are trying to push a fricken rope............ the more stacking WE all can do.

And I will do what I always do, BTD,if it merits it, and keep the bulk of my powder dry and possibly get the chance to back up the truck.

Tue, 05/08/2012 - 14:17 | 2407488 BlandJoe24
BlandJoe24's picture

Would someone please translate the Sean Corrigan quote: i don't get the language.

Tue, 05/08/2012 - 14:21 | 2407511 Henry Chinaski
Henry Chinaski's picture


Tue, 05/08/2012 - 15:36 | 2407844 DoChenRollingBearing
DoChenRollingBearing's picture


Tue, 05/08/2012 - 14:21 | 2407513 cossack55
cossack55's picture

Don't sell unless you have to.

Tue, 05/08/2012 - 14:33 | 2407563 BlandJoe24
BlandJoe24's picture

ok, thanks

Tue, 05/08/2012 - 14:22 | 2407515 JustanEmotion
JustanEmotion's picture

Are you just trolling?

it can be summed up in two words. impending hyper-inflation

Tue, 05/08/2012 - 14:23 | 2407522 Stackers
Stackers's picture

Buy real stuff, becuase inflation be a come'n.

Tue, 05/08/2012 - 14:20 | 2407499 rickadoh
rickadoh's picture

My precious......come to papa....

Tue, 05/08/2012 - 14:23 | 2407514 Cognitive Dissonance
Cognitive Dissonance's picture

The Chinese say dog soup is delicious.

Wait...what are you talking about? :)


Tue, 05/08/2012 - 14:20 | 2407503 Dr. Engali
Dr. Engali's picture

A little deflation is the cover Ben needs to print. It's all coming together as planned.

Tue, 05/08/2012 - 14:26 | 2407539 Cognitive Dissonance
Cognitive Dissonance's picture

I so love it when things come together as planned.

Holding physical Silver and Gold? Check. Plenty of food and ammo? Check.

Bring it on asswipes.


Tue, 05/08/2012 - 14:32 | 2407560 niktamere
niktamere's picture

guns will run dry eventually

youre toast, Cog.

Tue, 05/08/2012 - 14:39 | 2407576 Cognitive Dissonance
Cognitive Dissonance's picture

That's Mister Cog to you buster.   :)

Tue, 05/08/2012 - 14:48 | 2407619 Manthong
Manthong's picture

If you are considering running out of ammo before you commandeer more, you need to revamp your tactical plan. : D

Tue, 05/08/2012 - 14:55 | 2407667 EBR MOD 0
EBR MOD 0's picture

I don't own any 40s ...yet. I'll just add some when the boyz in black show. Should be some toyz around for pick up.

Tue, 05/08/2012 - 15:07 | 2407721 Hulk
Hulk's picture

I got your back Mr Cog, just head down the valley and I'll be there


Tue, 05/08/2012 - 15:22 | 2407773 Cognitive Dissonance
Cognitive Dissonance's picture

They just don't sing them like they used to.

Tue, 05/08/2012 - 14:41 | 2407587 Doubleguns
Doubleguns's picture

Run dry?! Maybe ammo...not guns, but there is always the command "fix bayonets" for that day.

I will still protect my beans, bandaids and stack when the bullets run out. Ummm dont forget the diesel and ammonium nitrate.......spectacular to say the least.

Tue, 05/08/2012 - 14:42 | 2407600 niktamere
niktamere's picture

All Im saying is get familiar with HTH..

Tue, 05/08/2012 - 14:56 | 2407669 Upswaller
Upswaller's picture

You've never heard of re-loading, have you?   

Tue, 05/08/2012 - 15:34 | 2407833 AL_SWEARENGEN

Guns do run dry. Which is why you want to own a battle ready sword, short sword, or battle axe as part of your survival pack. Don't fall for a cheap replica that will break in half when you go to use it. $500 and up should get you a quality piece of steel that in trained hands is as effective as any small arms close range. Find a sword smith and get something right for you, they still exist if you look for them.

Tue, 05/08/2012 - 18:21 | 2408397 niktamere
niktamere's picture

Bingo. Maybe keeping them blind would have been best

Wed, 05/09/2012 - 07:40 | 2409435 Lord Koos
Lord Koos's picture

Swords and guns vs drones.

Tue, 05/08/2012 - 20:02 | 2408580 DosZap
DosZap's picture


guns will run dry eventually

you're toast, Cog.

No, guns will never run dry,nor will ammo.

Reason, everyone against you has them, all you have to do is take theirs, and their ammo.............supply possibly endless.Just make sure you are not the target first.

Thu, 05/10/2012 - 16:18 | 2414477 MeelionDollerBogus
MeelionDollerBogus's picture

you can make & find re-loads. You can also use crossbows.

Tue, 05/08/2012 - 14:40 | 2407581 worbsid
worbsid's picture

Ah, don't forget toilet paper ... wait, I guess you weren't talking about TP.  Sorry.

Tue, 05/08/2012 - 14:45 | 2407608 Dr. Engali
Dr. Engali's picture

That's what I keep an extra roll of tens and twenties around for.

Tue, 05/08/2012 - 14:54 | 2407652 Angel Face
Angel Face's picture

Don't forget toilet paper.

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