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Guest Post: Are Commodities Topping Out?

Tyler Durden's picture


Submitted by contributor Charles Hugh Smith

Are Commodities Topping Out?

The past several years have seen a growing backlash against "paper" investments as more and more investors consider hard assets to be a safe haven against the implications of central bank money printing. But as the global economy visibly slows, this question arises in many minds: Are commodities, which have been on a tear since the March 2009 bottom, finally topping out?

The question requires both a fundamental economic response as well as a technical chart analysis.

We can start by observing the common-sense connection between demand for commodities such as copper, cement, steel,etc. and economic expansion. When demand rises faster than supply, prices rise. Since supplies of commodities face all sorts of restraints in terms of extraction rates, energy costs, and declining reserves, increased demand quickly pushes prices higher.

The Big Picture

As developing world nations such as China, India, and Brazil have expanded, their consumption of basic commodities has skyrocketed, pushing prices higher and stimulating exploration for additional sources of these materials.

Now there is evidence that these developing world economies are slowing, along with the developed economies of Europe, Asia, and North America.

If demand for commodities falls significantly while supply remains ample, then prices will soften. If demand continues to exceed available supply, then prices will rise.

In other words, there are two potential drivers of commodity prices: demand and supply. If supply of a specific commodity were to plummet due to geopolitical turmoil, its price could skyrocket, even in a recessionary environment of declining demand.

Absent a sudden drop in supply, however, a global recession would crimp demand, and thus commodity prices could be expected to fall.

So the question, are commodities topping out? boils down to the question, is the global economy expanding or contracting?

The rough outlines of the bullish and bearish cases are well known to anyone who follows the economic/financial media.

The Bulls vs. The Bears

On the bullish side, Europe’s credit crisis is seen as abating, the US economy is viewed as continuing its slow but steady expansion as unemployment declines, and China is seen as transitioning from an export-dependent mercantilist economy to one based more on domestic consumption.

The bearish position sees the European debt crisis as a long-term force for economic contraction as austerity and debt service are diverting national incomes away from productive investments and consumption, China’s real estate bubble is bursting, with no equivalent source of spending available, and the US is sliding into recession, a call supported by the Economic Cycle Research Institute’s Leading Economic Indicator and the Chicago Fed National Activity Index (CFNAI), depicted on this chart courtesy of The Technical Take.

Since much of the bullish case for rising commodity prices rests on China and India, common sense suggests that we take a look at those stock markets, as equities tend to be indicators for the underlying growth prospects of the economy. Here is India’s Sensex Index:

And here is China’s SSEC index: 

In both cases, key support levels have been broken and downtrends that began months before the US market broke down in August 2011 are still firmly in place. Without any fancy footwork, it’s difficult to view the action of these critical markets for commodities as being remotely bullish or supportive of stronger demand for commodities going forward.

The Technical Picture

To get the technical pulse of the general market for commodities, let’s look at the Reuters/Jefferies CRB Index, courtesy of

In this chart, we see the tremendous spike in commodity prices that accompanied the top of the pre-financial meltdown global economy in 2008, its free-fall heading into 2009, and the gradual recovery since February 2009. The trend line that has been in place since that low has been broken, albeit briefly.

For additional information, let’s turn to another view of the CRB:

The bull sees a double bottom; the bear sees a potentially serious break in a rising trend line. The bullish case remains unsupported by key indicators such as RSI, CCI, and MACD, all of which remain weak.

To many, the bullish case for global commodities relies on a positive reading of US gross domestic product (GDP), currently clocked at an annual rate +1.8% by the Bureau of Labor Statistics (BLS), and on a rising US stock market, which is seen by bulls as a leading indicator of future growth prospects.

In this view, the US has “decoupled” from weaker developed/developing economies, and is now the engine for future global growth and thus demand for commodities.

If the US stock market is taken as the leading indicator for this decoupling/continued-growth/higher-commodity-prices story, then we should ask what actually drives the valuation of the S&P 500. Courtesy of, here is a chart of margin debt and the SPX (S&P 500). Rather than being the leading indicator for future commodity demand, this chart suggests the market is far more correlated to margin debt than it is to commodity demand. In other words, when margin debt expands and the proceeds are dumped into stocks, the market rises. When margin debt declines, the market declines.

It is noteworthy that margin debt has led the SPX since the March 2009 low. If debt is the key driver of U.S. stocks rather than global growth, then this calls into question the bullish assumption that the S&P 500 is a leading indicator for future commodity demand.

In Part II: Hard Times Ahead for Assets, we dive deeper into examining the leading indicators for commodities and what they predict regarding where prices are likely headed. In our exploration, we're able to make similar forecasts about how the equity market in general will fare in 2012.

Click here to access Part II of this report (free executive summary; enrollment required for full access).


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Tue, 12/27/2011 - 12:29 | 2013761 brew
brew's picture

jim rogers didn't write this...

Tue, 12/27/2011 - 13:38 | 2013936 greyghost
greyghost's picture

but but but but but but......peak oil.....peak oil

on a more serious note! has anyone else's gasoline prices fallen, all the while oil has gone up!!!!!!!! does anyone know why the disconnect?????

Tue, 12/27/2011 - 13:42 | 2014023 Hohum
Hohum's picture

because Brent crude is down (WTI is up).  Not a great shock.  Don't get used to the lower gas prices, though.

Tue, 12/27/2011 - 14:04 | 2014087 greyghost
greyghost's picture

well living in calif. don't we get our crude from wti and europe brent???? and no i am not getting used to them, just taking what i can get.

Tue, 12/27/2011 - 14:23 | 2014128 firstdivision
firstdivision's picture

Prices are unstable.  They will break to the upside, but that is because they are trying to cut supply faster than demand falls.  In the mid-term I would expect sub $3 prices, but do see a spike up in the short-run.

Tue, 12/27/2011 - 15:42 | 2014388 greyghost
greyghost's picture

thank you firstdivision nice web sites for future reference....thanks

Tue, 12/27/2011 - 15:01 | 2014261 Raymond Reason
Raymond Reason's picture

The Brent vs WTI doesn't really explain it, because there has also been a disconnect between gas and diesel.  Diesel has only fallen a few cents. 

Wed, 12/28/2011 - 02:42 | 2015434 mophead
mophead's picture

It's to keep delivery fees high so wholesalers/distributors/shippers are discouraged from reducing 'fuel surcharges' (or discourages them from reducing prices when baked into the cake). Why is this important? Obviously because retailers pass the additional costs onto the consumers in the form of price increases (not a line item that says 'fuel surcharge') and the Gov. wants phony GDP (permanently; prices are sticky, as they say). If regular gas prices go up too much what you get is sticker shock and people  stop spending altogether.

Tue, 12/27/2011 - 14:33 | 2014173 SheepDog-One
SheepDog-One's picture

Probably govt mandated so people would do more 'consumin'...really stupid.

Tue, 12/27/2011 - 12:31 | 2013767 firstdivision
firstdivision's picture

explain that to whomever just bought an ass load of USO a few minutes ago.

Tue, 12/27/2011 - 12:34 | 2013784 SheepDog-One
SheepDog-One's picture

What has 'topped out' is not commodities, but 'economic expansion' which has only been due to wildly increased supply of fiat money. 

Economic insanity and centrally planned world banking is about topped out as well, no more blood to suck.

Tue, 12/27/2011 - 12:52 | 2013843 Quinvarius
Quinvarius's picture

They are going to print blood and suck on that for a while.

Tue, 12/27/2011 - 13:05 | 2013863 DormRoom
DormRoom's picture

consider the scenario in which China's property bubble pops.

That would likely collapse copper prices.

Also, assuming  a lot of players are massively  leveraged up on a collateral trade, they will be forced to delever their positions in other asset classes.  Thus more asset selling.

If the copper collateral trade ends, so likely will be the finacialization of copper, and thus bids on futures contracts will dry up, and copper backwardation wiil create a negative feedback loop.


Same process may happen with gold.  modern finance is structured like an inverse pyramid.  You have leverage positions on asset classes based on different asset collateral.  But there's too much cross-pollination/dependencies, so when the base of one asset class unwinds, it may rapidly collapse other asset classes.

Tue, 12/27/2011 - 13:24 | 2013957 agent default
agent default's picture

Consider that China crashes.  Obviously, China will run for liquidity. What is the first asset they will sell to raise cash?  Why US Treasuries.  What will happen to interest rates then?  Either they go up,in which case the US defaults within weeks, of the Bernank keeps them artificially low as he is doing right now.  Either way we have an aggressive monetization scenario, in which the FED prints moar, because moar.  Because that's the only way they can kick the can.  So, in the long run you are better off in hard assets than in cash and bonds.  As far as the "commodity assets" are concerned, if you own the real commodity, you are reasonably safe.  If on the other hand you own NYMEX/CBOT/COMEX futures and ETFs, you are right.  There is a serious risk that the paper side of these assets will collapse.  This however may lead to the following situation:  Producers refusing to sell or stopping production at those price levels.  And then exactly what does that do to the futures markets?  And what happens when people holding the futures, which are multiples of the real underlying in any market you care to look, start to demand delivery?  Real prices skyrocket, futures become worthless coast to coast  lawsuits for fraud against market makers,  another total clusterfuck brought to you by the TBTFs.  Unfortunately, PMs, although not the best, are the only commodity that you can physically hold.  Yes wheat and rice are far more useful than gold, but how do you plan to accumulate so much stuff?

Tue, 12/27/2011 - 13:55 | 2014056 scatterbrains
scatterbrains's picture

not sure but I hope you bitches are gonna let me take another swig around sub $25 in silver... at least for a few minutes guys.. don't make me chase it.

Tue, 12/27/2011 - 16:50 | 2014572 FreeNewEnergy
FreeNewEnergy's picture

I think you're going to get your wish, probably before March, if current trends remain in place.

Why do you think the govt. extended the Payroll tax cuts (actually a 33% reduction in employee contributions to SS, but the media won't characterize it that way) for only two months?

Sure, they cannot agree on much, but they know there's going to be hell to pay in January, especially when those retail figures start coming out, like, "sales were strong, but profit was down 20%."

January will be a good month to short anything. I'm waiting on silver as well.

Tue, 12/27/2011 - 20:17 | 2015053 agent default
agent default's picture

Silver may hit 25-20 until May if the current liquidity squeeze continues.  But when it goes up above 50, I doubt you will see prices beginning with 3 for years.

Tue, 12/27/2011 - 14:34 | 2014176 SheepDog-One
SheepDog-One's picture

Empty blood calories, they can try to live on that all they like but while youre eating as much as you can youre still starving to death.

Tue, 12/27/2011 - 13:06 | 2013887 midtowng
midtowng's picture

I'd say that all short and medium term trends are bearish for commodities - and that partly means gold and silver as well.

In the long-run commodities are still the place to be, but you'll have to be very patient. The easy money in commodities has already been made.

Tue, 12/27/2011 - 16:30 | 2014522 francis_sawyer
francis_sawyer's picture

I still can't believe people make these comments...

The easy money in commodities has already been made...

OK... I see... So the OBJECT of the game is to stack $100 dollar denominated pieces of cotton as high as possible... Right? THAT makes you rich...

Well then, let's just apply that logic a little further... GRANDMA is on a pension... & since the "price" of everything is now coming down (as result of the PRINTING of exponentially larger quantities of worthless pieces of denominated cotton)... Soon, GRANDMA will be able to buy MUCH MORE of whatever her heart desires...

Hold on Grandma! Just eat catfood for a little while longer!... Soon you'll be able to buy prime rib & caviar for the cost of a tin of catfood... Don't fill up the Buick either! You'll soon be able to double your church visits on the same tank! Listen to those PAPER CHARTISTS! They're EXPERTS! They know what they're talking about...

Hey... & if you have any extra to spare... ROBOT TRADER probably has a few hot equities he can turn you on to so that yhou can DOUBLE your stack of denominated pieces of cotton... (whether you end up being able to convert them into either CATFOOD or CAVIAR, we'll let the 'Gods' decide)...

Tue, 12/27/2011 - 12:38 | 2013789 Scirocco
Scirocco's picture

Topped out in what terms ? In USD ? haha... no can do.


Tue, 12/27/2011 - 12:37 | 2013790 vast-dom
vast-dom's picture

I think I've topped the fuck out?

Tue, 12/27/2011 - 12:39 | 2013797 bill1102inf
bill1102inf's picture

This is an example of what happens when something gets too expensive. People don't/wont buy it and the price comes down. Doesn't matter if its Gasoline, home heating oil, wheat, rice, beef, pork, or houses.  Counting on China to spend all its USD's to buy this stuff is not a smart idea, their state/local govs dont even have the $$ to make bond payments. Its ALL comming down.

Tue, 12/27/2011 - 12:57 | 2013852 SheepDog-One
SheepDog-One's picture

Also with the amount of trillions of dollars flooding markets, oil should be way over $100. That is a price-suppressed level certainly.

Theyre trying to print faster to fill a hole which only gets deeper the more they try to throw in. Its all insane, only a matter of time before the entire contraption blows to pieces.

Theyve built a system where only a few people are multi bazillionaires, something like 100 families control 90% of all the worlds wealth and resources while the rest live off scraps, and theyre surprised now that their crazy system is failing them? I dont see why, unless they all are really just inbred lunatics.

Tue, 12/27/2011 - 13:13 | 2013898 pine_marten
pine_marten's picture

Yep, inbred lunatics.  They became so greedy and dimmented that they lost sight of what makes civilization function.  They have killed their own golden goose by neglect.

Tue, 12/27/2011 - 12:40 | 2013800 High Plains Drifter
High Plains Drifter's picture

charts , charts ,charts............full steam ahead............bah humbug.........


when the commodities bull started this time in 2001, what were our collective debts?   and what are they now?   what was m3 then?  what is m3 now?   how many derivitives were in existence in 2001 and how many are in existence now?   etc etc.............


i have faith in gentle ben........he will keep doing what he is told like the good little minion that he is..........

Tue, 12/27/2011 - 12:42 | 2013812 Prairie Fire
Prairie Fire's picture

Of course they've topped out. It's a no brainer. I agree with Sheep that it's due to exces fiat and not expansion.

All of you gold bugs should get on your knees and beg the Fed to print. Same for anyone still long in these markets--equity and commodity. Personally I want them to inflate the bubble of all bubbles--it buys time, time for last minute preperations and stock piling.

For now gold will keep sinking because people need to unlock liquidity. The USD will keep rising because people need safety--where alse are you going to park your capital?

The best way to kill 2 birds with one stone is to use a printer.


Tue, 12/27/2011 - 12:49 | 2013833 High Plains Drifter
High Plains Drifter's picture

jesse over at the americain cafe said a few years ago that he thought one day a big long would come in and crush the bank short game. he said it would come out of the shadows and they would not see it coming.  there is no honor among thieves. when it gets to nutt cutting time, its every man for himself. if gold was such a bad thing then why do banks and countries such as china and russia and india and etc etc buy it......chart readers are just technicians. if you asked this guy about the city of london, he  would not understand the question. 

Tue, 12/27/2011 - 13:17 | 2013923 JimmyTheHand
JimmyTheHand's picture

For liquidity someone would have to sell it, but someone would also have to buy it.  Gold is in short supply, it isn't like a factory has created a billion ounces and now has to much on hand so the prices are reduced so that it can sell its inventory.  Their is more gold being mined, yes, but not enough to drive price down dramatically.  The gold that is changing hands is doing just that, changing hands from weak hands to strong hands.  The price will rise as their is enough money already in the system to drive it up.  But the price of gold is ALWAYS driven down when the commercials are buying big stakes into it.  More bang for their buck.  Once they have finished buying from weak hands the price will go up.  Go look at the COT report recently.  You will see that the BIGS are buying and that means the metals will soon rise again as they let it run.  The CFTC just stands by and lets it happen....

Jim Willie has been saying that the price might actually be being supressed by one of the shadow longs that is getting ready to hand the bankers their a$$ by ramping up the price after the shadow longs have bought what they wanted. 

I guess time will tell who is right.

Tue, 12/27/2011 - 12:45 | 2013820 JimmyTheHand
JimmyTheHand's picture

Topped out?!  Hehehe... more like coiling up like a snake and getting ready to strike even higher prices. 

Chris is only looking at commodities through the eyes of the Comex.  PEOPLE ARE FLEEING THE COMEX, so of course prices are going down.  People are going straight to farmers and miners, totally bypassing the CRIMEX because they don't want to be MF'ed Globaled.

The OI on January gold has risen quite a bit and the commercials are bailing out of theirs shorts and adding longs.  Paper price is going down, physical price is going up and you can expect real physical shortages of certain commodities in the near future.

Corn anyone?  Well good luck with that, the crops sucked last year because of the drought and higher fuel costs.  Guess what we have again this year?  More drought and even higher fuel costs.


Tue, 12/27/2011 - 12:48 | 2013821 sbenard
sbenard's picture

Commodities topping out?


Crude oil is up 7 days in a row! Up $1 today, just blasted through $100, close to $101!

Corn is up 7 days in a row! Wheat - same thing!

Soybeans -- up 30 cents today, up 9 days in a row, up 14 of the last 17 days!

Beef and pork futures are up!

Milk futures are up!

Cocoa, coffee, sugar, and cotton are all up! OJ too!

Thanks to the ECB and LTRO!

Tue, 12/27/2011 - 12:53 | 2013845 JimmyTheHand
JimmyTheHand's picture

Yea, I forgot about Beef.  BEEF is going to get REAL expensive.  I know a lot of ranchers and farmers both.  The majority have sold their cattle because of drought and higher feed costs and the majority of farmers are having hell because their just isn't enough water falling.  All of that translates into much higher costs when it happens several years in a row. 

I expect farmers markets to start springing up as they attempt to sell what little they do have and as they bypass the normal markets because they are tired of getting ripped off. 

What we are seeing is a contraction, away from globalization and to more localized markets.

Tue, 12/27/2011 - 13:45 | 2014029 Hohum
Hohum's picture

Good thing the beef market isn't a pure free market.  If it were, prices would be multiples higher.

Tue, 12/27/2011 - 15:02 | 2014265's picture

But you can't eat beef. At least I won't eat beef. Buffalo's the thing.

Tue, 12/27/2011 - 15:08 | 2014284 Raymond Reason
Raymond Reason's picture

Martinson's anylisis makes sense for cement, steel, copper.  But not for food, nor PMs.  People gotta eat, gotta protect savings. 

Tue, 12/27/2011 - 12:45 | 2013823 Scirocco
Scirocco's picture

It is freaking awesome to have Oil decorrelate a bit from the rest...


Tue, 12/27/2011 - 12:45 | 2013824 fuu
fuu's picture

"Since much of the bullish case for rising commodity prices rests on China and India, common sense suggests that we take a look at those stock markets, as equities tend to be indicators for the underlying growth prospects of the economy."


Tue, 12/27/2011 - 14:00 | 2014071 akak
akak's picture

I took notice of that particular piece of RobotLemming-like gibberish myself.

Tue, 12/27/2011 - 12:45 | 2013826 Mugatu
Mugatu's picture

Buy Gold, but wait until it washes out to below $1300.  

It is just time to bump the weak holders off the gold train.  We might even see silver below $23 before this purge is completed. PM's need a good purging to set up the next big run.  We need some pain before we see the gain.

Tue, 12/27/2011 - 14:33 | 2014171 JW n FL
JW n FL's picture



I dont know if things go quite that low.. but lower.. sure.

when the markets drop 40%.. so will the price of paper metals.

I dont think people will be able to buy physical at those lower prices..

but I will have cash just in case!

I think anyone who is not buying silver at sub $30's is CRAZY!

I think anyone not buying Gold sub $1,600 is Crazy!

Like I said.. I Agree with prices going lower.. I just think that backwardation takes over even more so that right now.

whereas the U.S. de-coupling from Europe is NOT! going to happen..

I can PROMISE! YOU!! ALL!!! Silver and Gold.. Physical! will be de-coupling from the paper market that trades 100 times more a day than what is above ground.. that day is coming. Lease rates be damned!

people will look back and ask?? how did not EVERYONE see that coming?

100 times (or more) a day traded! than what the entire amount above ground!

yes a run is coming..

and silver is more useful and more scarce than gold.


I have tried to help you!

listen or dont!

the facts have been provided! and are easily sourced thru Google!

and I didn’t even mention how the markets are rigged..

did anyone else notice how gold and silver steadily went up when the debt ceiling was reached and the FED could no longer buy the price down??


Tue, 12/27/2011 - 17:32 | 2014717 Vint Slugs
Vint Slugs's picture

Gave you a red arrow for your asinine remark about the Fed buying the market down.  Try using 'selling' or 'offering'.

Go ahead and buy silver "sub $30s.  You've got plenty of time - that market's not going to go anywhere significant up side for the next 2 years.

Tue, 12/27/2011 - 19:15 | 2014934 JW n FL
JW n FL's picture



I gave you a green arrow for speaking up. After using the down arrow!


but as for the market will be in grid lock for the next two (2) years I have to disagree.

1. The Stock Market is going to have an adjustment.. in which the paper price (due to covering) will go lower.. in line with the broader market.

1.a depending on how long and how much printing Europe does.. the ups and downs in the flights to safety to flights of covering loses could be significant.

2. Printing will at some point have to kick in.. love it or lump it.. I am no fan of it myself.. but it doesn’t change the fact that on Dec. 30th America is at the upper threshold of its spending limits.

2.a As I see external pressure(s) from Europe, China and others.. along with a much stronger downward spending habits of regular Americans.. and not to mention the complete and utter lack of trust in the markets.. should drive the markets down far enough (easily) for Open Market Operations to get involved with the day to day of the markets.


 Happy New Year! I hope You make a Killing either way!

Tue, 12/27/2011 - 12:46 | 2013827 YouThePeople
YouThePeople's picture

I'm no financial Superman, Look at these charts,,,fucking ridiculous.


Tue, 12/27/2011 - 12:47 | 2013829 Gene Parmesan
Gene Parmesan's picture

It's all relative.

Tue, 12/27/2011 - 12:49 | 2013832 JW n FL
JW n FL's picture



Industry Balks at NYSE Sub-Penny Plan

By Peter Chapman

An NYSE Euronext proposal to permit its members to quote in sub-pennies is proving highly controversial.

The exchange operator's "Retail Liquidity Program" would create dark pools at the New York Stock Exchange and NYSE Amex, where members could vie for retail order flow with quotes only a tenth of a cent better than the market's best displayed prices.

Read the full story


we cant have the Goy Slaves taking pennies from off the top! LULZ!!

Tue, 12/27/2011 - 12:50 | 2013838 Dr. Engali
Dr. Engali's picture

They may have topped on the short term, but Ben will be printing soon to monetize the 1.2 trillion new debt ceiling.

Tue, 12/27/2011 - 12:51 | 2013841 High Plains Drifter
High Plains Drifter's picture

where is robo fuckshite?   i expect him to come in here and do some kicking ...........

Tue, 12/27/2011 - 12:59 | 2013861 Dr. Engali
Dr. Engali's picture

He has been around he commented a few posts back.

Tue, 12/27/2011 - 12:59 | 2013858 Sudden Debt
Sudden Debt's picture

At least gold and silver demand still goes up, so not every commodity is going to,go down.

Tue, 12/27/2011 - 13:10 | 2013895 j0nx
j0nx's picture

And the sheep keep saying bahh bahh why mah geroceries so expensive, bah bahh or damn those arab scumbags for raising the price of mah gas. 9 out of 10 Americans are clueless as to what's going on and look at you like you just told them Jesus was a muslim when you tell them that their own government is responsible for the massive increase in prices that they are paying for daily staples. The real fireworks start when the people figure it out and have had enough although with the IQ of the average American I don't know if that day will ever come.

Wed, 12/28/2011 - 03:31 | 2015468 Dave
Dave's picture

The day will come, but it'll be far too late. Actually it's already too late. Some of those who are prepared will get away. Most won't. Serf mentality and love of country and shit like that. If you're not prepared to jet, good luck...

Tue, 12/27/2011 - 13:10 | 2013896 Debugas
Debugas's picture

imagine a rich guy sitting on a pile of copper while the rest 99% struggling to make ends meet.

Will copper go up ? The answer is if the guy at the top decides to buy more then it will (poor miners will be more than happy to mine more)

Will copper go down ? It is possible if the top guy decides he does not need any more.


Nobody really cares what the needs of 99% are simply because they have no money power to buy anything and they totally depend on money printers providing giveaways

Tue, 12/27/2011 - 13:11 | 2013900 Dr. Engali
Dr. Engali's picture

I hope that all of you freedom loving terrorists (including me) are prepaired for the detention camps.

Tue, 12/27/2011 - 13:18 | 2013925 fuu
fuu's picture

Top bunk bitchez.

Tue, 12/27/2011 - 13:12 | 2013906 Mark123
Mark123's picture

One element that is common to all BRICS....corruption.  Not great for long term growth (just ask Argentina).


I think that commodities that are tied closely to Chinese growth will get hammered.  2008/09 was just a warm up.  This will be met with coordinated money printing on a bigger scale to try and restore asset prices, and it is anybody's guess what will happen then because you are talking about destruction of faith in the system. 


Tue, 12/27/2011 - 13:13 | 2013911 Gutão
Gutão's picture

Base metals might be in trouble but grains and soft commodities still have room to recover.

mainly due to lower stocks but also because of weather.

Not considering Heli Ben printing machine.


Tue, 12/27/2011 - 13:15 | 2013914 Gutão
Gutão's picture

Base metals might be in trouble but grains and soft commodities still have room to recover.

due to lower stocks but also because of weather.

Not even considering Heli Ben printing machine.


Tue, 12/27/2011 - 13:15 | 2013915 Gutão
Gutão's picture

Base metals might be in trouble but grains and soft commodities still have room to recover.

due to lower stocks but also because of weather.

Not even considering Heli Ben printing machine.


Tue, 12/27/2011 - 13:58 | 2014061 agent default
agent default's picture

Yes, yes we get the point.

Tue, 12/27/2011 - 13:16 | 2013918 Uber Vandal
Uber Vandal's picture

Commodities have yet to top out for they have not been on the cover of Time Magazine.

Also, imagine where gold and silver would have been now were it not for the margin hikes and MF'n Global.

Tue, 12/27/2011 - 13:16 | 2013920 Killtruck
Killtruck's picture

An article written comparing the different global stock exchanges, all of which are interconnected and reliant upon one another...and amazingly, all of the charts look the same. Then, look at these results and say, "Holy shit, the prices of commodities are decreasing!" Meanwhile, in the real world, it's a race-to-the-bottom currency devaluation war with governments printing up a blizzard of paper money. No wonder the prices are decreasing when compared to fiat currency.

Let's see an updated post where you price oil, rice, beef, tampons and anything else you can think of in terms of gold. Real, solid pure gold. See where your shitty article stands then, douchebag. What a waste of my time.

Tue, 12/27/2011 - 13:19 | 2013931 whaletail
whaletail's picture

This thesis is bullish for money printing which will be the precursor for higher commodity prices. 

Tue, 12/27/2011 - 13:35 | 2013968 fx_dilemma
fx_dilemma's picture

those who hope that commodities will be rising due to more and more capital flowing into them will be greatly disappointed.The government will not allow the prices to rise above specific levels , if they do , expect intervention which may also include capital controls and brutal margin increases.We are not in 2005 anymore , rising commodity prices endanger the political system , they will have no other choice but to intervene.I can only see bullish case for gold and silver due to massive physical demand and simple ways of storing the physical metal and of course the monetary nature of the both metals.With most other commodities however physical demand will be falling substantially and the only source of price increases will be speculation which is not a very stable source , increase margin to 50-60-70 percent and the entire capital will flow out as there will not be any money to make.Benny's printing presses will kill the dollar eventually but before they do expect some significant steps by the government aimed to keep the game going a bit longer , if nessecary they will start killing futures brokers so that people speculating on crude and co. lose their funds as with MF global and when the game is finally over and the dollar goes down it will take all other currencies to hell too and commodity prices in paper money terms won't matter anymore...

Tue, 12/27/2011 - 13:43 | 2014024 whaletail
whaletail's picture

Si. The only caveat I'd add is don't try to time the end game. "Pretend and extend" will end tomorrow or after you are dead or sometime in between. Don't get caught in a liquidity trap. 

Tue, 12/27/2011 - 13:34 | 2013989 PulauHantu29
PulauHantu29's picture

WASHINGTON (Reuters) - The White House plans to ask Congress by the end of the week for an increase in the government's debt ceiling to allow the United States to pay its bills on time, according to a senior Treasury Department official on Tuesday.

The long and short answer about commodities is they have not even started refecting the flood of money that has entered the global system according to my financial advisor.

Tue, 12/27/2011 - 13:37 | 2014003 pineyard
pineyard's picture

TECHNICALLY .. and as presented .. it doesnt look good .

When i  perform surgery  and things dont go the way I was BIASED to believe

 ..i always look at the facts ,,the TECHNICALS ... in order to receive GUIDANCE

THAT has served me and my patients well ...over time

I would deduct ..its not much different with financials


Tue, 12/27/2011 - 13:41 | 2014021 pineyard
pineyard's picture

and just like is the case for US Assets.. the suspicion that NO MORE MONEY will come out of EUROPE

may be the decisive factor also pulling down the recent growth areas of the emerging world

Remember the BASIS for that economic Tiger-leap has been EUROPERAN CAPITAL INVESTMENTS

currently in all 3.5 TRILLION USD European money lent out to the EMERGING WORLD

That kind of easy funding .. is NO LONGER AVAILABLE !

Tue, 12/27/2011 - 13:53 | 2014053 FranSix
FranSix's picture

The only thing that will seperate the wheat from the chaff is negative interest rates.  Gold is the only money market commodity that can function with negative interest rates.  Negative interest rates can creep along the yield curve.

You might therefore see negative interest rates at the short end of the curve, while you have higher interest rates at the long end of the curve.  The bond market has also topped out, though low interest rates are very likely for the longer term.

That means there's a monetary crisis.  Inflation might be seen in the economy while credit deflation gathers momentum.

Tue, 12/27/2011 - 13:58 | 2014065 tekhneek
tekhneek's picture

Why do these assholes never write these types of articles during run up periods in commodities? It's like they only wonder if they're topping out while they're bottoming.


Tue, 12/27/2011 - 14:05 | 2014089 akak
akak's picture

It's like driving forward while focusing on the rear-view mirror ---- never a recipe for success.

Tue, 12/27/2011 - 15:42 | 2014275 Bob Sacamano
Bob Sacamano's picture

Agreed.  Unless it is saying we are going back to March 2009 levels, this would have been a more impressive report several months ago (say April) when commodities were materially higher. 

Tue, 12/27/2011 - 15:05 | 2014276 JimmyTheHand
JimmyTheHand's picture

Because these are the kinds of folks that REALLY ARE into fearmongering for capital gain.  He releases this little paper when the price declines and the weak hands are wringing their little weak hands, then at the bottom of the paper says "Hey, I know a way out, subscribe to my service and I will tell you all about it, weak little handed sheep."

Screw that.  Chris can take his charted up little report and stick it where the sun doesn't shine.  If I subscribed to his service, I would cancel and demand a refund, because I think Chris is playing on peoples uncertainty and fear.

I can't tell you what tomorrow will bring and neither can Chris, but I won't sit here and try to scare you into paying for a subscription to my newsletter like he is doing.  All you have to do is use your noggin folks and it will take all of ten seconds to see that this "report" is craptastic nearsighted nonsense.

Tue, 12/27/2011 - 14:02 | 2014076 terryfuckwit
terryfuckwit's picture

if wholesale bulion dealers were sellin phys silver at 10$ per ounce we could all fill our boots...but would supply dry up?? and would it ever be allowed to happen??

Tue, 12/27/2011 - 14:03 | 2014079 monopoly
monopoly's picture

I hate to say it but except for physical gold and silver being in confetti feels good. If gold breaks 1,535 will be loading up the ship with what little space is left. I just cannot drink the bullish scenario from so many pundits. 

With these low levels of volume easy to get whip-sawed, either long or short. Lets see what next week brings.

Nada here.

Tue, 12/27/2011 - 14:28 | 2014159 Georgesblog
Georgesblog's picture

Industrial demand for commodities will definitely go down. Food and food related infrastructure will be under a lot of pressure to meet profitable production levels. Whatever the cost, the bullet will be bitten, and the rising costs passed to consumers. Food inflation could make the government numbers silly.

Tue, 12/27/2011 - 15:12 | 2014297 JimmyTheHand
JimmyTheHand's picture

Not only do I know farmers and ranchers personally, but my brother-in-law runs a cafeteria for a college.  He stated that his food costs are going to rise 30% in the first quarter on a great many number of items.  The college is having a hard time with it because they don't want to raise their rates, but like the rest of the food industry they run on very low profit margins.  Right now they make money, but very very little and they have to raise rates because they can't just cover the cost.  They don't have any padding to do that with.

Tue, 12/27/2011 - 14:32 | 2014169 _underscore
_underscore's picture

It's always a good idea I think ,when checking the weather, to look out of the window first. That's why I'm always slightly surprised that when the 'expert' interprets market data, that they don't tend to look at or pay enough attention to (the fundamentals of ) the weather system passing overhead.

Enough of the weather analogy though. In a world of general shortage (i.e. there are plenty enough/too many  people to make stuff & eat food without worrying about who'll buy the copper to make wire or corn to make bread) it can only be speculation and/or market shorting that will reduce the real price of any actual real good or commodity - and I don't doubt that could happen, in the short term.

I'm also surprised as to where such analysts think all the created & inflationary money will be deployed - ultimately, it seems only logical that 'money' must find expression in goods,services & commodities. If it finds expression in one, it must find expression in all since there are real firewalls between countries or goods/services/raw materials.

If I'm correct in assuming that the level of 'forward consumption' (i.e debt) essentially means that we can't simply pull/push the monetary levers anymore to create demand for goods/services (GDP) without adding to the debt, it looks like a negative feedback loop.  A loop that must (if the old prescriptions are practised) get tighter & tighter until the host is strangled by that debt.

Since deflation would mean the day of strangulation would be that much closer (the incurred debt is harder to pay with less nominal amounts of money & those goods/services generate less money in taxes/earnings) the  PTB's solution looks completely rational - inflate the debts away, make the current and near-term GDP figures fit a new (greater nominal) level of de-valued fiat money. We've currently got an of-the-peg suit that doesn't fit - we either gain poundage or re-cut the suit; but be made to fit it must.

My first post here & just a word of praise about the quality of some posters' contributions -  I learn and/or get new perspectives with each new paragraph I read!


Tue, 12/27/2011 - 14:38 | 2014190 tekhneek
tekhneek's picture

Welcome and thanks for sharing! I agree with your weather analogy and opinion.


Tue, 12/27/2011 - 15:02 | 2014263 _underscore
_underscore's picture

Thanks for the kind words & welcome tekhneek.


Wed, 12/28/2011 - 00:47 | 2015356 Potemkin Villag...
Potemkin Village Idiot's picture

worrying about who'll buy the copper to make wire or corn to make bread

Fuck that... Put the copper & the corn together and make something useful out of it... Like whiskey...

Tue, 12/27/2011 - 15:48 | 2014368 Bob Sacamano
Bob Sacamano's picture

It seems the path forward is somewhat binary for Europe and eventually the US -- either inflate materially (to pay off debt with debased currency) OR default.  Inflation will be the path of least resistance to the politicians and is wholly consistent with Bernanke's past writings and current practice.  In contrast with past inflations, this one will likely have wage inflation materially lag behind commodity inflation (which we got a taste of March 2009-April 2011).

I worry a little that there is some other middle / muddle through way with a broader variety of government actions and a broader variety of consequences -- but I can't see what that cocktail might look like nor how to prepare for it. 

And any scenario requiring real discipline in spending (consumers and particularly government) is very unlikely -- despite being a fairly logical path. The people in Europe and the US are generally coddled entitiled victims of some sort largely unable to figure out how to get through life -- so it is very bullish for the government dependence agenda and more government spending.

Wed, 12/28/2011 - 00:44 | 2015354 Iwanttoknow
Iwanttoknow's picture


enjoyed your post.

Tue, 12/27/2011 - 14:47 | 2014215 KickIce
KickIce's picture

Food, firearms and perhaps fuel  -------->  inflation

I'm guessing about everything else will be deflationary.

Tue, 12/27/2011 - 15:40 | 2014360 Lester
Lester's picture

The commodity markets, aside from currency futures, and oil, are all thinly financed and traded relative to all but regional stock markets. The bond mkt is 10x larger than all equities. So, put this in perspective. Takes very little money, comparatively, (especially when PPT or other backed-by-printing-press govt function) to run the markets your way and Paint The Charts....

Eight years ago, in 2003, I saw Gary North do an about turn in his basic perspective. He no longer postured government function as being in enmity or opposition to the goals of his audience. Other financial-fringe columnists also did about-face turns in their tone and content. As if they were typing with a gun to their head or on their families...

The whole fucking market system is DEAD. Has been for years. Don't matter what the price structures are. The buyers use them to cheat you if you are a seller/producer. The whole thing since 2008 has been a manipulated run-up and now a run-down to fleece those who are dumb enough to swim with the sharks. Are you an industrial buyer who must purchase raw materials for processing and rendering? Then this shit means nothing to you. Sellers had best figure how to sell direct, so as not to get totally fucked into the ground. Don't matter what the price changes and ranges are, what you pay as a consumer will only go up.

The MF Global Swindle has shown the slow-witted The Light. Markets take confidence to function, especially when delayed delivery and production variances are involved. Nothing ever takes 5 minutes... Can't have a Swindle of this proportion in the kiddie-pool sized commodities arena without the entirety going flat until confidence is restored.

Remember: TPTB aren't out to only Loot America, but also to FUCK U.S. Into The Ground so restoration will not be possible. Not only have they killed the goose that layed our golden eggs, they have destroyed all her DNA so one can never be cloned again...

Why did 97 Senators vote against The Constitution and Duty They Owe Constituents and vote in the NDAA? How did we come to this ruin in all our markets? (Even the supermarket; been there recently?) Twasn't an accident, Buck-o. Nothing these fucks have done was by accident or mere bad-luck.

Tue, 12/27/2011 - 18:01 | 2014779 Monedas
Monedas's picture

Let's not forget that Au is not just another commodity like rice and pork bellies ! It used to be (1900s) 99% money and 1% commodity ! Forgive the wild guesses, my staff has the day off ! In the 1950s what was it....90% commodity and 10% money ? Some day it will go back to it's 99%/1% dual role ? When does that kick in ? What's Gold right now ? 10% coinage, 40% investment bullion, 50% commodity ? Don't forget safe haven panic function ? Trade war ammunition function ! End of World bomb shelter stuffer ? Bath tub and bedroom sex toy function ? It's so much more than a simple commodity play ?    Monedas 2011  Comedy Jihad Confused, Hopeful And Perma Bull !

Wed, 12/28/2011 - 00:57 | 2015362 Potemkin Villag...
Potemkin Village Idiot's picture

Last I checked... It was 99% stacked on pallettes in secret Rothschild's vaults... & 1% in aerosol cans, spray painted onto tungsten bars for 'banksters' to create a 100x levered paper market on & rehypothecated from time to time from your brokerage account so they can scratch even more of the gold paint off those bars to buy a 12th yacht to waterski behind...

Does that solve the riddle?

Tue, 12/27/2011 - 20:13 | 2015049 Money 4 Nothing
Money 4 Nothing's picture

Create a disenfranchisement of an investment, pick up the weak hands.

Gold has hit it's high's and locked in a predetermined trading range. Done, TPTB make the price, not us.

Sux, but true. I hold Phizz, looking for one more $1,750 gold & $30.00 silver and I'm out. My opinion.

Wed, 12/28/2011 - 03:44 | 2015477 akak
akak's picture

Yeah, because all of our systemic financial problems have been solved, because Ben is going to stop printing for good --- honest, this time for real! --- and the unsustainable federal debt and budget deficit is just going to ... what, evaporate I guess?  Good luck wishing on moonbeams and unicorn farts, my friend.  I'll wave "Hi" to you as you stand in line at the bank during the collapse --- and in the food lines to come afterward.

Wed, 12/28/2011 - 13:25 | 2016538 Money 4 Nothing
Money 4 Nothing's picture


Your talking like your going to have the opportunity to use your Bi Metal investment. If their is food abound post collapse, I'm not giving up a loaf of bread for 5 Troy oz of Gold, It's worth more to me under my arm. 

Bullets and beans will serve you better. I will take my weapon and relieve you of your Gold position in your pocket though, I will keep the beans..

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