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A chart they won't like at Minyanville
Wednesday, August 13, 2008
Wow. He talks just like those USA Today reporters write. I thought they were supposed to be smart over there at Minyanville - you kind of expect that sort of thing at USA Today, but at Minyanville?
Though not a regular reader, I've come across enough good material there in recent years to have a generally favorable opinion of the work that appears there.
Maybe that opinion will have to be reassessed.
Executive editor Kevin Depew was just on PBS's Nightly Business Report with Paul Kangas and had this to say on the subject of commodity prices:We've talked so much about a bear market that may or may not be happening in equities and there's really another bear market that's happening right under our noses.
Uh... there's a 20 percent decline in the price of oil just about every year...
If you look at crude oil prices from the mid-July peak, they're down about 20 percent, as of yesterday at the close, they were down 20 percent. So, that's the definition of a bear market, that minus 20 percent move.
We're seeing commodities come down 15 percent, using the CRB commodities index, gold's down almost 15 or 16 percent as well. This is really a global demand story where demand is beginning to slow in response to tighter credit conditions.
That's not to say that the price of oil won't go lower from here - that recent run-up was both long and powerful - but 20 percent declines for commodities and 20 percent declines for equities are two completely different things.
10 comments:
Nice chart Tim -- More evidence that we have years to go in the commodities bull.
Kevin Depew is a deflationista -- a position neither I nor you (Tim) agree with. However, he is a smart guy and a comic genius. I agree the 20% thing is a bit of a faux pas but generally I have a lot of respect for the guy fwiw.
I stopped believing anything the "deflationistas" had to say after Bob Prector's claim that gold would never pass $400 was soundly disproved.
Greenspan Sees Bottom In Housing, Criticizes Bailout
"Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009," he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, "prices could continue to drift lower through 2009 and beyond."
///
In the past, to be sure, Mr. Greenspan's crystal ball has been cloudy. He didn't foresee the sharp national decline in home prices. Recently released transcripts of Fed meetings do record him warning in November 2002: "It's hard to escape the conclusion that at some point our extraordinary housing boom...cannot continue indefinitely into the future."
and,
Publicly, he was more reassuring. "While local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity," he said in October 2004. Eight months later, he said if home prices did decline, that "likely would not have substantial macroeconomic implications." And in a speech in October 2006, nine months after leaving the Fed, he told an audience that, though housing prices were likely to be lower than the year before, "I think the worst of this may well be over." Housing prices, by his preferred gauge, have fallen nearly 19% since then. He says he was referring not to prices but to the downward drag on economic growth from weakening housing construction.
Would someone either please tell Greenspan to shut up, or put him out to pasture?
http://nmmmnu.blogspot.com/2008/08/commodities-still-well-shy-of-2006.html
Check this - it is linked article for commodities (CRB), and I made same calculation for Gold and Oil.
Correction we see now, is near sevire than 1-2 years ago. Read the article first
730 - 542 = 188 = 25.7 %
1033 - 846 = 223 = 21.5 %
80 - 51 = 29 = 36.25 %
147 - 112 = 35 = 23.81 %
anyone blathering on and on about the 20% bear market rule has just labled themselves an idiot.
Another entry on a long list of cnbc talking points making the world a dumber place.
The only reason to bother coming here is the comic relief. Stories and commenters alike.
Deflationistas?
Wha?
Look, if the blog dedicated to the man who created the modern bubble cannot see a modern bubble in commodities AS IT IS HAPPENING, I don't see much help available.
Hell, people talk about $140 oil breaking the US, but there are alternative energies much cheaper than that. Oil at $100 has no support besides the groupthink of commodities "bulls". What a load of crap this has become. Greenspan and Bernanke created a whole shitload of USD. It has to go somewhere or down the deep dark hole of asset deflation. You take your pick, because the market already did so. This is not your 1970's inflation.
Chuck Ponzi
One can use a lot of quick peek indicators (I like fading Bubblevision) but only an in depth analysis of long-term supply and demand will answer this bubble question. For most commodities, demand has been ramping much faster than supply for years. With the blow out in the credit boom, WW demand will subside and find lower levels. The supply side remains largely unchanged. There will be no prolonged downtrend in prices in the absence significant excess supply and production capacity.
BTW, gold is definitely not a commodity. If it were, it would be cheaper than silver. Its values is almost entirely monetary. Supply is effectively fixed and demand is a function of relative confidence vs other forms of money.
I really like Kevin Depew and Todd Harrison. His bear market comment was tongue-in-cheek, imo. I would also put myself in the deflationista camp. However, this obviously does not mean all prices go down. Prices for assets driven by credit expansion will decline while prices for assets driven by supply/demand imbalances will continue to trend up. Also, one has to ask "prices measured how?", since the composition of money is also unstable.
Moves in commodity prices are not analogous to moves in equities for the simple reason that commodities are based on the asset price. Moves up and down would be dramatically amplified if you financed half your oil purchases with debt.
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