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Advisor

broad technical

CRB bounced pretty well the last couple of weeks after laying around 500 for many months.

 

Crude closed over $100 tonnight and lots of stuff showing alittle pep.

 

By historical measures there's plenty of crude, grain, sugar, coffee etc. A lot of those markets were very oversold and due a bounce.

 

As far as the question of rotation to commodities I think, yeah, some of that.

 

Peple complain daily about governments printing money. Well, the stock markets of the world printed $10 trillion on if last year in terms of market cap so if the joyride there gets a little rocky and say $200 billion (a pittance) sloshes over to the commodity side, that's a big deal.

 

Stock sell off doesn't matter until and if it starts to really scrunch liquidity.

 

Also, in a more conventional mode, the CRB has a similar seasonal tendency to grains.

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10 Replies
Veteran Advisor

Re: broad technical

Hey Noxie Good to hear from ya.

 

What do you think of the rather dramatic decrease in the BDI?  I like looking at this as a way to measure economic movement 6 weeks to 6 months out.  Seems that if they are not moving goods around then we won't be selling those goods. Without sales earnings will be reduced. Seems to me that this is a bad omen for this year.  I also find it intriguing that with the world awash in energy products that oil isn;t around 80 bucks right bow. It would seem to me that This is a clear example of runaway devaluation of the Dollar.

 

I believe this is why Russia, China, India, Brazil abd Iran will have a very good petro currency trade going before the end of the year. This will end the Dollars dominanceas a reserve currency.

 

Interesting to tour around the financial headlines right now and see the news on Argentina, Turkey, Australia and New Zealand.  Lots of players that are Em's or second world econopmies that probably are gonna implode to some degree this year.

 

Then you add in the wierd suicides in the banking world.....Who committs suicide with a nail gun?..... Makings for an interesting year.

 

I think fundamentals rule the grains for the next 4 months, Then it will be all anout the Dollar. FOrtunatly The Dollar is still putting a better floor on this market than the fundamentals are for now. Just my take.

 

I am off to coach Basketball with my sons team today. Trying to get in a couple extra practices to make up for the lost snow days.

 

See Ya!

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Advisor

Re: broad technical

Hi JR,

 

You mentioncouple of topics that I've been thinking about a lot but have any real answers for either.

 

As you know the Baltic Dry has been very soft for a long time- chronic overcapacity- and has rallied a bit and then collapsed several times before. Although this one is particularly impressive. My take is that, yes, the world economy is slowing but probably nothing as dramatic as the you might be tempted the think the collapse shipping rates indicates.

 

Still think that in a credit crunch the senior currency (USD) rallies against most others. Thus far the relatively small ructions in emerging markets certainly haven't moved it much yet.

 

As far as oil and commodity prices I've been thinking about this piece.

 

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10575292/Coming-oil-glut-may-push-...

 

Kind of a convoluted logic, really. But what central banks fear most is deflation. In the commodity cycle supply has finally caught up and while cheaper raw materials would seem to be good for the real economy they would be bad for the not real economy. Just thinking about that as a lot of commodities have caught a bit of a bid here in recent days. Not anything there to draw any type of conclusion, just has me thinking.

 

Yeah, as far as the dead bankers. Reminds me of the cluster of dead scientists in the early 2000s, all of whom had direct expertise or something that could be associated with biological warfare and epidemics.

 

There really are coincidences and then there is "hey, wait a minute."

 

I've kept that filed away just to see if anything ever emerged that made any sense of it and nothing really has yet. So like the dead scientists I'd say about the banker's plaugue that you'll never know.

 

At 4 it is still within the far realm of credible coincidence.

But whether it is a coincidence I think it is fair to say that there is some skullduggery in the financial world involving both private and public players so hardlt preposterous to wonder what it's about.

 

 

 

 

 

 

 

 

 

 

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Senior Advisor

Re: broad technical

The $ will continue to be the world's reserve currency. To be the number one requires an open market country. Russia and the like are definitely not it.
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Advisor

Re: broad technical

http://www.foreignpolicy.com/articles/2013/02/25/the_new_westphalian_web

 

Thinking about this- the free internet- and the undeniable fact that it presents challenges to the sovereignty of nations states that has prevailed for almost 400 years. It should hardly come as a surprise that those structures will act to defend the challenge to their authority.

 

Point being that the real threat to money is digital currencies. If not bitcoin, then something better. If anything its a greater existential threat to the whole order. And also no surprise that it will be fought tooth and nail.

 

Lots of ideas about money and currencies floating around in the ether. Kinda interesting to me that traditionally some in conservative circles have whispered darly about the plot for one world currency (on the way to world government) but many seem a bit enchanted by the anarchistic possiblities of digital currency.

 

Like all discussions of money it gets pretty ethereal pretty fast. You've got the John Galt guys who just love the idea of being competely freed from any government control of money (and the 99% who are just holding them back).

 

My take is that if you ended national soveriegnty over money, whomever happened to be standing in the .01% slot at that moment would, by default, become a permanent ruling world class, free to fly the globe in private jets and plunder. That assumes that there would be any sort of stability in the money supply- more likely you would see wild inflationary and deflationary swings. But that is a great environment for plunder, too.

 

I guess my summation would be that, yes, I'm also given to occasional bouts of anarchism, just want to see the durn thing blow up. But really, in the best ttadition of Burkean conservatism, it would be foolish to assume that all that has proceded was for the worse and radical change is called for. 

 

That tradition does allow  for incremental change.

 

 

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Veteran Advisor

Re: broad technical

Pal how many changes in currency leadership have there been over the years? Lots in the last century we had a change. I think that with time that change will happen at faster intervals. No one thought in 1850 that in less than 100 years the sterling would no longer be the currency of world trade. Why should the US hold this status at longer intervals while technology has sped up the business world and the speed of financial transactions the world over. Just because something of man has been the same for years doesn't mean that it will continue to be. And in 1850 no one would think it possible that the us could become the world currency controller.
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Advisor

Re: broad technical

For bettre or worse, the USD had earned the title, also that the British Pound died of exhaustion from 2 great wars.

 

Just don't see the single heir apparent. That was the hope of the euro but don't think so. Also don't see the renmembi although you have to say that its the best candidate. Might be a window of opportunity for a decade or so before their already tipped demographic tipping point really tips.

 

Back in 2008 when I and I think everyone was perplexed by the steady march of crude oil to $150 I was thinking a lot about the dollar, the petrodollar and oil and if anything could be surmised there. Wasn't really able to parse anything out of it but remain suspcious that it is in there somewhere.

 

Taking the 50,000 foot look, I don't think the dollar loses reserve status as long as the US maintains military supremacy. Sort of a gordian knot there- we keep our economy running with the military-industrial machine, and our deficits flowing.

 

So yeah, since our supremacy is somewhat on the wane, sure. Sometime. And probably from geoplitical and military reversals as much as our own profligacy.

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Honored Advisor

Re: broad technical

What is that Chinese currency?????   

 

In terms of who handles the transactions ------ they will probably get to make that decision.

 

And the only reason the usd is it for now is because someone needs to get rid of them in a major way.

 

 

That is not what I would call monitary security.  Though it may be for the wrong reasons.

 

Pal has a good point .

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Advisor

Re: broad technical

Meh. They're toast, demographically.

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Advisor

one more thing

While engaging in some flights of speculative thought.

 

Background: I've always tried to keep the experience of corn and China 1994-5 in the back of my mind. While it is no doubt different today, and perhaps more transparent than then I can't be absolutely sure that we really know what's going on there in regards to commodity imports.

 

Fact, more or less: several commodies, primarily metals, are held in large amounts as warehouse stocks in China. And they have become a central part of the chinese shadow banking system as they're held as collateral for multiple rehypothecations.

 

There are hints that the same may be occurring with the massive stocks of cotton held there.

 

Can't say that is happening with soybeans or other grains but the cotton thing suggests that they've moved down the value density chain a bit.

 

Conclusion- it is possible that a serious liquidity squeeze on the chinese shadow banking system cuold reveal a king who is quite naked.

 

 

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