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Veteran Advisor

commmodity valuations

I think this has it about right- it is a money game and for now momentum rules. But it won't forever.

 

A strategy to address that view is worth considering.

 

 

http://www.zerohedge.com/article/global-tactical-asset-allocation-q4-update-commodities-0

 

"Most commodities are continuing their up move into deeply overvalued. As with other assets it does not really matter in the short-term (as long as the trend is positive) but it is paramount for longer-term projections. We have little doubts that commodity long-only who buy to hold are going to experience a >50% drawdown (from current levels) on their industrial metals, crude oil and agricultural positions sometimes in the next 24 months. Demand has been artificially boosted by China strategic reserve building, infrastructure intensive fiscal stimulus, booming demand from the rest of emerging economies and, as the trend persisted, by trend followers and money managers new attraction to the sector (you know it is not correlated so you should buy them to diversify your portfolio... sorry it WAS not correlated...). The introduction of physically-based ETFs is not helping in this matter as it represents a big short-term increase in marginal demand especially when the Fed is busy implementing QE2." Damien Cleusix
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Veteran Contributor

Re: commmodity valuations

Now they might get it right some day...but I find ZERO HEDGE to be more of a 'hype' source of information.  The sky is always falling.  It may be, but some made money even in the depression.  Governments have always had corruption, today it is just more well known.  Now, I will admit, I am not qualitfied to trade Wall Street.  I need to stay doing what I know.  And I still believe alot of times the turtle still wins the race.

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Veteran Contributor

Re: commmodity valuations

I can see how the fiscal stimulus would be considered an artificial boost, but why would China's building reserves be considered artificial?  Perhaps it could be temporary, but isn't it real?

 

Also, why would booming demand from emerging economies be listed as artificial?  This demand may even be long lasting.

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Veteran Advisor

Re: commmodity valuations

Remember- the most compelling fundamental story is always at the top.

 

I don't know what weather will do, governments will do etc- so I don't know when the most compelling story emerges., but I do know that money flows are notoriously and inevitably fickle.

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Senior Contributor

Re: commmodity valuations

"I can see how the fiscal stimulus would be considered an artificial boost, but why would China's building reserves be considered artificial?  Perhaps it could be temporary, but isn't it real?"

 

You do realize China has cities built for 300,000+ residents that have absolutely zero people living in them don' you?  They have factories built that even with a 10% growth annually won't be in production for upwards of 25 years.  I'm not sure what you'd call this, but I call it artificial demand.  What happens when they stop building cities and factories for two decades into the future? 

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Senior Contributor

Re: commmodity valuations

Husker,

 


"You do realize China has cities built for 300,000+ residents that have absolutely zero people living in them don' you? They have factories built that even with a 10% growth annually won't be in production for upwards of 25 years. 
"

 

Do you have some internet reference for this?  It sounds unlikely to me.

 

Jim

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Senior Contributor

Re: commmodity valuations

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Senior Contributor

Re: commmodity valuations

The China Ghost City story is interesting.  I didn't see any substantive reporting from people like WSJ, The Economist or similar, but there is certainly a plethora of internet info.

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Senior Contributor

Re: commmodity valuations

Did you read the 15 facts about China that will blow your mind?  Of all these facts, the most disturbing fact to me is that China's male population outnumbers its female population by 39 million.  This is an awful lot of disposable males in times of war which is all but inevitable once China's bubble bursts. 

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Senior Contributor

Re: commmodity valuations

jim, the wall street journal?  talk about behind the curve

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