# Commodities tipped to collapse



## wayneL

Don't shoot the messenger! :whip

http://finance.news.com.au/story/0,10166,18993553-462,00.html




> Commodity collapse tipped
> From:
> By Andrew Trounson
> 
> May 02, 2006
> 
> 
> COMMODITY prices were likely to peak this year and were primed for a fall of up to 50 per cent, analysts warned yesterday as resource stocks again jumped sharply higher.
> The gold price hit a 25-year high at $US661.10 an ounce, sparking fresh buying of mining stocks, despite a warning from Canberra-based Access Economics that metal prices are poised to start dropping steeply from the end of the year.
> 
> Gold shot up on the back of growing fears over the nuclear standoff between the US and Iran, and expectations that US rates are on hold.
> 
> This year will be as good as it gets in metal markets, according to Access's latest quarterly survey of 10 forecasters. Booming copper prices are forecast to fall about 50 per cent over the next two years, with other base metals to fall 30-40 per cent. Gold is forecast to be averaging $US564 an ounce a year from now.


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## Porper

wayneL said:
			
		

> Don't shoot the messenger! :whip
> 
> http://finance.news.com.au/story/0,10166,18993553-462,00.html




:shoot:  :shoot:

Only joking Wayne but when anything is in a boom, whether it be the stockmarket, commodity prices or whatever you always get people saying it can't last.I am not saying it will not go through the boom bust scenario, but let's just wait and see.

When the overall direction changes, we can all go short and make even more money that we are now going long.


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## tech/a

Just give the emerging giants a call and let them know.
Better still send them the article.
Development will be rubbing its hands together next year then with such huge savings to be had.


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## wayneL

BTW

I have no opinion either way really, just posted for interests sake. 

I'm with Porper, just trade the trend!


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## coyotte

wayneL said:
			
		

> Don't shoot the messenger! :whip
> 
> http://finance.news.com.au/story/0,10166,18993553-462,00.html





wonder if these are the same " FORCASTERS " that advised the Aust Govt to sell it's GOLD reserves @ around POG low 

or advised young Johnny to sprout how he had secured the deal with China to contract natural gas in $us at a time when the $au was at a near time LOW


Cheers
Coyotte


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## markrmau

I think there is one thing the analysts are missing.

The potential for irrational exuberence in US investors.

Everyone knew that there were no earnings in the tech stocks, but they just kept going up anyway. People convinced themselves that it was a new paradigm.

Now the us investor is focussing on materials and convincing themselves that china will go on forever.

Just wait, the us speculative industry is going to go into absurd overdrive.

I tip copper to tripple in the next nine months, xjo to hit 7000 and then an '87 style collapse.


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## michael_selway

wayneL said:
			
		

> Don't shoot the messenger! :whip
> 
> http://finance.news.com.au/story/0,10166,18993553-462,00.html




*Market highs prompt crash fears PRINT FRIENDLY EMAIL STORY 
PM - Thursday, 27 April , 2006  18:26:00
Reporter: Stephen Long*

MARK COLVIN: The stock market has hit record high after record high in recent weeks.

And today, the share price of one of the big four banks, ANZ, hit a new peak after a bumper profit, with many other companies set to follow suit.

There are plenty who think the good times will go on, but some are beginning to argue that too many companies are fully-priced or overpriced.

They fear that, just as in the late 80s, the market is ripe for a fall.

Economics Correspondent Stephen Long.

STEPHEN LONG: Oliver Stone's movie Wall Street has come to symbolise the excesses of the 1980s.

It came out two months after the October '87 stock market crash.

And to Greg Hoffman, Research Director at The Intelligent Investor, the film's opening scenes sound a warning bell about today's market.

GREG HOFFMAN: Lou Mannheim, who's a sort of a crusty old broker, strolls into the office, past all these slickly attired, gung-ho brokers.

(Excerpt from Wall Street)

LOU MANNHEIM: Marvin, Marvin I've got a feeling that we're going to make a killing today.

MARVIN: Oh yeah, where's your machine gun?

GREG HOFFMAN: And he declares that he can't make a buck in this market. He says the country's going to hell faster than when that son-of-a-bitch Roosevelt was around. He says there's too much cheap money sloshing around the world.

(Excerpt from Wall Street.)

LOU MANNHEIM: Jesus, you can't make a buck in this market, the country's going to hell faster than when that son-of-a-bitch Roosevelt was in charge. Too much cheap money sloshing around the world.

GREG HOFFMAN: And we see that as a danger right now. There's an awful lot of cheap money. Australia's Reserve Bank has been printing money at a growth rate of 10 per cent over the past five years, which is a lot faster than our economy's been growing, which means we've got a whole surfeit of extra dollars in the system that need to find a home.

STEPHEN LONG: Since the air wheezed out of the housing bubble, it's been finding a home in the share market, and cheap credit's encouraged speculators to invest with borrowed money. 

Margin lending, where people borrow to buy stocks, is a growth industry, with 150,000 active accounts and billions of dollars at play.

Greg Hoffman.

GREG HOFFMAN: Over the past seven years we've seen marginal lending in the country go from approximately $7.2 billion to about $19.9 billion, and as we sit here that figure's probably north of $20 billion. 

So there's an awful lot of borrowed money out there in the market. That's money that, if the market would've pulled back, is going to create an awful lot of problems for people.

STEPHEN LONG: Margin lending is money for jam while stock prices are going up, but if there's a big fall it magnifies the losses.

The problem, says Greg Hoffman, is that so many people dismiss the possibility.

GREG HOFFMAN: We've had 15 years of growth in this country, of economic growth. People forget how bad things can get when the economy takes a downturn.

STEPHEN LONG: And it's not just individuals speculating with other people's money.

The past few months has seen a spate of mergers and acquisitions, and most of the predator companies are using debt and shares to buy their targets, just like in the days of Skase and Bond.

GREG HOFFMAN: It's quite reminiscent of the boom times in the late 80s, when we saw a lot of entrepreneurs making aggressive moves with borrowed money, with the bank's money.

We're seeing it around the world, but in Australia, because we're such a resource-based market, I think that the current euphoria is particularly pronounced here.

STEPHEN LONG: The Australian market's nearly doubled in value since March 2003, and risen by a third in the past year alone.

And the stock prices seem to assume that the good times will keep rolling.

Big banks are trading at multiples 43 times higher than their British counterparts, and the price of many other companies only make sense if their earnings keep soaring.

It's not quite Tech Wreck territory, but if the bubble bursts, it could be ugly.

Greg Hoffman.

GREG HOFFMAN: There's a fantastic study by a brilliant American investor called Jeremy Grantham. He runs one of the largest funds management companies in the world called GMO. 

And they identified 27 bubbles in the past, and they noted that in every single one of those bubbles, except the latest one, which they believe hasn't played out, they've noticed that prices don't just fall from the boom time top back to the average, or the mean, they actually fall straight through the mean on the downside. 

So what you end up with is a situation that goes from extreme exuberance, a boom, quite quickly can turn into the opposite, to a bust and despair and depression.

STEPHEN LONG: In this stock market there's plenty of bulls roaring that now's the time to buy. 

But the cautious are pulling back. And like Lou Mannheim in Wall Street, they're warning that there's not too much around that looks like value.

(excerpt from Wall Street)

LOU MANNHEIM: Stick to the fundamentals. That's how IBM and Hilton were built. Good things sometimes take time.

MARK COLVIN: Economics Correspondent Stephen Long reporting, with a little help from Oliver Stone. 

http://www.abc.net.au/reslib/200604/r83324_242917.asx
http://www.abc.net.au/pm/content/2006/s1625499.htm
http://www.aireview.com/index.php?act=view&catid=8&id=3827
http://www.smh.com.au/news/BUSINESS/Big-falls-in-major-minerals-Access/2006/05/01/1146335639645.html


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## phoenixrising

Today's revamped daily Aireview covered this.

Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.

No tech bubble here.

A pullback is always on the cards tho.


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## wayneL

phoenixrising said:
			
		

> Today's revamped daily Aireview covered this.
> 
> Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.
> 
> No tech bubble here.
> 
> A pullback is always on the cards tho.




Just being devils Advocate...

The likes of BHP might not be bubble priced based on current commodity prices.

But it *could* be that the underlying commodities themselves are in a bubble situation.

A substantial cut in the price of the underlying commodities will most certainly pull the rug from under the likes of BHP et al.

Cheers


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## nizar

phoenixrising said:
			
		

> Today's revamped daily Aireview covered this.
> 
> Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.
> 
> No tech bubble here.
> 
> A pullback is always on the cards tho.




Pays a good dividend?

Its not much more than 1%, and market average is 3.9%, work that one out


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## The Once-ler

Poor old Greg Hoffman from the 'intelligent investor' must be kicking himself. I subscibed for a while, but the tips were shocking. Their biggest mistake though was calling the resource boom a bubble about 2 years ago. They may have done OK since then, I don't know.


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## Julia

The Once-ler said:
			
		

> Poor old Greg Hoffman from the 'intelligent investor' must be kicking himself. I subscibed for a while, but the tips were shocking. Their biggest mistake though was calling the resource boom a bubble about 2 years ago. They may have done OK since then, I don't know.




Not imo, they haven't, Once-ler.  My one year subscription is about to end and I definitely won't be renewing it.  Haven't followed a single one of their suggestions and thank goodness for that.

Julia


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## michael_selway

*Fresh surge in commodity prices raises fears of unsustainable speculative bubble 

By Philip Thornton, Economics Correspondent 
Published: 03 May 2006 * 

Fears of an unsustainable bubble in commodity prices were fuelled yesterday after key industrial metals such as copper and zinc surged amid thin trading. 

The copper price leapt more than 3 per cent in London as traders returning from the Bank Holiday rushed to catch up with a strong increase in New York on Monday.

It jumped by $235, or 3.4 per cent, to $7,235 a tonne compared with Friday's close. Zinc rose $135, or 4.3 per cent, to $3,310 a ton, within sight of the record of $3,445 hit last month.

The increases were scored against very thin trading in the absence of buying from China and Japan, the major consuming nations that begin week-long holidays this week.

"If the natural buyers go away you would expect the market to come off a bit but it's not happening - it shows you that it's a financial market, not a market between physical sellers and physical buyers," one fund manager said.

The International Wrought Copper Council (IWCC), a trade association for copper users, has written to the Financial Services Authority and the London Metal Exchange (LME) warning about the increasing role of speculators.

Simon Payton, its secretary general, said the price had been driven up by a "feeding frenzy" by hedge funds. "It may be great for the producers but we feel that a market built on speculation leaves tremendous problems for out side of the industry," he said.

*"The margins on metal is straightforward, so at $3,000 a tonne, it is just about bearable but $7,500 a tonne raises serious issues."*

The LME refused to discuss either its conversation with the IWCC or the reasons for the rise in prices. A spokesman said: "The market is operated in an orderly and transparent fashion and we have mechanisms in place to make sure that that is the case."

The copper market is prone to speculation as it is essentially a fast-moving financial market placed on top of a physical market with considerable lags between the mine and the open market.

Last winter, copper prices surged to a then-sedate $4,115 a tonne on rumours that a Chinese state copper trader had taken out a huge bet that prices were set to fall - and then went missing when prices soared 30 per cent.

However, analysts believe commodities are being driven by fundamental factors. On the one hand, supply is being held back by a number of constraints. On the other, the meteoric growth in countries such as China, India, Brazil and Russia - the foursome dubbed the BRICs by Goldman Sachs - is driving demand.

As Barclays Capital said in its recent forecast update: "Very few natural resource companies possess either the opportunities or capabilities to swiftly raise their output to keep abreast of the sustained move up in demand growth."

A survey by Barclays of 200 of its investor clients, including banks, pension funds, mutual funds and hedge funds, showed a massive shift into commodities. While more than two-thirds had no position in commodities at the end of 2004, the same proportion forecast that they would hold at least 6 per cent of the portfolio in these physical assets.

Whether this is speculation or sensible investment is open to debate but the figures appear to show that even conventional investors have woken up to the fundamental forces driving the price.

With the US equity market posting a 6 per cent gain in 2005 and US bonds rising 7.8 per cent, according to ABN Amro, committed commodity investors look wise.

There was fresh evidence of strong demand for copper on Monday from figures showing that US spending on construction rose twice as much as forecast in March, and a snapshot survey of the industry showed hefty expansion in April.

The metal is used in infrastructure projects for electrical wiring and piping. Copper also goes into a wide range of manufactured export goods such as fridges, computers and mobile phones.

Copper had gained 59 per cent this year and zinc, used as an anti-corrosive coating in galvanised steel production, had jumped 66 per cent.

Even the gold price, which hovered below the record of $661 an ounce set last week, is being driven by fundamental factors, analysts said.

Ross Norman, a director of thebulliondesk.com, said: "There is always a danger in saying that 'things are different this time' but there are some fairly compelling reasons that we are seeing a once-in-a-century, or perhaps even longer, rise in demand for resources - perhaps since the Industrial Revolution."

He said that while issues such as rising inflation and geopolitical tensions had helped push up prices, it was easy to overlook the mismatch between supply and demand.

Production in South Africa is at its lowest since 1924, development of new mines is being slowed by new social regulations while Latin American governments are turning increasingly nationalistic towards their natural resources.

On the demand side, there are signs that investment and pension funds are looking to increase their positions. At the same time, demand has been spurred by the creation of exchange traded funds that allow investors to buy almost directly into gold. On top of that, the creation of exchanges in places such as India and Dubai has increased the ease of investing.

Mr Norman said the ratio of the oil price per barrel to the gold price per ounce - traditionally between 13 to 15 - showed that gold could be worth $950 an ounce.

"Gold has underperformed relative to other commodities and is playing catch-up," he said. "There are lot of people looking to get in at the bottom whenever it falls, which shows the character of the market."

The role of speculators has also been a matter of heated debate between consumers and producers in the oil market. Crude prices have surged seven-fold, from below $10 a barrel during the 1998 Asia crisis to almost $75 a barrel in recent days.

Western countries have blamed Opec, the producers' cartel, for withholding supply and being opaque about the volume of reserves and production. In return, Opec states have blamed the high and volatile oil price on hedge funds.

Strong global growth, especially in China, has led to a surge in demand for the "black gold". Meanwhile, the slump in prices at the end of the last century provided little incentive for the investment in exploration and refining, creating supply problems now.

On top of this, growing tension between the UN Security Council and Iran over the regional superpower's nuclear ambitions and mounting civil unrest in Nigeria has raised concerns over supply disruptions.

Mohammad Hadi Nejad-Hosseinian, Iran's deputy oil minister, raised the temperature further yesterday, saying there was "some possibility" of a US attack on his country. He said prices could hit $100 a barrel by the winter.

US oil rose 50 cents to $74.20 a barrel, while London Brent crude gained 21 cents to $74.10 yesterday.

*Don't blame us for what is happening, say hedge funds*

The hedge fund industry looked to pour cold water yesterday over a growing chorus of malcontents blaming it for the "super spike" in the price of commodities.

A letter from the International Wrought Copper Council to the Financial Services Authority and the London Metal Exchange claimed speculators were driving prices to levels that no longer reflect supply and demand.

The trade body echoed the sentiment of Lord Browne of Madingley, the chief executive of BP, who last week decried hedge funds and speculators as the engine driving soaring oil prices.

He said: "The increase in prices has not been driven by the fundamentals of supply and demand. It is the case that the price of oil has gone up while nothing has changed physically."

BP's head of supply and trading, Vivienne Cox, said trading in oil commodities by hedge funds had increased tenfold over the past five years. Certainly, the hedge fund industry is booming and managers are increasingly active in commodity markets, which have proved extraordinarily profitable for a handful of funds, both here and in America.

In recent months, the UK funds Armajaro Holdings, Winton Capital and Red Kite Management were among those to have done nicely from winning bets on copper alone.

But the hedge fund industry insisted that commodity prices were being driven by a range of factors - an increasing diversification into alternative assets by the traditional big investors; the voracious appetite for raw materials from China, Japan and India; low stockpiles; disruptions to production - and not simply speculation.

Fred Demler, who manages the base metals desk for Man Financial, said: "Fundamentals are driving prices. There's a view that we are in a commodities 'super cycle'. Sure, the hedge fund community has grown, but 95 per cent of hedge funds have no exposure to commodities."

Commodity markets were too big and too liquid to be cornered by any single class of investor, hedge fund managers said.

Gary Parkinson 

http://news.independent.co.uk/business/analysis_and_features/article361612.ece


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## rederob

I'll be blunt.
The market commentators were saying this over a year ago.
At that point the (pension) funds were not too interested in commodities.
They are now.
Funds are moving out of the greenback and into US dollar based commodities *because * they will continue to rise as the greenback weakens.
This trend of funds accumulating positions in commodities, especially metals, is still warming up.
The fundamentals driving all commodities are very tight and show no sign of weakening.
While market tightness is in place, expect occasional parabolic spikes.
Funds will probably finish their accumulation phase by year's end.
Get out your worry beads in 2007, maybe...  but for now the trend is up, volatile and scary!


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## Odysseus

Access Economics gets the whole situation fundamentally wrong. (1) China, India and other countries need commodities urgently to continue their industrial revolution. There is no way that they are going to stand still, and they have the money to buy what they need as they earn astronomic amounts by selling clothes etc. to the West. (2) Access Economics sees problems on the supply side. And indeed there ARE such problems. But if you have a shortage of supply on the side of the suppliers and a growing demand on the part of those who need the goods, prices can only go in one direction. There simply is no other way. This situation can only come to an end if either demand stops, or supply becomes plentiful, or supply stops altogether. The first two are extremely unlikely for the time being, and although supply is well short of what it needs to be, it is unlikely to collapse entirely. One has to agree, of course, that the supply problems are serious, but so long as there is any supply at all and the demand is there to meet it, money will be made by those supplying. OTHER FACTOR ALTOGETHER: there is a psychological problem behind such over-negative forecasts. People have difficulty taking in the magnitude of a disaster, but also to take in the magnitude of its opposite. This boom, for once, is for real, like a few others in history. It's not a boom artificially created by cheats like Bond and Chase, nor by conjurers like dot.com people


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## phoenixrising

wayneL said:
			
		

> Just being devils Advocate...
> 
> The likes of BHP might not be bubble priced based on current commodity prices.
> 
> But it *could* be that the underlying commodities themselves are in a bubble situation.
> 
> A substantial cut in the price of the underlying commodities will most certainly pull the rug from under the likes of BHP et al.
> 
> Cheers




Agreed Wayne, i don't want to use those famous words "this time it's different". I just see the "Chindia" argument to compelling atm.

I also subscribe to the "bear" theory also, but happy to run with the bulls when on the loose.

A side note, i must have the record for the slowest ton (me and Gillespie)
See if my next is quicker.

Cheers


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## phoenixrising

nizar said:
			
		

> Pays a good dividend?
> 
> Its not much more than 1%, and market average is 3.9%, work that one out




Thaks for that Nizar, I hadn't checked that out properly

Cheers


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## noirua

http://research.stlouisfed.org/fred2/data/OILPRICE.txt


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## ducati916

The Bureau of Labour Statistics, in the compilation of the CPI, overstate by 30% the prices tracked by the CPI. (In the US)

This 30% overstatement mitigates to an uncalculated % the effect of monetary inflation.

Rather, the *inflation* has been redirected.
Has it been redirected into assets?
Housing, Equity?

The surge in commodity prices more accurately represents the level of monetary inflation, as of course the demand for product has risen with the money supply. This traditionally results in *price inflation* as more money chases the same goods, profit margins rise faster than the costs of production. This has not happened. In fact the opposite has happened, price has fallen. Purchasing power has increased. The very antithesis of the definition of inflation.

China, far from being an economic giant, has become the manufacturing base for US and world consumption within the commodity based product market. The price that they can manufacture at is of course an artificial price.
It is a price devoid of ethical costs.

Therefore, should US and world consumption falter, the economic growth of China would crater. Taking steel as an example. Without government subsidy, the steel industry in China would be bankrupt. This is true for many products, where the margins are nonexistent, and no capital expenditure is possible.

This cratering of business in China would nigh on bankrupt the banks that have made the loans to the various industries, and the financial sector could come under extreme pressure.

The revaluation of the Yuan is a very problematic issue. Should the Yuan revalue upwards against the US$, then Chinese goods become more expensive in the US and world, thus dampening demand.........and cratering the Chinese economy whose margins are so thin, that they can only be maintained on huge volume, should the unit costs be spread over lower gross revenues.........disaster.

Should China blow up it's economy, then prices in the West will start to show very high inflation.........as the effects of ethical costs are priced back into the margins.

Therefore the US economy, with it's trade imbalance with China, is in no immediate danger, as China is addicted to US consumption in the same way as the US is addicted to the low price of commodity items from China etc.

You would expect therefore with the removal of liquidity, not a crash in asset prices, but a crash in commodity prices......and, or, an increase in inflation dependant on demand for commodity items, which should equate to the same outcome.

jog on
d998


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## rederob

ducati916 said:
			
		

> You would expect therefore with the removal of liquidity, not a crash in asset prices, but a crash in commodity prices......and, or, an increase in inflation dependant on demand for commodity items, which should equate to the same outcome.



True.
And just as the US has printed money willy nilly, so too could the Chinese.
With an exception: China does not have the debt problems of the US in printing money as its current account balance is around 70 billion (US$) in the black (the US is $225 billion in the red).
I don't know what China's national debt is, but US national debt is over $9 trillion and someone needs to pay the interest on that.
Wouldn't it be ironic if China just picked up "liquidity" ball dropped by the US and played the same game they did for another 50 years.
In any case, I am hoping for a decent correction soon as it will present an excellent buying opportunity: Another few percentage points down would do the trick.
The rebound will quickly recover all losses and launch higher again.
There is nothing wrong with the global economy right now, so with commodity supply constraints and demand unmet, higher prices are here to stay a lot longer.


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## Knobby22

I agree with you rederob.

Ducat, if the yuan wet up then imports would become cheaper to China, end result, no real effect.


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## rederob

BHP billiton says copper markets remain very positive
Last Update: 3:29 AM ET May 4, 2006

MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that its view of both refined copper and copper concentrate markets remains "very positive" as disruptions to production look set to continue and stockpiles remain low. 
"From such low levels it will take some time to rebuild stock to normal levels," BHP said in a statement. 
"Large net inflows of fund money have also added to price rises but it is difficult to know when this will end." 
The deficit in copper concentrate looks set to persist with China taking over from Japan as the largest market, BHP said. Treatment and refining charges are expected to fall.


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## Bobby

Hi Red,

What are your own thoughts ?

Bob.


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## rederob

Bobby said:
			
		

> Hi Red,
> 
> What are your own thoughts ?
> 
> Bob.



Bob
At post #15 on this thread.
Cheers


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## michael_selway

rederob said:
			
		

> BHP billiton says copper markets remain very positive
> Last Update: 3:29 AM ET May 4, 2006
> 
> MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that its view of both refined copper and copper concentrate markets remains "very positive" as disruptions to production look set to continue and stockpiles remain low.
> "From such low levels it will take some time to rebuild stock to normal levels," BHP said in a statement.
> "Large net inflows of fund money have also added to price rises but it is difficult to know when this will end."
> The deficit in copper concentrate looks set to persist with China taking over from Japan as the largest market, BHP said. Treatment and refining charges are expected to fall.




Yeah its funny how diff  views in regards to copper the analysts have below



> BHP Billiton says copper surplus unlikely, even by 2008
> 
> E-mail | Print |  | Disable live quotes Last Update: 7:12 AM ET May 4, 2006
> 
> MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that copper from mines is unlikely to catch up with surging demand by the start of 2008, a longer period than most analysts are predicting.
> "The major independent analysts forecast that the market will move back into surplus later in 2006 or in 2007," said John Crofts, BHP's base metals marketing director.
> At the end of 2004, analysts had been predicting a surplus at the end of 2005, which hasn't yet happened, Crofts said from London on a conference call.
> "Even a surplus in 2007 looks more doubtful as disruptions to production can still continue to restrict," he said. "This is consistent with BHP Billiton's assessment of the market."




http://c.moreover.com/click/here.pl?x522474923&f=1774



> Copper price 'set to plunge by 20pc'
> By Tom Stevenson (Filed: 04/05/2006)
> 
> The soaring price of copper could drop by a fifth in the next two to three months, a senior trader on the floor of the London Metal Exchange has warned. The dealer, who asked to remain anonymous, said recent market fluctuations were typical of the trading pattern prior to a significant change of direction.
> 
> "I expect a 20pc correction. The market will be volatile and illiquid for a while before it cracks," he said. The LME accounts for around 90pc of the world's trade in copper, dwarfing rival markets in New York and Shanghai.
> 
> The London Metal Exchange
> 
> The price of copper has risen by 60pc this year, with the cash price for immediate delivery reaching a peak of $7,391 a tonne this week, a five-fold increase on the $1,400 at which the metal traded only four years ago. At yesterday's lunchtime fix of $7,231, copper has generated huge profits for the speculative funds who have piled into commodities but caused pain for industrial users.
> 
> The scepticism on the LME's trading floor is confirmed by the prices being quoted by brokers for delivery on the longest contracts, which are much lower than the current cash price. "Copper is the only commodity in the world, where you can buy for five-year delivery at a 45pc discount," the trader said. "The market is saying the current price is unsustainable or that supply will kick in to meet demand."
> 
> An escalation in the volume of speculative trading, and the growing use of commodities as a diversification for pension funds away from equities and bonds, has contributed to the soaring price of the metals traded on the LME. It is estimated that 80pc of trades derive from financial rather than industrial traders.
> 
> Big investors such as Hermes, which manages the retirement funds of BT and the Post Office, Calpers, the largest public sector fund in the US, and Sainsbury's pension fund have all announced plans to increase their exposure to commodities.
> 
> The International Wrought Copper Council, which represents copper fabricators, wrote to the LME and the Financial Services Authority saying: "This investment or speculative activity has come to dominate the market, tending to divorce it from its industrial base.'
> 
> For recent entrants to the market, a downward lurch like that expected by traders would be a stomach-churning reminder that the rise and rise of commodity prices in recent years is not one-way traffic.
> 
> Investors are divided between those who believe metal prices are in the early stages of a multi-year upward "super-cycle", driven by demand from the developing economies of China and India, and those who think recent rises are the last gasp of an unsustainable bubble.
> 
> Merrill Lynch recently compared the price performance of commodities with listed futures, including copper, with those such as rubber and steel that cannot be traded so easily using derivatives. On the basis of this analysis it concluded the influence of speculators on the market was "unprecedented" and analyst Richard Bernstein warned that "commodity prices always fell in the 12-month period subsequent to extreme commodity speculation".
> 
> Trading has soared over the past 18 months at the famously raucous LME, where a twice-daily round of five-minute "rings" sets the prices of six metals - zinc, tin, lead, copper, aluminium and nickel. During a short but intense dealing session, traders from eleven member firms face each other off from positions on a circular red leather-upholstered banquette.




http://www.telegraph.co.uk/money/ma...d=242&sSheet=/money/2006/05/04/ixcitytop.html


----------



## Bobby

rederob said:
			
		

> Bob
> At post #15 on this thread.
> Cheers




Thanks Red,

Got it.  

Hope your being a good boy like me tonight, although I'm entertaining myself as usual alls well.

Regards Bob.


----------



## wayneL

michael_selway said:
			
		

> Yeah its funny how diff  views in regards to copper the analysts have below
> 
> 
> 
> http://c.moreover.com/click/here.pl?x522474923&f=1774
> 
> 
> 
> http://www.telegraph.co.uk/money/ma...d=242&sSheet=/money/2006/05/04/ixcitytop.html




Nice pop upwards this evening.

Vivo El Toro Grande


----------



## clowboy

Well i hope the gains taking place ATM continue over night.

Could be a very interesting day on the market tommorow.

Chances are that it will all fall apart over night though.


SIGH


Seems like i need to take some lessons in Yo Yo ing.


----------



## rederob

Copper Surges to Record on Supply Concerns; Zinc and Aluminum Prices Soar 
May 4 (Bloomberg) -- Copper prices surged the most in 18 years, reaching a record, after BHP Billiton Ltd. said labor disputes and equipment and worker shortages may persist at mines through 2008. Zinc also soared and aluminum climbed to the highest since August 1988. 

``Almost every mine is working at full capacity and is under a lot of stress,'' Diego Hernandez, president of BHP's base-metals unit, said today in an a London interview. Melbourne-based BHP is the world's largest mining company. 

Copper has risen 74 percent this year as disruptions at mines from Indonesia to Mexico limited supply and demand grew. Mining companies Antofagasta Plc and Kazakhmys Plc yesterday reported first-quarter production declines. The price rally has sent shares of producer Phelps Dodge Corp. to a record high today and boosted costs for makers of copper wire and pipes.


----------



## RichKid

Some weakness across the board in the metals today, nothing major yet but this volatility might get nastier. Even strong bulls expect corrections and some people are bound to get caught out (including me).


----------



## jft

Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
Cheers,
John


----------



## Bobby

jft said:
			
		

> Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
> http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
> Cheers,
> John



 Thanks  !

Bob.


----------



## RichKid

jft said:
			
		

> Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
> http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
> Cheers,
> John




Thanks for that John, he's quite a character.


----------



## noirua

Resources boom and a warning:


http://longterm.blogspot.com/


----------



## tech/a

Nice link But appears you may not have read it.




> What he doesn't understand ( and if he did understand he wouldn't be a politician he'd be a rich investor) is that there is almost no similarity between resources and tech in terms of valuation. In the end a bubble is all about valuation and major metal companies and oil companies trading well below the market multiple IS NOT A BUBBLE. A company with no plan to ever be profitable raising $300M is a bubble. A company earning a few million dollars, selling for billions is a bubble. Companies trading at 50 or a 100 times earnings is a bubble. A company trading at 10 times earnings is NOT. Was the treasurer forecasting the end of the tech boom in 2000???





And finally the best warning of all from the same article.

*DON'T TAKE YOUR ECONOMIC ADVICE FROM THE GOVERNMENT!!*


----------



## bvbfan

If Costello think commodities are going to collapse then why is he making 36billion in tax cuts. 

Either he is an idiot or doesn't believe what he's saying


----------



## Smurf1976

bvbfan said:
			
		

> If Costello think commodities are going to collapse then why is he making 36billion in tax cuts.
> 
> Either he is an idiot or doesn't believe what he's saying



Or we're about to see some serious money printing.


----------



## rederob

tech/a said:
			
		

> *DON'T TAKE YOUR ECONOMIC ADVICE FROM THE GOVERNMENT!!*



This is what our taxes pay for:
http://www.abareconomics.com/australiancommodities/index.html
ABARE cannot conceive of gold averaging more than $560 this year, yet the report has data to end February 2006!
Then again, ABARE reckons that copper will average less than $5000/tonne this year, which means they will be right if copper now collapses to a shade over $4000 and stays there for the rest of the year.
I think if the people that wrote about the markets invested in them, they might do a bit better.
Anybody who wants to jump off the commodity juggernaut is welcome, but I reckon it has so far to go before a major correction (I am looking at about 20%) that it's just not worth it right now.
I think it is worth revisiting this issue in a few months, when oil prices will be over $80, and we can see what damage the across the board high prices are doing to consumers.


----------



## coyotte

Just set your " stop losses " 
Ride it to the top and just over
and you can ALLWAYS re-enter


KISS
Coyotte


----------



## professor_frink

Smurf1976 said:
			
		

> Or we're about to see some serious money printing.




does anyone here know at what rate we are printing money? Most people are aware of the U.S expanding their money supply at an exponential rate, but what are we doing here?


----------



## coyotte

professor_frink said:
			
		

> does anyone here know at what rate we are printing money? Most people are aware of the U.S expanding their money supply at an exponential rate, but what are we doing here?






post on Kitco last week 9.5%
(US 8%)

Coyotte


----------



## rederob

Base metals are up between 2% and 3% in early European trade (pre-NY open).
I got the feeling today that Oz investors were reluctant to get into commodities any more than they already have.
However, metals are being pushed up by fund money that makes our allords insignificant, so prices are still trending strongly north.
By the way, today's copper price is higher than nickel's price 3 years ago!
Fundamentals for the base metals remain tight and are showing sign of doing anything other than staying that way, or getting tighter.
Who is tipping the collapse, and when?


----------



## bvbfan

God help us if they choose people like this for the future fund, mind you with the cuts in education last decade seems any one with a degree can work for the government.


----------



## Kipp

Is anyone here old enough to remember the last commodities crash (Bullmarket, for one :mexico:?  What were the symptoms leading up to it... surely there must be some warning signs?

Of the commodities, isn't gold potentially the most likely to plummet?  I mean, isn't most of its price rise attributable to speculation, rather than demand and functionality (as opposed to Zinc, Iron, Nickel etc which are all important components for a variety of things). --->  Please correct me if I'm wrong or you have a different opinion.


----------



## kgee

coyotte said:
			
		

> post on Kitco last week 9.5%
> (US 8%)
> 
> Coyotte



Does that mean that interest rates here in Australia are under more presure to rise than at the US ... or is there more to the picture such as debt and trade deficit??
Economics aren't my strong point!!


----------



## Smurf1976

kgee said:
			
		

> Does that mean that interest rates here in Australia are under more presure to rise than at the US ... or is there more to the picture such as debt and trade deficit??
> Economics aren't my strong point!!



Both of these two countries have huge trade (including interest on debt owed to foreigners) deficits relative to GDP and both are faced with sharply increasing oil import volumes which aren't going to help in the slightest.


----------



## rederob

Smurf1976 said:
			
		

> Both of these two countries have huge trade (including interest on debt owed to foreigners) deficits relative to GDP and both are faced with sharply increasing oil import volumes which aren't going to help in the slightest.



smurf
It's OK.
twojacks has the answer!
Maybe not - I can't tell if I am joking any more with this government.
Those that think the Budget was so good never thought about our future oil import costs, I'll bet.

Kipp
I'll be brief - you are wrong.
Take a few hours to read through several of the relevant commodity threads - be sure to ignore anything ducati says about gold coz he's done his dash on that one.
Trust me, this time it's different (until the inevitable crash, of course).

kgee
Read the Budget papers and you can become an instant economist.  It's like being a lawyer - you are always right, except when you are wrong, and you weren't actually wrong; just that someone interpreted events differently and there opinion held sway.


----------



## rederob

Anyone presently awake needs to go to kitcometals and see what's happening.

http://www.kitcometals.com/

Base metals going ballistic tonight.
Silver and gold on a roll - maybe gold takes out $720 tonight and ducati rides into the wilderness with his "speculation" prognostications that need reworking.


----------



## Sean K

You only have to look at the 80s gold graph to see where this is eventually headed. 

Everyone, please, put on a parachute!


----------



## rederob

Message at kitcometals:
Due to technical difficulties, the prices displayed are inaccurate. We are working to solve the problem and we anticipate that it will be corrected soon. We apologize for the inconvenience and appreciate your patience
Apart from nickel, their prices seem close to the mark (nickel presently indicated cheaper than copper - lol).
Silver at $14.94 as I press to post....


----------



## Bobby

rederob said:
			
		

> Anyone presently awake needs to go to kitcometals and see what's happening.
> 
> http://www.kitcometals.com/
> 
> Base metals going ballistic tonight.
> Silver and gold on a roll - maybe gold takes out $720 tonight and ducati rides into the wilderness with his "speculation" prognostications that need reworking.




Hi Red,

But duc,s  logic on the market can't be wrong   ??????????????????

Bob.


----------



## clowboy

Gold might take out $720 tonite?  Ha Ha done that already?

$750?

$800?

Will be an interesting night + day on the market tommorow that is for sure.


----------



## RichKid

rederob said:
			
		

> Message at kitcometals:
> Due to technical difficulties, the prices displayed are inaccurate. We are working to solve the problem and we anticipate that it will be corrected soon. We apologize for the inconvenience and appreciate your patience
> Apart from nickel, their prices seem close to the mark (nickel presently indicated cheaper than copper - lol).
> Silver at $14.94 as I press to post....




Another source for commodity prices, different units though, Kitco did that last week as well, hope they fix it pronto: http://www.bloomberg.com/markets/commodities/cfutures.html
(All metals prices are still healthy so don't panic guys! (not yet anyway))


----------



## RichKid

clowboy said:
			
		

> Gold might take out $720 tonite?  Ha Ha done that already?
> 
> $750?
> 
> $800?
> 
> Will be an interesting night + day on the market tommorow that is for sure.




I've been checking open interest and it looks healthy for gold, high closes for the recent bars. I think there's some sort of method to check when OI goes to extremes. Maybe Wayne'll tell us more. I'll do some checking of COT reports fwiw and post in the gold thread if I can.


----------



## coyotte

Kipp said:
			
		

> Is anyone here old enough to remember the last commodities crash (Bullmarket, for one :mexico:?  What were the symptoms leading up to it... surely there must be some warning signs?
> 
> Of the commodities, isn't gold potentially the most likely to plummet?  I mean, isn't most of its price rise attributable to speculation, rather than demand and functionality (as opposed to Zinc, Iron, Nickel etc which are all important components for a variety of things). --->  Please correct me if I'm wrong or you have a different opinion.






From what I remember it was it's generally a situation very similar to now (should have kept records )

Building Boom comes off the boil

Rising interest rates -- when inflation is rising due to higher costs and NOT due to  higher consumer demand

Shortage of materials --puts projects on hold --leads to rising unemployment ---onto falling property values ---hence a surplus of materials

dueing the boom & bust of the 70s you could not even buy nails @ one stage


BUT then we didn't have CHINA


Cheers
Coyotte


----------



## tech/a

> BUT then we didn't have CHINA




India,Russia,or Indonesia.


----------



## wayneL

tech/a said:
			
		

> India,Russia,or Indonesia.




...or a collapsing US dollar.

http://www.futuresource.com/charts/charts.jsp?s=DX1!&o=&a=D&z=800x550&d=LOW&b=bar&st=


----------



## rederob

wayneL said:
			
		

> ...or a collapsing US dollar.



And rising global industrial production!


----------



## wayneL

rederob said:
			
		

> And rising global industrial production!




....financed by the biggest debt bubble in history.


----------



## The Once-ler

Today will be an interesting day. I couldn't get to sleep last night looking at all the goings on. Thankfully I'm about 80% invested in resources and energy, but you wouldn't know what was going to happen today. Cheers.


----------



## Fab

What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me


----------



## tech/a

wayneL said:
			
		

> ...or a collapsing US dollar.
> 
> http://www.futuresource.com/charts/charts.jsp?s=DX1!&o=&a=D&z=800x550&d=LOW&b=bar&st=




Fantastic---The richer we become and there is ONLY 23 Million of us.




> ....financed by the biggest debt bubble in history.




If your talking US or any other country debt then Duc's response re % GDP calls it pretty plainly.
Talking in percentages brings it into real terms.

If it costs the US 3.2% in GDP to service debt thats like a $1000 a week PAYE
taxpayer needing $32/week to service his debt.

If your talking of houshold debt then the US is still powering and needing interest rate hikes to pull it up and they are STILL lower than ours!

Any pullbacks or slowings are a good thing.


----------



## The Once-ler

Fab said:
			
		

> What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me





I'm talking about the opposing forces that will be at work today on the market. Commodities rising to ever increasing levels, verses the big drop on US due to increasing inflation [due to increasing commodities]. Cheers.


----------



## coyotte

one rarely hears mentioned the reasoning of the 70s of why POG went up

it was commonly put down to @ that time to Pres Nixon removing the the
$us from the gold standard

the Yanks simply had built up to much debt to pay for Vietnam
seems their pulling the same stunt now !

exccept for housing we haven't seen real inflation in Oz for around 15yrs I suppose 
but when you start seeing retailers building up inventories 6-12 months ahead
of the time they are due to be sold, you will Know it's coming big time

we have had inflation during a recesion --- shortage of supplies -- hence higher prices -- but projects put on hold due to shortages --- so unemployment



Coyotte


----------



## Smurf1976

Everywhere I look I'm seeing more and more evidence of inflation of business input costs. With retail prices of many items having not risen greatly yet I think there could well be a lot of inflation gradually working its way through the system that hasn't hit the checkouts (yet).

Just a few things I noticed over the past week.

If filled up a company vehicle with petrol. It was virtually empty but $106 just to fill it. Nothing unusual, a Ford Falcon utility.

I don't smoke anymore but whilst waiting at the counter in the service station I noted that cigarettes are up about 170% in the past 11 years.

Household bottled gas (delivered) price is up 75% in the past 8 years.

Various pipe fittings we buy at work are up around 300% in the past 5 years. We keep getting faxes every month or two about yet another (usually about 7% at a time) increase in the cost of the pipe itself. 

A letter landed on my desk saying that electrical cable prices (wholesale) just went up 13%.

Ordered some custom made plastic products from a local supplier and found that prices were up about 22% compared to the last order (January this year).

An independent inquiry into fares has recommended that bus fares in Hobart need to be incresed by 50% because the CPI increases in the past just haven't been adequate to cover costs.

House prices have more than doubled in the past few years in most cities.

So it looks to me like trying to contain inflation is becomming a bit like fixing a worn out hose. Fix one leak and a bubble appears somewhere else. That bursts, you fix it and then another one appears. The only way to win that game is to get serious and replace the hose altogether. In the context of inflation, the only way to contain it ultimately is to stop inflating.


----------



## professor_frink

coyotte said:
			
		

> post on Kitco last week 9.5%
> (US 8%)
> 
> Coyotte




thank you kind sir.
That figure was alot higher than I would have guessed!


----------



## noirua

"Last person out shuts the door", more likely, "the door is shut very early on, locking most in", as "log of cash" moves out suddenly.

http://www.iht.com/articles/2006/04/30/business/web.0430oil.php


----------



## Kipp

coyotte said:
			
		

> From what I remember it was it's generally a situation very similar to now (should have kept records )
> 
> Building Boom comes off the boil
> 
> Rising interest rates -- when inflation is rising due to higher costs and NOT due to  higher consumer demand
> 
> Shortage of materials --puts projects on hold --leads to rising unemployment ---onto falling property values ---hence a surplus of materials
> 
> dueing the boom & bust of the 70s you could not even buy nails @ one stage
> 
> 
> BUT then we didn't have CHINA
> 
> 
> Cheers
> Coyotte



Thanks Wylie.  It would be good to know bullmarket's thoughts as well- he's been around a while and has a bit of a cautious streak (I think).


----------



## michael_selway

http://www.telegraph.co.uk/money/ma...d=242&sSheet=/money/2006/05/13/ixcitytop.html

Banks face vast losses in copper mayhem
By Ambrose Evans-Pritchard (Filed: 13/05/2006)

The spike in copper prices over recent weeks has left a group of banks and operators on the London Metal Exchange (LME) nursing vast losses, raising concerns about the stability of the commodities market.

Simon Heale unexpectedly said that he would be stepping down by the end of the year 
The banks have been caught out by a sudden widening in the gap between the price of three-month futures and that of long-term futures, for December 2010 or April 2011. 

"The dramatic differential we have seen over the past six weeks has cost them a huge amount of money," said a market source. "The bigger players can absorb the losses but smaller operators have nowhere to hide."

Copper surged this week to an all-time high of $8,875 a tonne, rising almost 10pc on Thursday. Yet futures prices for April 2011 are just $3,778 a tonne. 

Barclays Capital denied reports that it faced losses of £500m on copper trades, saying that it would have issued a statement if such claims were true.

Banks help to finance the LME's $3,000bn trades each year, often taking on long-term hedges from metal producers, which they cover by selling short-term futures. If the two suddenly diverge, it plays havoc with their books.

Adding to the intrigue, the LME's chief executive, Simon Heale, unexpectedly said on Thursday that he would be stepping down by the end of the year. His spokesman denied that there was any link to the metals mayhem this week, insisting that 

Mr Heale wished to spend more time with his family.

Copper has doubled in price this year even though industrial demand is flat.

"This is fairyland," said Richard Elman, head of the Noble Group. "We have 

never seen such a disconnect between reality and pricing 

of raw materials. The long-term story is sound but the short-term froth is patently frightening." 

William Adams, an analyst at BaseMetals.com, said demand for copper tubes was collapsing as producers switched to PVC plastics. The market in Germany has halved from 90,000 to 45,000 tonnes. "There's a very rapid switch from copper. When it turns, copper could easily drop $1,000 a tonne in one day," he said. 

David Threlkeld, a veteran copper trader, said the market had been "out of control" for months, allowing speculators to run roughshod over industrial producers and users. "The LME has been seduced by hedge funds, [which have] pushed prices to levels unsupported by fundamentals. There's a vacuum below and the crash could set off a chain of margin calls running through the whole commodities sector. We've got a crisis on our hands and it is a lot bigger than copper," he said.


----------



## noirua

Falls on the LSE and NYSE may move the ASX into the red, mining and oil stocks were the hardest hit. Reports from China, that they require less steel and other metals than forecast, caused the falls. Reports in the London Evening Standard outlining the position of speculators, particularly in copper, added to the market wobble.


----------



## nizar

HMMmmmmm.... dont these comments sound familiar!



> Andrew Bell, head of research and strategy at Rensburg Sheppards, said: "It's beginning to feel like it's five minutes to midnight, and for commodity investors there's a danger that everything turns to pumpkins and mice."




From the Telegraph


----------



## brerwallabi

Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.


----------



## rederob

brerwallabi said:
			
		

> Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.



Yep
Consumers have to buy physical, so are propping up the prices with the funds at the moment.
These same consumers will need to pass costs on finished products to retailers, who pass it on to us.
Consumer price inflation cannot now be contained as the high cost of commodities has been too enduring.
Zinc, copper and nickel are in such tight supply that irrespective of any short term retrace, there will be a rush for market offtake  - so dips are highly likely to be backfilled quickly by frantic consumers.
There is no present end in sight to this market tightness: Indeed, right now the screws are tightening.
About the only thing different to a year ago is that the commodity bull is a year older and metals prices are so much higher.
The nay sayers simply can't conceive of a bull run built on such high levels of speculation: Odd, that seems to have driven gold north for 5 years now!
The nay sayers point to rising metal production: And the evidence they offer is?
Indeed, evidence is mounting that in many cases mine output in the previous year was higher than it will be this year.
Why?
Last year mines took the opportunity to optimise output by mining best grades.  So even by pulling more ore from the ground this year, metal production will be less because the head grades are poorer.
How many newspapers said that?
This is a game where staying ahead is about being well informed.
If you want to be well informed on commodities, stop reading the newspapers.
Start going to the major producers' websites and review their "market presentations".
The BHP's of the world are committing billions of dollars on capacity expansion, infrastructure and exploration: Read why.
Then think about it.
Do you reckon BHP makes such huge commitments without doing an incredible amount of research into future demand?  
They can't afford to get it wrong because their performance bonus payments go down the gurgler.
If they do get it wrong it will be from an event "from left field", something quite unlikely, possibly "unthinkable" (like the US economy going into melt down).
Tomorrow and the next day (possibly) represent buy opportunities and my bids are in.


----------



## noirua

After watching several views on Bloomberg TV, it is a case of "you pays your money and takes your choice". One view suggests that China may consider raising its gold reserves and another, that several countries are considering taking advantage of present high gold prices.
Other commodities are seeing swings of views, one that demand and a wall of cash will see commodities go on up for several more years and the other that speculators could become nervous and send everything crashing down.


----------



## rederob

noirua
Really does not matter when you do it as the market moves all over the place all the time.
Today is/was a buying day.
Tomorrow might be too.
If you find someone that can give you a definite answer on "tomorrow", please buy her/him and I will go you halves, OK!
Day traders that don't close out each day may have got burnt this last week.
None of my 4 buy orders were filled today - so I am happy if there is more carnage overnight.
If there is not a considerable retrace north-east in the next 6 months, my view of the markets will need a substantial revision.  
Today's standout buy still is (while it lasts) OXR.
As an unhedged producer its upside potential remains barely scathed.
I find gold a great barometer of sentiment and today it has moved within a narrow range after rising immediately over $718 at open.
It's still a bit early, but the narrow range in gold's price today tells me that the DOW is likely to consolidate tonight.  What is certain is that gold has "absorbed" Friday's poor bourse reactions and has every likelihood of closing this week well above $720.
Base metal prices need to see further downside to them in order to shake out the overly speculative elements in them.  Unfortunately, as consumers are now fighting on the buy side at LME rings, dips in price are going to be met by some robust bidding action.  So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.


----------



## rederob

rederob said:
			
		

> So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.



Well, so far gold has fallen $15 from today's peak and silver is down 80cents - and both remain in current free fall.
Looking better for some bargains tomorrow already.
Keep it down boys!


----------



## wayneL

Even the bulls would have to concede we're due a correction.

....and if you're bullsih, a nice correction (of one helluva lot more than 20-50 dollars) would be healthy and would set the market up for further upside.

As luck would have it, I was itting at the 'puter when it broke lower, and trading this as a healthy correction... maybe 50 - 100 bananas with a bit of luck. But not discounting the possibility of buyers moving back in soon.

Gotta trade it though  

Just for a bit of fun... and reference, here is the 1979-80 chart of GCM80 (COMEX June 1980 Gold)


----------



## wayneL

Here's the 15 min chart as of now: 

Also Oil pleasingly tanking, which gave me a nice short setup on thursday.

Corrections all round.

However, I am overall bullish on these.


----------



## rederob

Wayne
I think the bottom (for the moment) has just been hit.
POG needs a $650 to set it up for a good run again, but even if we consolidate in the present $680 - $720 range for the week or two, a bit of sting will be taken from the market.
I am hoping like heck that when the US opens we can knock off another $30 so let's see.


----------



## wayneL

Yes,

That was a big move, about 2 x ATR, and wouldn't expect much more today. If it does its a bonus. Prolly should have taken some off at 690ish.


----------



## rederob

wayneL said:
			
		

> Yes,
> 
> That was a big move, about 2 x ATR, and wouldn't expect much more today. If it does its a bonus. Prolly should have taken some off at 690ish.



gawd
POG doing a jelly-rubber bounce
bring on the bears
the New York bears
c'mon
(as me mate Layton has me doin')


----------



## tech/a

Nice charts.

Have you got one for Oil Wayne.
Whats Gold and Oil worth a pip?
Obviously dont trade futures.


----------



## wayneL

tech/a said:
			
		

> Nice charts.
> 
> Have you got one for Oil Wayne.
> Whats Gold and Oil worth a pip?
> Obviously dont trade futures.




Tech

Gold 
ZG & GC = $10 per tick ... 1 tick = 10c
i.e. $100  per $1 move per contract

There is a mini contract but  I don't trade it.

Crude Oil

CL = $10 per tick ... 1 tick = 1c
i.e. $1000  per $1 move per contract

The mini, which I do trade is half size i.e $500 per $1 move
QM  = $12.50 per  tick ... 1 tick = 2.5c

The colored zones on the 15 min chart are yesterdays range (hi, lo, closing price etc) which I use for swing trading.


----------



## markrmau

Just having a look at http://www.nymex.com/cop_fut_csf.aspx (expanded session overview).

It seems the big fall is in the active front months - say July06. In actual fact they are simply coming into line with (less actively traded) long dated contracts such as Dec06.

So you would have to be nuts to value your OXR and BHP on the short term July contract when Dec was always showing a fall.

So the impact on OXR and BHP is possibly being overstated (or more accurately the earlier run up was overstated).

Is this a reasonable argument?


----------



## rederob

markrmau said:
			
		

> Just having a look at http://www.nymex.com/cop_fut_csf.aspx (expanded session overview).
> 
> It seems the big fall is in the active front months - say July06. In actual fact they are simply coming into line with (less actively traded) long dated contracts such as Dec06.
> 
> So you would have to be nuts to value your OXR and BHP on the short term July contract when Dec was always showing a fall.
> 
> So the impact on OXR and BHP is possibly being overstated (or more accurately the earlier run up was overstated).
> 
> Is this a reasonable argument?



No
The contango typically rules commodities.
Nearby supply tightness will give you a backwardation and this can increase quickly and sharply when visible metal supply constraints are known, eg events that give rise to force majeur to be declared at a mine or production facility.
But lets's prove the point.
There are two ways.
One is to look at the December contract prices now, and compare them to spot prices at December.
Another is to go back to last October/November and review contracts 6 months out, and compare those to spot delivery.
You will not find any forward contracts that ever contemplated copper at $8000/tonne, yet the likes of BHP and OXR are likely to have some small amount of sales into the market at or above that price: These sales are real and will appear on the company's balance statements.
So the question of what OXR or BHP are really worth should be addressed by actual sales rather than futures contracts.
The futures contracts can be rolled over, and rolled over, and rolled over.  But unhedged producers will sell at the prevailing spot price and this is the chart which should guide your forward view.
My present view is a reclamation of the recent copper highs in the medium term, and a probably high nearer $10,000 based on the fact that just is not enough metal for consumers to run their businesses on.


----------



## markrmau

Thanks rederob. If you look at nymex copper, it doesn't say PANIC to me. Close was down, but close to the highs. Gold didn't look so good though.


----------



## Sean K

Can you do a gold one for us Mark?


----------



## wayneL

Mark can put the daily one up... but here's an  hourly @ 12:10 AM NY time


----------



## Sean K

Looks like people are happy to buy at $680.

Perhaps it's found a base. Too early to tell I suppose. 

Any technical indicators showing its next level of support backward?


----------



## ducati916

> Looks like people are happy to buy at $680.
> 
> Perhaps it's found a base. Too early to tell I suppose.




I doubt it.
Covering shorts if anything.

jog on
d998


----------



## markrmau

http://www.futuresource.com/charts/charts.jsp?s=GCM06&o=&a=D&z=610x300&d=LOW&b=bar&st=

(June 06 contract).

Kennas, you might be correct about a base at 680, but I think the little kick at the end of the day is from daytraders covering shorts so as not to have a position overnight.


----------



## wayneL

wayneL said:
			
		

> Also Oil pleasingly tanking, which gave me a nice short setup on thursday.
> 
> Corrections all round.
> 
> However, I am overall bullish on these.




Bailed from my short oil pozzie, was always just a swing trade. At a few ticks under $3.00, not bad for short countertrend swinger.

Still holding gold short...this position has caused me mucho anxiety at times.
Digitalis anyone


----------



## TheAnalyst

The cracks are appearing..........


http://www.theage.com.au/news/busin...ore-price-soars/2006/05/21/1148150124509.html

China baulks as iron ore price soars
By Barry Fitzgerald
May 22, 2006

CHINA is crying poor that its steel industry cannot afford the bumper 19 per cent price increase secured by Australian and Brazilian iron ore producers for shipments of the key steel-making raw material in 2006-07.

The Government-owned China Daily said the US dollar price rise ”” it follows on from last year's 71.5 per cent increase ”” could bust the current boom.

China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto.

"When over-capacity is looming in China's steel industry, rising ore cost that further bites in to domestic steel makers' profits could turn the current boom in to a bust and no one will benefit," according to an editorial in the China Daily.

China's Iron & Steel Association said that its steel makers and the iron ore producers that supply them, including BHP and Rio, "still differ" on price and that their price talks would continue.

An emergency meeting of 16 Chinese steel makers in Beijing on Friday was held in an effort to ensure a united front in China's opposition to the price increase ”” one now accepted by the rest of the global steel-making industry as the new benchmark. This was underlined by the announcement from Rio Tinto's Hamersley Iron subsidiary on the weekend that it had reached agreement with South Korea's POSCO for a 19 per cent price increase for shipments of its Pilbara lump ore.

The chief executive of Rio's iron ore operations, Sam Walsh, said the agreement with POSCO ”” the world's fourth biggest steel maker ”” confirmed the "tightness of the iron ore market and the very strong demand for Australian iron ore".

China's hopes of securing a price increase of no more than 10 per cent were dashed last week when the world's biggest producer, CVRD, effectively set the new benchmark in a 19 per cent price-increase settlement with Germany's ThyssenKrupp.

The Chinese have argued ever since that the CVRD settlement was not a global benchmark.

The Federal Government's chief commodity forecaster, the Australian Bureau of Agricultural and Resource Economics, predicts that world seaborne trade in ore ore could rise by 7.6 per cent to 706 million tonnes this year, with China's booming economy to account for about 44 per cent of the total ”” up from 28 per cent in 2003.

Expansions by BHP and Rio are expected to underpin a 17 per cent surge in Australian exports this year to 282 million tonnes worth about $14 billion.

Meanwhile, the Australian producers' case for China to pay up for iron ore has been strengthened by moves in India to curb its iron ore exports.

India's Steel Ministry has called on the Ministry of Commerce to curb exports to protect the interests of the domestic steel industry.

Exports from the country are not big but their removal from the global market, to feed the booming domestic industry, would add to the global tightness in iron ore supplies.


----------



## rederob

Reinvigorating this thread: The collapse is correcting.
Maybe it was only ever a correction to begin with.
Base metals will collapse when fundamentals collapse.
BHP hasn't collapsed because the Chinese have not yet signed the iron ore price hike that is in front of them: Does anyone think the Chinese can afford *not * to buy iron ore from BHP?
Had the fundamentals for metals been weaker, the "correction" would be written in blood-red ink cut deep into chart paper.
We know that the correction is not a collapse because in the midst of it RIO and others got their price hikes for iron, oil has hovered around $70 and nickel prices have been holding near or above $20,000/tonne throughout.
The fact that global equity markets got ahead of themselves and speculative money poured into the so called "new dot com" of commodities was as evident a recipe for disaster as one could ever hope for.
We now are seeing some traders trying to milk the swings in an insanely volatile market; and once they lose interest (or their shirts – or both) volatility will decline and a semblance of sanity will return.
Anyone who thought six months of excessive exuberance could be dissipated in a few days or the odd week should now know better: The market is telling you and you should be heeding the lesson.
I admit to buying a little too early, but having mostly added to existing long term positions, my strategy was mostly of accumulation on the dips.
My current thinking is along the lines of reviewing more deeply where we are placed some time around September – into our reporting season.  There should be enough to glean by then to determine if commodity positions should be lessened into 2007 or ridden fearlessly.  My suspicion is that oil prices around that time will play a key role in markets generally.
In the meantime, enjoy the rollercoaster ride for some weeks to come.


----------



## noirua

My own view is: that countries generally will slow their growth in favour of maintaining low inflation, and this is certainly the case in the USA, Canada and the UK.   Europe ( excluding the UK ) has very low interest rates in the Eurozone and it is thought they will follow others and slowly increase interest rates.  

Worldwide growth will drop and so will the need for all commodites and minerals, including gold and oil. My guesses are that gold will drop below US$500 per oz, oil below US$50 per barrel, and all within the next 12 months. Coal has already dropped in price and iron ore will struggle, as non-China users reduce requirements. It will take a while before producers, like BHP Billiton, reduce supplies.

Fortunately its only me forecasting, so, you can take a deep breath, afterall, " What do I know? ".


----------



## Sean K

*Minerals sector to soar higher*

"THE minerals boom is set to get even bigger. Australia's official commodity forecaster yesterday lifted its forecast of mineral and energy export earnings in the coming year by almost $10 billion, and predicted record levels of capital investment and exploration.

In a bullish quarterly update to its forecasts, the Australian Bureau of Agricultural and Resource Economics (ABARE) predicted that minerals and energy sector export earnings will jump another 20 per cent in 2006-07, on top of rises of 30 and 33 per cent in the past two years.

ABARE says minerals and energy exports in 2006-07 will now be more than double the levels of three years earlier, rising from $53 billion in 2003-04 to $110 billion. That is $18 billion more than the $92 billion they have earned in 2005-06."

_out of The Age this am. _


----------



## wayneL

Just as new mines are opening up all over the place (read increased supply)

*China Slowdown Affects Commodities* (read reduced demand lol)

http://uk.biz.yahoo.com/25072006/244/china-slowdown-affects-commodities.html



> China is a developing economy that definitely punches above its weight class. It's a huge trading economy and voracious consumer of industrial commodities. And nowhere is the struggle by the Chinese government to wrestle down its high-flying economy being watched more closely than in the worldwide basic metals markets.
> 
> The July 21 move by the People's Bank of China to raise its reserve requirements by 50 basis points, to 8.5% on mainland lenders, marks the second such rate hike in two months. And it's causing turmoil in global copper, zinc, and nickel prices.
> 
> The worry: that Beijing will have to throw even more ice water on its overheating China economy, which clocked 11.3% growth in the second quarter of 2006, well above consensus forecasts [see BusinessWeek.com, 7/21/06, "Is China Growing Too Fast for Comfort?"].
> 
> FEELING DIZZY.
> 
> Asia stocks fell broadly on July 24 to factor in the risk of an economic slowdown on the mainland. Especially hard hit were mining companies such as Australia's BHP Billiton, and Korean and Japanese steelmakers with heavy sales exposure to China. Copper futures contracts for delivery in October fell 3.2% in trading at the Shanghai Futures Exchange.
> 
> Over the long haul, China's growth prospects still look dazzling, of course. It's the short-term that could cause commodity traders a bit of vertigo. "We are maintaining our positive outlook for Chinese commodity demand over the one-year horizon," Jonathan Anderson, Asia chief economist for UBS Securities in Hong Kong said in a note to clients on July 24. "However, we should warn that for the next couple of months, we are probably in for a rougher time than expected."........


----------



## dubiousinfo

By Jon Nones
25 Jul 2006 at 01:29 PM 

Chile's Codelco, the world's largest copper producer, said that a July 23 rock slide at the Chuquicamata mine will likely reduce copper output by 1,000 metric tonnes a day. Also in Chile, the union at the Escondida copper mine, which produces 8.5% of the world's copper, said it will vote for a strike in a meeting on July 28 if BHP didn't agree to its wage demands



By Shapi Shacinda

LUSAKA (Reuters) - Zambia's Chinese-run Chambishi copper mine has stopped production after riots on Tuesday in which six workers were shot following a dispute over delayed wages which unions say are the lowest in the industry.

It remained unclear who fired the shots amid conflicting reports from the restive Copperbelt region in Zambia which has been the scene of labour violence in the past. A senior official said the mine planned to resume work on Thursday.


----------



## dubiousinfo

STEELMAKERS in China, the world's largest consumer of iron ore, look set to fail in their second attempt to cut annual prices of the raw material as global demand outpaces production.

Credit Suisse Group and Beijing Antaike Information Co are forecasting prices to rise in 2007 for a third straight record. 

Soaring demand in China and limited mine expansion has driven spot prices as much as a fifth higher than the benchmark – $US47 a tonne – as Baosteel Group Corp, China's biggest steelmaker, prepares to lead Asian mills in initial contract talks in October with suppliers including BHP Billiton, Rio Tinto and Brazil's Companhia Vale do Rio Doce.

"There is a struggle to bring on capacity, and miners have bottlenecks at the ports, rail and mines," said Rob Clifford, an analyst at ABN Amro. "Next year is going to be at least as tight as this year."



http://www.couriermail.news.com.au/story/0,20797,19919636-3122,00.html


----------



## dubiousinfo

High commodity prices have solid basis: IMF


John Garnaut Economics Correspondent
September 7, 2006

THE world's leading body for economic research has punctured claims that speculators are inflating a commodity price "bubble".

In findings that have multibillion dollar implications for Australia's miners and bear heavily on the inflation outlook, the International Monetary Fund says "there is little evidence that speculative investments have been a significant driver of non-fuel commodity price movements".

Its econometric analysis shows higher fundamental prices have created demand from investors, rather than the other way around.

"For example, in the crude oil market there has been no persistent pickup in net long non-commercial positions in recent years when oil prices have had a strong upward trend," says the IMF's World Economic Outlook.

"More strikingly, in the copper market, net positions have actually fallen steadily over the past year, during which prices have reached record highs, suggesting that contrary to common perceptions, speculation may not have played a major role in the recent price run-up."

The findings suggest commodity prices will not "burst" - an event that could throw the Australian economy into recession.

Nevertheless, the IMF modelling show non-fuel commodity prices should steadily decline through to 2010 - while remaining well above 1990s levels.

It predicts aluminium and copper consumption will grow rapidly, by 5.6 and 4.8 per cent a year respectively, but rising that demand will be met by new supply at falling prices.

It expects aluminium and copper prices to slip by 37 and 57 per cent by the end of the decade - broadly in line with pricing on the futures market.

The oil price, however, may remain lodged around present levels due to an inefficient, OPEC-dominated market and finite reserves.

"In contrast to hydrocarbons, overall reserves of base metals are practically unlimited," it says.

Commodity price predictions hinge on understandings of China's transformation from a peasant-based economy to an industrial one.

It says China's consumption patterns have roughly tracked Japan and Korea at the equivalent development stage, with real incomes at roughly $US6400 (adjusted for purchasing power parity).

But its heavy concentration of industry makes it a "somewhat special case" with higher consumption of some metals.

In 2002-05, the IMF says China accounted for almost all of the increase in world consumption of nickel and tin and exceeded global consumption growth for lead and zinc.

China accounted for about half of global consumption growth for aluminium, copper and steel.

Chinese people are also consuming more meat at lower incomes than other countries.

But farmers may not reap the benefits.


----------



## Sean K

Out of The Australian

*Mining still on the up*
Robin Bromby, Resources 
October 02, 2006

MINING shares, far from peaking, are to soar further according to the latest reports from leading analysts. The resources team at Deutsche Bank predicts that Rio Tinto's price has still $34 to go before it reaches target. 

Deutsche's Peter Rose and colleagues, with Rio last trading at $70.10, made this big call of a $104 target in the belief that the worst of the commodities price correction was over and recovery was just around the corner. 

This was a view shared by Merrill Lynch's London resources guru Evy Hambro who said on Friday that mining companies were "staggeringly cheap", a sentiment echoed over the weekend by Sydney-based Fat Prophets which believed the large diversified majors such as Rio and BHP Billiton were "incredibly cheap". 

Fat Prophets analyst Gavin Wendt said no sector other than resources could offer share prices only 10 times earnings, solid yields and rivers of cash flowing in. "If you sell BHP or Rio and take your money, where do your put it? In banks -- no; in retail -- no; in Telstra -- no." 

Citigroup said its key resources pick was BHP while ABN Amro, reporting on that company, stated: "Enough selling, time to buy." This confluence of bullishness comes just weeks after several analysts, most notably Morgan Stanley's Stephen Roach, spooked the markets with calls that the metals boom was about to fall over, triggered by economic slowdown and a housing sector crisis in the US. 

Yet the stocks at the London Metal Exchange indicate demand for metals is not far from its peak. LME nickel stocks were 5500 tonnes last week (less than two days' global use) against a 52-week high of a still modest 37,218 tonnes; zinc stocks were at 142,200 tonnes against a 52-week high of 533,325 tonnes and lead at 62,500 tonnes against a high of 117,900 tonnes. 

And the two-year futures on the LME tell the story. Nickel for delivery in three months was fetching $US28,775/tonne on Friday, but the 27-month contract price ended at a very bullish $US20,700; copper was selling on Friday at $US7535/tonne, but buyers expect to be paying a still high $US6040 in 27 months time; while zinc is also expected to make only a modest retreat from $US3340/tonne to $2468. 

All those price trends are down -- but the lower ones still represent bountiful profits for debt-free majors. 

ABN Amro's team said the market's confusion was understandable, with some investors saying base metals were about to fall out of bed, others not understanding what the doom and gloom was all about. 

"It could be fair to say that we are contributing to the confusion with our view of equity prices heading north and base metal prices heading south." 

Even if metal prices fell, the big miners were riding on a tide of handsome commodity incomes. Their share prices would rise once "ongoing growth and solid returns drown out the near-term noise". Deutsche bases its $104 share price target for Rio on global growth moderating but not imploding, upgraded iron ore price forecasts and Rio earning big money on aluminium, copper and molybdenum. 

Less favoured was BHP, although the target is $32.60 against Friday's $25.63 close. Deutsche sees commodities staying strong after a mid-cycle dip resulting in BHP shares performing well over the next year. 

Zinifex also gets the nod: its target has been increased to $14.59 a share based on higher zinc prices. It closed at $11.75.


----------



## swingstar

I thought "everyone" was bearish?


----------



## nizar

swingstar said:
			
		

> I thought "everyone" was bearish?




Isnt that the best time to buy?


----------



## michael_selway

nizar said:
			
		

> Isnt that the best time to buy?




only at the end of the bearish period

thx

MS


----------



## swingstar

nizar said:
			
		

> Isnt that the best time to buy?




My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.


----------



## Sean K

swingstar said:
			
		

> My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.




Hmmmm. The selected ones for the article are. Perhaps the ed is bullish and going long his own stocks?


----------



## barney

Cocoa's down!  ......Coffee's down!.........Sugar's down..........might have a cup of tea this morning!.........PS Oil's down too, but it doesn't taste too good


----------



## wayneL

barney said:
			
		

> .....Coffee's down!.........



Looks like they took me and Frinky seriously  

https://www.aussiestockforums.com/forums/showthread.php?t=4363


----------



## barney

wayneL said:
			
		

> Looks like they took me and Frinky seriously
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=4363





I "frink" you are right


----------



## professor_frink

wayneL said:
			
		

> Looks like they took me and Frinky seriously
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=4363





Not a moment too soon either. My mercenaries were ready to go  

 :shoot:


----------



## barney

barney said:
			
		

> Cocoa's down!  ......Coffee's down!.........Sugar's down..........might have a cup of tea this morning!.........PS Oil's down too, but it doesn't taste too good




Not often I get to quote myself...........Ditto to everything I said yesterday..................

You and the Professor must carry a lot of clout to get coffee dropping that easily Wayne!! :cup:


----------



## coyotte

swingstar said:
			
		

> My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.





Interesting story in Your Trading Edge  Sept/Oct 06  page 20 , by Gary Norden .

He gives a run down on the difference between --- Brokers, Analysts , Traders and TRADERS 

found it was what I suspected all along

Cheers


----------



## RichKid

barney said:
			
		

> Not often I get to quote myself...........Ditto to everything I said yesterday..................
> 
> You and the Professor must carry a lot of clout to get coffee dropping that easily Wayne!! :cup:




LOL, geez, you guys are funny!! Glad to see the humour flowing through!!


----------



## barney

professor_frink said:
			
		

> Not a moment too soon either. My mercenaries were ready to go
> 
> :shoot:




Hey Prof and Wayne, You guys may need to watch your backs after what you've done to coffee...........Lots of irate farmers out there ..............exerpt from publication...................

For most Americans, drinking coffee is a daily ritual. And whether you're drinking gourmet blend or freeze-dried instant, the price is about the same from one day to the next.

For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close. 
 Reports say tens of thousands of Mexican coffee farmers have fled their fields in search of incomes to feed their families. El Salvador recently acknowledged that over 30,000 jobs have been destroyed because of the price slump. Many of the 60,000 coffee producers in Nicaragua are facing losing their land because of mass indebtedness. Farmers in all three countries have taken to the streets to demand government support for farmers on the brink of starvation.

"You two boys will be sorry!"

Site if anyone is interested............ http://www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html


----------



## wayneL

barney said:
			
		

> Hey Prof and Wayne, You guys may need to watch your backs after what you've done to coffee...........Lots of irate farmers out there ..............exerpt from publication...................
> 
> For most Americans, drinking coffee is a daily ritual. And whether you're drinking gourmet blend or freeze-dried instant, the price is about the same from one day to the next.
> 
> For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close.
> Reports say tens of thousands of Mexican coffee farmers have fled their fields in search of incomes to feed their families. El Salvador recently acknowledged that over 30,000 jobs have been destroyed because of the price slump. Many of the 60,000 coffee producers in Nicaragua are facing losing their land because of mass indebtedness. Farmers in all three countries have taken to the streets to demand government support for farmers on the brink of starvation.
> 
> "You two boys will be sorry!"
> 
> Site if anyone is interested............ http://www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html




Barney,

Did you see the date on that article?  Anyway starving farmers can join our band of mercenaries 

As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.


----------



## wayneL

A similar situation in Cocoa in late 1999.

It took a bit longer to trend upwards, but the minimum value opportunity was still valid (i.e write WTFOTM puts)


----------



## 2020hindsight

wayneL said:
			
		

> When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.



 :topic 
As they said before the French Revolution "the farmers are revolting " - "yes and they smell too".  But who had the last laugh ?  lol.   I sometimes try to imagine the fact that Aus was founded in 1788, and the French revolution was in 1789–1799.  AND no internet to keep up to date. !!  Imagine being stuck in Sydney then !!   Quick - BUY Guillotines!! - Sell CASTLES!!
sorry Wayne - I keep doing this to your serious threads dont I lol.  I'll try to be serious tomorrow - but right now its happy hour lol.


----------



## barney

wayneL said:
			
		

> Barney,
> 
> Did you see the date on that article?  Anyway starving farmers can join our band of mercenaries
> 
> As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.




Hi Wayne.......Just being a bit silly... sorry!.......didn't even look at the date............I don't even entertain the thought of trading Comm's.....I have enough trouble with regular stocks   ...........It is interesting how they move up/down just the same..............and coffee has been "roasting" of late..............as for 20/20 and his French Revolution........if they'd drunk more coffee instead of that French wine, they probably wouldn't have had a Revolution  :cup: :bier:   Cheers Barney.


----------



## barney

wayneL said:
			
		

> Barney,
> 
> Did you see the date on that article?  Anyway starving farmers can join our band of mercenaries
> 
> As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.




Hey Wayne, Just as a serious follow up to that coffee slump,  I see it took about 10 months for it to fully re establish its uptrend..........What was the catylist for the recovery??..............PS You are right how the "doom and gloom" articles were a pre-curser to the recovery...........I guess when things are really bad, they often can't get much worse?!...............What would be your slant on Sugar atm just out of curiousity, cause it has been "suffering" for a while as well??  Cheers Barney.


----------



## noirua

Dr Marc Faber's view on commodities is always worth adding as he has called the markets correctly in the last 5 years.

This is an interview on 15th September 2006:  http://inhome.rediff.com/money/2006/sep/15faber.htm


----------



## wayneL

barney said:
			
		

> Hey Wayne, Just as a serious follow up to that coffee slump,  I see it took about 10 months for it to fully re establish its uptrend..........What was the catylist for the recovery??..............PS You are right how the "doom and gloom" articles were a pre-curser to the recovery...........I guess when things are really bad, they often can't get much worse?!...............What would be your slant on Sugar atm just out of curiousity, cause it has been "suffering" for a while as well??  Cheers Barney.




Barney,

I suppose that farmers walking away started creating tightness in supply... just a guess though.

Re sugar: Looking at the long term chart below, I would have to say minimum value is around about $5. The current spot price is ~$11 so it could go much lower. Whether it will, is another matter.

Cheers


----------



## Sean K

Looks like there could be some support between the green lines too. So it could steady. Could we have another 1980 spike still?? Must have been some strange stuff going on then....


----------



## barney

kennas said:
			
		

> Looks like there could be some support between the green lines too. So it could steady. Could we have another 1980 spike still?? Must have been some strange stuff going on then....




Yeah that was a major spike Kennas....I'd be interested as well on any info re that.............(any ideas Wayne?) Always curious as to the catalyst for things like that....Cheers, Barney.


----------



## wayneL

Here's a very good PDF on the coming commodities crunch.

http://bloomberg.com/news/marketsmag/traders.pdf


----------



## rederob

wayneL said:
			
		

> Here's a very good PDF on the coming commodities crunch.
> 
> http://bloomberg.com/news/marketsmag/traders.pdf



Wayne
Bloomberg might be right within the next decade.
I have now seen doomsayers rampant for the past 2 years, and continue to be badly wrong.
There will be an exceptionally strong rally into year's end, led by zinc and nickel, and the laggard lead.
I don't expect people to "take my advice", but my record on commodities has lined my pockets nicely, thank you.  And I have continued to buy when many have been selling.
The Amaranth fiasco just shows that the funds think they are immune from failures, but are really little different to you or me - we cannot always be right.


----------



## wayneL

rederob said:
			
		

> Wayne
> Bloomberg might be right within the next decade.
> I have now seen doomsayers rampant for the past 2 years, and continue to be badly wrong.
> There will be an exceptionally strong rally into year's end, led by zinc and nickel, and the laggard lead.
> I don't expect people to "take my advice", but my record on commodities has lined my pockets nicely, thank you.  And I have continued to buy when many have been selling.
> The Amaranth fiasco just shows that the funds think they are immune from failures, but are really little different to you or me - we cannot always be right.




Well bully for you.

BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular.


----------



## Ken

who thinks Rio will get to 100?


----------



## Sean K

Ken said:
			
		

> who thinks Rio will get to 100?




Absolutely...but in one year, or 10????


----------



## Ken

well whats your prediction.

its in a bit of a rally at the moment.  where will the resistance come from on its latest push.  it has blitz from $70 to $73.  i suspect it will take a breather around $74.  Same with BHP now.  Some profit taking may go on.

thats just a gut feeling.

they have risen almost 10% in last month


----------



## nizar

Ken said:
			
		

> well whats your prediction.
> 
> its in a bit of a rally at the moment.  where will the resistance come from on its latest push.  it has blitz from $70 to $73.  i suspect it will take a breather around $74.  Same with BHP now.  Some profit taking may go on.
> 
> thats just a gut feeling.
> 
> they have risen almost 10% in last month




I would buy BHP many many many times over before even looking at RIO.

The future outlook is much better for copper (Wats the name of that mine in south america that produces 8% of the worlds output?), uranium (Olympic dam will be much much bigger than ERA even with Jabiluka) and oil (RIO lacks an oil division; BHPs is bigger than WPL) than it is for iron ore (the world is made up of 5% iron ore, hence there will NEVER be a shortage) and diamonds!

Give me BHP any day of the week


----------



## Ken

i have both which is hopefully going to be my first property  in 15 years.


----------



## nizar

Ken said:
			
		

> i have both which is hopefully going to be my first property  in 15 years.




ur first property in 15years?
Thats what i used to aim for.... when i was 5!

lol but now just past 20 and still no house... but im confident EVE and OMC will do it for me... OMC a nice car, but EVE, EVE is for my house!


----------



## professor_frink

wayneL said:
			
		

> Well bully for you.
> 
> BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular.




Wheat's been going limit up the last few days hasn't it?

It's 30 cents isn't it?


----------



## wayneL

professor_frink said:
			
		

> Wheat's been going limit up the last few days hasn't it?
> 
> It's 30 cents isn't it?




Yep,

I'll post a chart later... corn went limit up last nite as well = 20c


----------



## professor_frink

wayneL said:
			
		

> Yep,
> 
> I'll post a chart later... corn went limit up last nite as well = 20c



that would be good.
 

Slightly off topic question-
How do you find the grains to trade? Do you spend much time looking at fundamentals for them, or is it straight out astrology, sorry charting?


----------



## rederob

wayneL said:
			
		

> Well bully for you.
> 
> BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular.



Wayne
I have not followed grains at all, ever.
My real job means I barely have time to follow the market, let alone base metals (which I devote 90% of my research time to).

On the base metal front, my views on the title of this thread are probably now well known.

What so many fail to understand is that this last 2 years has not only led to high prices, it has led also to consumer destocking.  That is, the high prices have caused consumers to increasingly draw from their own stockpiles, so as to avoid high spot prices.  
A consequence of this is seen in copper inventories which have hardly moved, but rates of backwardation have fluctuated markedly because consumers (in particular) "know" when actual supply is tight "on the street" and when it is less tight.
The fact that copper has been in backwardation all year shows that "tightness" remains an important determinant of its price resilience.
So before commodities start to collapse, we will see significant consumer restocking - a process likely to take many months for copper, and many weeks for nickel.
On the other hand, we have zinc and lead experiencing significant weekly warehouse declines. Plus, we have a majority on non-traded metals concurrently experiencing continued robust demand. 
All this towards the end of a year that was supposed to see metals return to surplus.
And to top off everything we have the DOW hitting record highs, and our own allords almost there too.
If these are the ingredients for a collapse, they are very poorly timed.
Maybe in 2007 it will come, or the next year.
Right now Blind Freddy is probably raiding his money box and finding every spare penny to put on ZFX.
And why wouldn't anyone?


----------



## wayneL

professor_frink said:
			
		

> that would be good.
> 
> 
> Slightly off topic question-
> How do you find the grains to trade? Do you spend much time looking at fundamentals for them, or is it straight out astrology, sorry charting?




Prof,

You know you can chart them yourself with IB?

I'll post the symbology later


----------



## professor_frink

wayneL said:
			
		

> Prof,
> 
> You know you can chart them yourself with IB?
> 
> I'll post the symbology later




I looked at them, but I thought that would cost me to get the data. The market data for the CBOT is $55 USD a month, and I thought it would be a slight waste to do it when I'm not seriously thinking about trading them(well, not for awhile anyway)


----------



## wayneL

professor_frink said:
			
		

> I looked at them, but I thought that would cost me to get the data. The market data for the CBOT is $55 USD a month, and I thought it would be a slight waste to do it when I'm not seriously thinking about trading them(well, not for awhile anyway)




You can trade them now through ECBOT.... and it's LIQUID.

$55 is only for the PIT data

Try these (Going off memory as I don't have AMI up ATM)

WZ06-ECBOT-FUT wheat
CZ06-ECBOT-FUT corn 
SX06-ECBOT-FUT soybeans


----------



## professor_frink

wayneL said:
			
		

> You can trade them now through ECBOT.... and it's LIQUID.
> 
> $55 is only for the PIT data
> 
> Try these (Going off memory as I don't have AMI up ATM)
> 
> WZ06-ECBOT-FUT wheat
> CZ06-ECBOT-FUT corn
> SX06-ECBOT-FUT soybeans




Ohhhhhhhh  

Really should go through and read more on their site, shouldn't I?

Thank you for answering a question I should have answered myself


----------



## YOUNG_TRADER

nizar said:
			
		

> ur first property in 15years?
> Thats what i used to aim for.... when i was 5!
> 
> lol but now just past 20 and still no house... but im confident EVE and OMC will do it for me... OMC a nice car, but EVE, EVE is for my house!





Funnily enough I'm gonna need all of my EVE for the deposit requriments on my house that I'm building, settlement on land is in mid Dec, so run or not my EVE money is gonna have to come off the table


----------



## nizar

i reckon if it doubles to say 20c by then, maybe take the $125k and free-ride the rest?

just my opinion, obviously i dont know ur situation, etc.


----------



## Sean K

Looks to me like the resource bears have been put into hybernation. 

1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)


----------



## michael_selway

kennas said:
			
		

> Looks to me like the resource bears have been put into hybernation.
> 
> 1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)




true but eventually i think it will crash

thx

MS


----------



## thestorm

Commodities are sure to crash shortly. Every expert around is predicting their downfall. 

I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents!


----------



## michael_selway

thestorm said:
			
		

> Commodities are sure to crash shortly. Every expert around is predicting their downfall.
> 
> I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents!




i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous

thx

MS


----------



## CanOz

michael_selway said:
			
		

> i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous
> 
> thx
> 
> MS




I agree...its bound to happen. Remember what causes a crash though...fear. Vertical increases create the nervous tension....then the slightest ruffle and whooooosh, down they go. Demand has and will intervene to push things along again...but as demand weakens, so will the rate of recovery from these little mini corrections. As long as the BRIC continues to pressure supply, the trend will continue. 

I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example). Other factors that should create some nervousness are the amount of investment in Chinese banks, fixed assets and other "bubbles" in China and the other BRIC nations (and the US to some extent, although it seems to be a resilent BULL)

I would say that an overall picture of the global geo-political climate, as well as the economic cycles in the BRIC nations should be kept as up to date as possible for any trader or investor in a day to day manner. Its the difference between being in cash, fully invested in the equities booming, or starting to get defensive in your portfolio.

I soak up every bit of information i can every day while skimming over the rubbish that can distract you from your goals.

For a trader or an investor, the only decent bit of news to pay attention to is the broader picture.


----------



## Sean K

CanOz said:
			
		

> I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).




Yep, China will probably keep growing at it's lazy 10% until the Olympics and then what? Perhaps the middle class will have grown to a level that they start consuming their own trinkets and don't need to export every last mobile phone to the US....A self sustaining China is an Australian economic dream. Well, a WA and QLD dream....


----------



## nizar

CanOz said:
			
		

> I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).




Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...

Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??

After 27 years of growth, it will all come down because of the olympics?? or after the olympics??

So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??

I beg to differ i must say...

Please elaborate....


----------



## CanOz

nizar said:
			
		

> Really?
> I think the olympics has NOTHING to do with it
> But i guess u being based in China, would know better...
> 
> Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??
> 
> After 27 years of growth, it will all come down because of the olympics?? or after the olympics??
> 
> So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??
> 
> I beg to differ i must say...
> 
> Please elaborate....




Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)

Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.

Only my opinion. I'm very interested in your take on it too.

Cheers,


----------



## nizar

CanOz said:
			
		

> Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)
> 
> Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.
> 
> Only my opinion. I'm very interested in your take on it too.
> 
> Cheers,




Did u hear about ICBC float?
The retail portion closed 78times oversubscribed and the insto 30times oversubscribed! A good effort!
And they were raising, us$19billion OH MY!!
(its not like one of our uranium floats raising 5mil and closes 3x oversubsribed big woop)

Yeh u make good points about the OLympics i suppose, but remember, China was growing at 8-10% for 27 years, long before the olympics of any of this was even known. 

While back in the 80s and 90s, it wasnt really a major force, *now, China is of scale (biggest consumer of copper, zinc globally) and a major player that it doesnt need to grow at 10% a year to make a big difference and push up commodity prices. * The problem i see is not the demand slowing (it will possibly in %terms but in actual absolute figures, it will still grow) but the supply response. The supply response for copper is supposed to come in 2006-2007 but because of labour and equipment shortages and high oil prices causing cost blow outs, they will not come until 2007. Zinc i suspect 2008, maybe even 2009.

Every commodities cycles in the past, and they last minumum 15 years, have had mini corrections. I suspect that will happen after the olympics perhaps, and maybe u are correct. The drop in demand, or rate of growth of the demand, coupled with the (huge) supply response, should cause at least some sort of correction/crash.


----------



## CanOz

Good points Nizar...also, one thing i forgot to mention that is positive for the cycle too is the rate of savings by the Chinese people, something like 60% of their earnings....where as if they were similar to Western countries they would have all of this expansion plus consumer debt, which has yet to take root.

I hope the boom lasts much longer as you say. Certainly good to see the people prosper too.

Cheers,


----------



## YOUNG_TRADER

nizar said:
			
		

> Really?
> I think the olympics has NOTHING to do with it
> But i guess u being based in China, would know better...
> 
> Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??
> 
> After 27 years of growth, it will all come down because of the olympics?? or after the olympics??
> 
> So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??
> 
> I beg to differ i must say...
> 
> Please elaborate....




Nizar, I agree with Cana

I was in China last year and was blown away at the rapid level of development, a large portion of which was being done for the Olympic games, I'm not saying that this is the only factor, but it is a big one,

I have been told by many top level Exec's that they have been amazed at how determined China is to shrug off the 'peasant farmer' status it has had for the last few centuries and cement the 21st Century as the 'New Economic Super Power' and that the 2008 Olympics will act as their Stage for the world, 

As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,

While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,

Long Term Stronger for Longer driven by the Industrialisation of 3Billion People


----------



## michael_selway

YOUNG_TRADER said:
			
		

> As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,
> 
> While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,
> 
> Long Term Stronger for Longer driven by the Industrialisation of 3Billion People




I agree and ive said this a long time ago   

Late 2007 to 2008

Thanks

MS


----------



## nizar

YOUNG_TRADER said:
			
		

> *Long Term Stronger for Longer driven by the Industrialisation of 3Billion People*




THats key


----------



## BSD

http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html

Time to get in heavy!

When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy. 

Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?

Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?

What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?

Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.

Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.


----------



## michael_selway

BSD said:
			
		

> http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html
> 
> Time to get in heavy!
> 
> When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.
> 
> Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?
> 
> Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
> 
> What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?
> 
> Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.
> 
> Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.




3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?

thx

MS


----------



## wayneL

BSD said:
			
		

> http://www.smh.com.au/news/national/mining-boom-over-costello/2006/10/31/1162278141451.html
> 
> Time to get in heavy!
> 
> When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.
> 
> Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?
> 
> Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
> 
> What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?
> 
> Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.
> 
> Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.




I was thinking along the same lines myself, though I don't see the link between property trends and commodities.


----------



## BSD

wayneL said:
			
		

> I was thinking along the same lines myself, though I don't see the link between property trends and commodities.




More a reference to this continual assertion that there is a 'normal' value for commodities.

The mentality prevails (worse in the US) that commodity prices cannot have a bull market for more than 5 minutes but homes can easily double every  couple of years and the rental property is always 'cheap' despite a 2% yield. 



			
				MS said:
			
		

> 3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?




Probably - on momentum but maybe not on valuation. 

Most analysts are getting values for BHP and RIO far in excess of current levels based on expected 2008 Cu prices around $2.50 (most have risen recently though)

LME 15 month (now a start 2008 figure) $3.15
LME 27 month $2.82

This gives an approximate 2008 average of $2.98 from the futures players. 

Many analysts are still below the forward curve and nobody has a sell on BHP or RIO. 
___________________________________

Grades are falling, capital costs are rising by multiples and ongoing costs are up by a huge factor as a result. 

Copper is not going back to $1.20 and the long term numbers in analyst models are rising slowly. 

$1.40 + long term is now common and most laugh when they use such numbers in their models.

The Olympics has very little to do with commodities demand in my view. 

_"Of the 36 Olympic venues, 31 are in Beijing and of these, 11 are new, 11 are being renovated and nine will be temporary sites. The cost is estimated at $38 billion (£21.7 billion). Of that, about $2.4 billion will be spent on the Olympic venues alone and possibly as much as $40 billion will be spent on urban renewal and on infrastructure improvements." 

"That compares with the $16 billion expected to be spent on London’s infrastructure." _ - 

http://timescorrespondents.typepad.com/sinofile/2006/04/in_the_heart_of.html

$70bn USD is a lot of money in anyone's book - but not enough to generate 10% GDP growth for an economy with a GDP in of US$2.50 trillion in 2006. Let alone a commodities spike.


----------



## MiningGuru

There has been a bit of a history of cities experiening post Olympic blues. Usually the boom lasts to just after the games, and then there is slowdown.

There is usally an optomistic frenzy up to the games.

Look at Sydney, where there has been a property bust pretty much since the games were over.

Barcelona, Seol, and Athens all experienced it, and Beijing proabaly will as well.

Boom to 2008, then a mini-correction


----------



## YChromozome

Howard said so, so it must be correct . . . . LOL

Howard backs Costello on mining downturn - 1st November - The Australian.

The resources sector should continue to make a very big contribution to Australia's wealth but the reality was that there had been a dip in the sector, Mr Howard said today.


----------



## krisbarry

They are calling it tops so interest rates can then take a breather and that way they can secure another election win...either that or its a side stepping issue to avoid other pressing issues such as infrastructure problems on our ports, roads and railways etc.

...or maybe its because of the skills shortage crisis...who knows


----------



## BSD

MiningGuru said:
			
		

> Look at Sydney, where there has been a property bust pretty much since the games were over.
> 
> Barcelona, Seol, and Athens all experienced it, and Beijing proabaly will as well.
> 
> Boom to 2008, then a mini-correction




I dont buy it. Coincidences perhaps? 

The US economy didn't miss a beat post Atlanta and like Atlanta and the US, Beijing is a small component of overall Chinese economy.

Beijing is what % of Chinese GDP/Population?

I dont even think that Beijing is the driver of the 'China Story" it is the political city - not the manufacturing power house.


That said, I think plenty of small corrections (10% - 20%) will occur in the two years to 2008, as they have this year.


----------



## wayneL

BSD said:
			
		

> More a reference to this continual assertion that there is a 'normal' value for commodities.
> 
> The mentality prevails (worse in the US) that commodity prices cannot have a bull market for more than 5 minutes but homes can easily double every  couple of years and the *rental property is always 'cheap' despite a 2% yield.*




Well..... yes!

The epitome of "irrational exuberance" there and bull markets running well past where they *should.

Now that Johnny Rotten has joined the fray, I'm buying with my ears pinned back. LOL


----------



## Smurf1976

BSD said:
			
		

> Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?



The normal change of sentiment during a bull market.

At the beginning, hardly anybody expects prices to rise. You would have encountered that if this thread had been running a few years ago. Few would have believed that oil would go over $20 or zinc over $1000 simply because they had been so low for so long.

At the end of a bull market, it's the reverse. Hardly anybody expects prices to fall. Just look at how many were piling into the NASDAQ in early 2000 right at the end. Or how many still don't believe house prices can fall when, relative to practically any measure (especially those other than cash), they have fallen quite a lot at least in Sydney.

If people think you're doing the "right" thing with your investments then it's likely you're too late.


----------



## wayneL

YChromozome said:
			
		

> Howard said so, so it must be correct . . . . LOL
> 
> Howard backs Costello on mining downturn - 1st November - The Australian.
> 
> The resources sector should continue to make a very big contribution to Australia's wealth but the reality was that there had been a dip in the sector, Mr Howard said today.




Hmmm

Maybe Johnny Rotten and Kid Costello were right. Copper has been swatted, breaking some support levels, and I believe the other base metals as well.

The chart is now looking more like a distribution top than a consolidation in the trend IMO.

Reports of slowing growth coming out of China as well


----------



## Sean K

wayneL said:
			
		

> Hmmm
> 
> Maybe Johnny Rotten and Kid Costello were right. Copper has been swatted, breaking some support levels, and I believe the other base metals as well.
> 
> The chart is now looking more like a distribution top than a consolidation in the trend IMO.
> 
> Reports of slowing growth coming out of China as well




Not sure about the 'slowing growth', all I see is confirmation of around 10-11%. 

Thart chart looks bearish to me as well. What is it of?


----------



## professor_frink

kennas said:
			
		

> Not sure about the 'slowing growth', all I see is confirmation of around 10-11%.
> 
> Thart chart looks bearish to me as well. What is it of?



that's copper my good man


----------



## Sean K

professor_frink said:
			
		

> that's copper my good man



HG Z6 is copper? Falling through $320 looks ordinary.


----------



## professor_frink

kennas said:
			
		

> HG Z6 is copper? Falling through $320 looks ordinary.



Yeah it does look a little ordinary, doesn't it?
considering the falls in metals o/n, and not much of a move in the U.S, I was a bit surprised to see the spi only off 12 points from yesterday's close. Maybe it won't be as bad on Monday as it looks  
But I'm quite hungover, so not much is really making sense right now


----------



## wayneL

kennas said:
			
		

> HG Z6 is copper? Falling through $320 looks ordinary.




HG = the symbol for *H*igh *G*rade Copper futures

Z = the contract expiry month i.e. December

6 = the expiry year i.e. 2006

Expiry month symbols:

Jan = F
Feb = G
Mar = H
Apr = J
May = K
Jun = M
Jul = N
Aug = Q
Sep = U
Oct = V
Nov = X
Dec = Z

So for e.g. the symbol for March 2007 expiry copper is HG H7

Cheers


----------



## Sean K

wayneL said:
			
		

> HG = the symbol for *H*igh *G*rade Copper futures
> 
> Z = the contract expiry month i.e. December
> 
> 6 = the expiry year i.e. 2006
> 
> Expiry month symbols:
> 
> Jan = F
> Feb = G
> Mar = H
> Apr = J
> May = K
> Jun = M
> Jul = N
> Aug = Q
> Sep = U
> Oct = V
> Nov = X
> Dec = Z
> 
> So for e.g. the symbol for March 2007 expiry copper is HG H7
> 
> Cheers



Thanks Wayne. I'm putting my copper bear suit on tomorrow.


----------



## Smurf1976

kennas said:
			
		

> Thanks Wayne. I'm putting my copper bear suit on tomorrow.



All be on the lookout for kennas the bright and shiny copper bear wondering the streets. Growl...  :  :  :


----------



## Fab

again Kitco is giving me some conflicting information compare to Commsec Commodities which shows big drops in commodities overnight like 11% drop in lead. Who to believe ?
On the other side the Dow jump by 90 points today


----------



## Freeballinginawetsuit

Kitco.


----------



## CanOz

Lead looks a bit weak but overall zinc looks like it back on its way up. Although trading in a range on the 24 hour chart, the 30 day chart looks good.


----------



## Fab

CanOz   ,

Where did you get these graph from ?

Cheers


----------



## CanOz

here:

http://www.kitcometals.com/charts/zinc_historical.html


----------



## Kauri

Big sell off today in the Materials index, and the spots for metals looking shaky. Interesting to see  whether they stay negative ore not in tonights trading.


----------



## Fab

Looks to me that in the last few days we had a good correction of some of the commodity stocks such as zfx,cbh,mre ...
Maybe an opportunity to buy back as it looks like inflation pressure are easing in OZ and US . The only question mark is a possible slowdown in the us .


----------



## YOUNG_TRADER

According to this article Copper is sitting on its 200 day EMA and if it falls through it will cause a huge sell-off in commodities,

I don't believe that, surely the fundamentals of Zinc outweigh a technical chart on copper enough to support the Zinc price, that being said, I'd be happy to see Zinc pull back to $1.80/$1.85 to confirm this support level

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=EB3D7EB8-17A4-1130-F54DB49C85F1237F


----------



## KIWIKARLOS

Aren't the individual prices of each metal governed by there demand in the market. 

With metals such as copper, lead and aluminum primarily used in construction.

Copper used in the energy industry

and Zinc, nickle etc used for high tech devices and alloys.

wouldn't there need to be a global decline is basically all these industries to force there prices down.

Even if construction is low in the US and australia, China is people cities for the 12 million people every year that migrate from rural areas. If everybodys getting serious about global warming wouldn't there need to be massive investment in infrastructure across the globe? I mean solar power generators, water recycling plants and energy efficient buildings all require these basic resources. Even the technology we use is goin to have to be re-designed.

I wouldn't be surprised if waste/recycling  became a big industry in years to come.

As for Gold and oil, my basic understanding is that oil can only be bought in US dollars and gold, oil and the US dollar are all very closly related. So as if oil goes up so does gold, and if the US dollar goes down oil and gold go up. If the US economy is weakening and oil prices are rising couldn't we see a big effect as most countries in the world have vast stokepiles of US dollars which would become worth less and less. 

China has a trillion dollars of foriegn currency stockpiled for trade with a big proportion of that is US dollars. Can anyone shead more light on how any of these factors could influence comodity prices in the future?


----------



## YOUNG_TRADER

Another article with graph

http://stockresource.com.au/chart_of_the_week/view/1833


*Base Metal Price Correction*
Chart of the Week 11 Nov, 2006
Base metal prices appear to have commenced a corrective phase in the last few days, under the influence of significant fund selling pressure. The primary driver of the change in sentiment is the downturn in economic growth potential of the major markets, including the US and China. Recent Chinese data shows a deceleration in the rate of growth in construction activity as a result of the bank lending restrictions to the construction sector. However, this deceleration is likely to be temporary with lending controls being eased.

In the copper market weaker orders have led to a rise in refined metal exchange stocks of close to 50,000t since their low-point at the end of July and falling physical market premiums. Recent trends in copper pricing are illustrated below:

 Source: LME, BA, SR

While we recognise the risk of a significant correction in the near term, we remain optimistic over the outlook for base metal prices over the next few years due to the combination of ongoing constraints to supply growth and further strong Chinese demand.


----------



## Kauri

Sorry Chook   ..  :hide:    Todays West Aussie...


*Mining giants forecast slump
*_20th November 2006, 7:00 WST

_
Major mining companies have warned the world’s powerful central bankers and finance ministers that the price of key minerals such as gold and iron ore are set to fall, potentially stalling WA’s commodities boom as early as next year. 

The G20 meeting of nations ”” including Australia, the US, China, the European Union and Indonesia ”” also warned in an official communique yesterday of a real risk central banks would have to continue lifting interest rates to contain inflation from soaring commodity prices. 

Treasurer Peter Costello cautioned that general economic euphoria might end in tears because of the inflationary risks facing the world. 

In a report to the high-powered meeting in Melbourne, the chiefs of big unnamed international mining companies said the prices of some commodities had peaked and others would fall as extra supplies came on stream. 

Some commodities that have propelled the WA economy, such as iron ore, aluminium and gold, are likely to be hit hardest. 

The surge in prices for commodities has been led by China, helping fuel the WA economy, the State’s record wages and the property boom. 

But mining companies have started preparing for a downturn in prices from next year. 

*By 2009, copper prices are tipped to return to the levels of 1990. Though iron ore prices are also tipped to fall, they are expected to come back by only a third from their current record highs. Even gold, now well above the $US600 an ounce mark, is expected to fall to about $US450 an ounce.* 

Mr Costello said mining companies had sunk enormous amounts of cash into investments aimed at boosting supply. When this supply eventually kicked in there would be an impact. “The general view is that we’ve got to the peak and the peak is going to be dealt with by increased supply,” he said. 

But Mr Costello said while prices would come down, there would be a time lag due to the difficulties of bringing extra supply online. And prices would, in most cases, not plummet to past lows. 

“I don’t want you to get the view that they’re going into a trough,” he said. 

International Monetary Fund managing director Rodrigo de Rato also warned that while Australia and other mineral exporting nations had benefited from the commodities boom, those particularly hard hit would be nations like Australia that imported big amounts of oil. 

Alan Carpenter said the State Government had been investing in projects to take the WA economy well beyond the boom. 

“These projects are part of an $18 billion capital works program including new schools, hospitals and police stations as well as vital water and energy infrastructure,” the Premier said. 

WA Chamber of Minerals and Energy policy director David Parker said commodity prices were impossible to predict but the prediction of a downturn was a timely reminder that WA’s resources industry should not be complacent. 

He said the chamber believed the industry still had an “upside”, with figures released last week showing $35 billion was committed to minerals and energy projects in Australia.

SHANE WRIGHT and AMANDA BANKS


----------



## wayneL

Kauri said:
			
		

> Sorry Chook   ..  :hide:    Todays West Aussie...
> 
> 
> *Mining giants forecast slump
> *_20th November 2006, 7:00 WST
> 
> _
> Major mining companies have warned the world’s powerful central bankers and finance ministers that the price of key minerals such as gold and iron ore are set to fall, potentially stalling WA’s commodities boom as early as next year.
> 
> The G20 meeting of nations ”” including Australia, the US, China, the European Union and Indonesia ”” also warned in an official communique yesterday of a real risk central banks would have to continue lifting interest rates to contain inflation from soaring commodity prices.
> 
> Treasurer Peter Costello cautioned that general economic euphoria might end in tears because of the inflationary risks facing the world.
> 
> In a report to the high-powered meeting in Melbourne, the chiefs of big unnamed international mining companies said the prices of some commodities had peaked and others would fall as extra supplies came on stream.
> 
> Some commodities that have propelled the WA economy, such as iron ore, aluminium and gold, are likely to be hit hardest.
> 
> The surge in prices for commodities has been led by China, helping fuel the WA economy, the State’s record wages and the property boom.
> 
> But mining companies have started preparing for a downturn in prices from next year.
> 
> *By 2009, copper prices are tipped to return to the levels of 1990. Though iron ore prices are also tipped to fall, they are expected to come back by only a third from their current record highs. Even gold, now well above the $US600 an ounce mark, is expected to fall to about $US450 an ounce.*
> 
> Mr Costello said mining companies had sunk enormous amounts of cash into investments aimed at boosting supply. When this supply eventually kicked in there would be an impact. “The general view is that we’ve got to the peak and the peak is going to be dealt with by increased supply,” he said.
> 
> But Mr Costello said while prices would come down, there would be a time lag due to the difficulties of bringing extra supply online. And prices would, in most cases, not plummet to past lows.
> 
> “I don’t want you to get the view that they’re going into a trough,” he said.
> 
> International Monetary Fund managing director Rodrigo de Rato also warned that while Australia and other mineral exporting nations had benefited from the commodities boom, those particularly hard hit would be nations like Australia that imported big amounts of oil.
> 
> Alan Carpenter said the State Government had been investing in projects to take the WA economy well beyond the boom.
> 
> “These projects are part of an $18 billion capital works program including new schools, hospitals and police stations as well as vital water and energy infrastructure,” the Premier said.
> 
> WA Chamber of Minerals and Energy policy director David Parker said commodity prices were impossible to predict but the prediction of a downturn was a timely reminder that WA’s resources industry should not be complacent.
> 
> He said the chamber believed the industry still had an “upside”, with figures released last week showing $35 billion was committed to minerals and energy projects in Australia.
> 
> SHANE WRIGHT and AMANDA BANKS




Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)

Found this on kitco metals

*The Coming Nuclear Winter Base Metals*

http://www.kitco.com/ind/veneroso/nov062006.pdf

Read it and weep.


----------



## Sean K

wayneL said:
			
		

> Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)
> 
> Found this on kitco metals
> 
> *The Coming Nuclear Winter Base Metals*
> 
> http://www.kitco.com/ind/veneroso/nov062006.pdf
> 
> Read it and weep.



Do we buy banks Wayne? Or put the cash under the pillow?


----------



## wayneL

kennas said:
			
		

> Do we buy banks Wayne? Or put the cash under the pillow?



Far be it for to offer advise, even if I had a definate scenario (which I don't)

But there is a reason I have migrated out of equities to futures.

* a range of *non-correlated* instruments... grains, metals, livestock, coffee, interest rates, etc etc etc
* shorting a no-fuss and integral option
* still able to play the broad stock market via index futures
* more commonsense margin rules (especially for options) than equities.

amongst others.

Cheers


----------



## BSD

wayneL said:
			
		

> Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)
> 
> Found this on kitco metals
> 
> *The Coming Nuclear Winter Base Metals*
> 
> http://www.kitco.com/ind/veneroso/nov062006.pdf
> 
> Read it and weep.




The 'inside info' coming from the 'big knobs' who run Freeport would be the opposite I would imagine. 

They have decided to pay US$26bn to buy Phelps Dodge at a 20% premium to the market. 

The metals bears who will call this as another 'sign of the top' are the same metals bears who were selling/shorting the stock at prices 50% lower when Cu 'broke down' in May. 

What other boom have we been able to buy the best stocks in the world at 9 times earnings?

What other boom has led to the best companies being debt free?

_______________________________________________________


The Nuclear Winter?

A few comments (focussing on copper) ...

1. I freely disregard any relevance of 200 day moving averages

2. I do not think "it went up so far" as a reason for a fall

3. I do not believe in reversion to mean as grounds for a change in the price of a scarce resource

4. I do not agree there has been a rapid growth in supply - copper supply has been forecast to grow at 1.7% in 2006 and 2007 by the Copper Study Group

5. The comment on free capacity in the supply chain is extremely wrong. Utilisation is at maximum (why wouldn't it be with such good prices) and this is another reason for the continued plant failures, delays, dissapointments on the supply side. 

6. The Hedge Fund speculation story is difficult to fathom too. Are these guys saying that the short term momentum addicted hedge funds are still long and getting longer in the copper market? A market that has now fallen 25% since May? A fascinating argument. Surely there would be blood on the streets if this were true. 

From my experience, the momentum players have been shorting both the physical and the companys. The BHP and RIO shorts have been so arrogant to short into a buy back. They got squeezed again last month, but will be back in there again now. 

The hedge funds are short and not long. They are not manipulating the market. CHINA is the only party in town and they have far more ammo than the hedge funds. 

7. The market is not in massive oversupply. How could it be? Supply has hardly moved and demand continues (and will continue) to rise. One month of negativity and the bears call a surplus. Noise would be a better description. 

8. Contangos have not been present in copper at any time in the last year. Massive backwardisation has been the norm. In reality, the backwardisation has recently been reduced with spot approachng the forward months and the forwards not dropping much at all in comparison to spot. Nobody trading the forwards is getting too agressive in their selling. 

9. Copper and alumina (let alone paladium) are vastly different. I struggle with the relevence. The trading in the US natural gas market also remains vastly different from the global metals complex. China dont trade in the US gas market. 

10. The most major disagreement I have with Frank is in his absolute disregard for the contribution of the developing world for demand for copper. He doesnt believe the demand figures from the last three years!!!

___________________________________________________________


From my research, China has been drawing down their State Reserves and delivering into the LME to take advantage of the higher prices in Europe and to mark down the price of Cu before they are buyers again.

While Frank claims unreported stockpiles of metals -many believe the biggest private stockpile (that run by the Chinese) has been drawn down by 500,000tn this year. 

China talks down their economy every year the iron ore negotiations start and they are at it again. 

In September China imported 528,000tn of scrap Cu (the highest ever) and 380,000tn of concentrate (third highest ever) and in October they imported 75tn of refined copper (second highet this year). 

The Chinese are buying again and anyone with a view beyond a couple of trading sessions would be more interested in the 400m Chinese moving to cities in the next decade than the noise that floods the markets hourly.


----------



## wayneL

BSD,

Just the messenger, and as usual, you have valid arguments for the bull case. Thanks for those.

I have a few comments about your comments _

*Re Big Knobs and the Freeport/Phelps deal:* The guys in charge of that deal aren't actually big knobs, they are huge/enormous/humungus/(insert your own adjective) knobs.

In this deal they are not concerned as much much for shareholder value in the short/medium term as are shareholders/big knobs (ie a nice trending chart) It is more about power, market share, control and high falutin concepts like that. In no way can that deal be seen as an endorsement of higher and hihger prices in the near/medium future. There is a totally different imperative at work.

Why did they not buy PD 3 years ago? ....think about that one, you have already answered this question.

*Re 200MA's and the "break down"*: Firstly the 200 MA. It is a simple map of the longer term trend. If price action is below the 200 MA, mathematically it is trending down. A simple, but blunt measure looked at by most participants in the market.

Now to the "break down". What break down? There is no break down yet. Evidence of your ignorance of technicals. Sorry, but if you don't subscribe to technical theory, it does no good to your credibility to comment. We all know your illogical disdain for technicals, but enough already.

Ditto regression to the mean. BTW, to describe base metals as scarce is taking a great journalistic liberty with the truth. "Undersupplied" would be closer to the mark. Oversupply will inevitably follow, as with all booms.

All other points (even those I disagree on) are taken in the spirit of discussion.

The ultimate arbiter will of course be price and we each have different ways of dealing with its continuous revelation. If you are a bull, you should be thankful for sellers/shorters as they ensure supply for your demand. I don't understand the thinly veiled antagonism.


----------



## rederob

Wayne
Since you began this thread precious metals, oil and copper are lower.
Nickel and zinc are substantially higher.
Copper has been the barometer for base metals, but in my view broad-based market tightness is now allowing discrete metals to run their own races: Zinc being a winner in the sprint to middle distances and nickel doing the marathon.
While oil remains low, it will be interesting to see if precious metals remain similar, and range-bound.
The Veneroso link is an interesting mix of facts, charts and anecdote.  It is substantially flawed because he has not done the numbers longer term.
A supply side response is inevitable within 2 years - perhaps much less now.
Once the cycle turns prices down, many players will leave the game because their margins were narrow on entry.
However, the size of the new metals market is increasing so rapidly that the next game of catch-up will be played out for longer than the present bull run.
That's simply because the shift of wealth from West to East will have pent up a demand that will remain difficult to satisfy.
The past has seen boom times dependent on a burgeoning Europe, then USA, then Japan.
The future will see global populations 10 times this size wanting what we have, while we at the same time want more.
Once Veneroso's nuclear winter sets in, I will be an early vulture picking out the eyes of those blindsided to opportunity.


----------



## BSD

wayneL said:
			
		

> Why did they not buy PD 3 years ago? ....think about that one, you have already answered this question.




PD wasnt as grossly overvalued as it was recently.

BHP and RIO are also cheaper now on cashflow and earnings multiples than I can ever remember. Even using bearish assumptions for metals.



			
				wayneL said:
			
		

> Ditto regression to the mean. BTW, to describe base metals as scarce is taking a great journalistic liberty with the truth.




The most common argument for metals falling is "it has gone so far" it must fall. 

In an economic and physical sense, metals are scarce - they are neither unlimited or renewable without expense. Their supply is limited by way of a cost curve that continues to push out. 

Frank's marginal cost of production would be $0.50c higher now than in 1998. Grades are falling - capex is rising. 

Imagine if bears started squealing for $20 barrels of oil, on a reversion to mean argument. They would be laughed at.

While I can only quote Bloomberg and other talking head chartists on confirming/denying 'breakouts/downs' - I have studied stats enough to build a firm understanding of the meaning of mean reversion. 



			
				wayneL said:
			
		

> The ultimate arbiter will of course be price and we each have different ways of dealing with its continuous revelation. If you are a bull, you should be thankful for sellers/shorters as they ensure supply for your demand. I don't understand the thinly veiled antagonism.




All true

But antagonism? Not meant to be any - thinly veiled or otherwise. My response is not in reaction/conflict to you. 

Just a completely different view and timeframe of investment. It appears to be extremely different to most on this site, so it may appear divisive.


----------



## noirua

The following link gives the position on all types of coal in the United States by the US Government. It gives a good idea of the projections for coal prices, even though Asian prices may vary a great deal. We are still led by the US and demand there for coal gives a lead as to iron ore, pig iron and steel prices for the future; and of course all associated metals used in its manufacture. 

http://tonto.eia.doe.gov/FTPROOT/coal/newsmarket/coalmar061029.html


----------



## wayneL

BSD said:
			
		

> In an economic and physical sense, metals are scarce - they are neither unlimited or renewable without expense. Their supply is limited by way of a cost curve that continues to push out.
> 
> Frank's marginal cost of production would be $0.50c higher now than in 1998. Grades are falling - capex is rising.



OK by that definition, they are scarce. I don't really agree 100%, but can see the point.

It would seem then that there is a criminal wastage of these "scarce " commodities, but that is another discussion.




			
				BSD said:
			
		

> Imagine if bears started squealing for $20 barrels of oil, on a reversion to mean argument. They would be laughed at.
> 
> While I can only quote Bloomberg and other talking head chartists on confirming/denying 'breakouts/downs' - I have studied stats enough to build a firm understanding of the meaning of mean reversion.




1/ Bloomberg et al are bobbleheads, absolute %$#*ing imbeciles! I refuse to even watch that crap. They are just filling in airtime with garbage.

2/ If you had studies stats, you would know that the "mean" is actually a moving target and must be viewed as in the same family of statistical functions as an average. Indeed it can be an average:

#  Mathematics.

   1. A number that typifies a set of numbers, such as a geometric mean or an arithmetic mean.
   2. The average value of a set of numbers.

Therefore, the mean value of oil (to use your example) is nowhere even close to $20, unless you want to use an irrelevant time frame. In fact oil is an excellent example of reversion to the mean.



			
				BSD said:
			
		

> But antagonism? Not meant to be any - thinly veiled or otherwise. My response is not in reaction/conflict to you.
> 
> Just a completely different view and timeframe of investment. It appears to be extremely different to most on this site, so it may appear divisive.



I don't find your opinion divisive at all in the context of your obvious time frame and investing style.

But your comments with regard to technicians and shorter time frames are condescending and derisive. Your posts are otherwise of high quality and I fail to see the necessity of same. It is this I take issue with.

Cheers


----------



## noirua

noirua said:
			
		

> The following link gives the position on all types of coal in the United States by the US Government. It gives a good idea of the projections for coal prices, even though Asian prices may vary a great deal. We are still led by the US and demand there for coal gives a lead as to iron ore, pig iron and steel prices for the future; and of course all associated metals used in its manufacture.
> 
> http://tonto.eia.doe.gov/FTPROOT/coal/newsmarket/coalmar061029.html





Just maybe, this call, for collapses in commodity prices is basically a wrong call and markets are going through a phase of consolidation after sharp rises.

http://www.bhpbilliton.com/bbContentRepository/Presentations/060523LeondeVeldMcCloskeyCoalConf.pdf


----------



## Kauri

From memory the bears were sharpening their claws and eyeing the succulent salmon swimming upstream in May 2004 as well. Copper, which seems to be leading the pack, has in my opinion, a ways to go yet before it can called anything major. Not for one moment implying it wont fall further, but so far its still healthy for mine.  :bounce:


----------



## wayneL

Kauri said:
			
		

> From memory the bears were sharpening their claws and eyeing the succulent salmon swimming upstream in May 2004 as well. Copper, which seems to be leading the pack, has in my opinion, a ways to go yet before it can called anything major. Not for one moment implying it wont fall further, but so far its still healthy for mine.  :bounce:




Well some bear somewhere would have made a nice trade out of that.

I traded the volatility which peaked at that time... too chicken to play straight out price. 







Copper is off > $1.00 from the highs so some bears must be happy.


----------



## noirua

wayneL said:
			
		

> Well some bear somewhere would have made a nice trade out of that.
> 
> I traded the volatility which peaked at that time... too chicken to play straight out price.
> 
> 
> 
> 
> 
> 
> Copper is off > $1.00 from the highs so some bears must be happy.





Sometimes a chart of one commodity alone ignores the bigger picture. A chart of sugar prices, in soft commodities, could be used to show that the whole sector has collapsed, it's just not so. 

No doubt, some commodities will fall in price as more production comes onstream. This however, does not point to a collapse, as total expenditure on the product may rise despite a drop in the price per defined traded weight of product


----------



## wayneL

noirua said:
			
		

> Sometimes a chart of one commodity alone ignores the bigger picture. A chart of sugar prices, in soft commodities, could be used to show that the whole sector has collapsed, it's just not so.




Quite so.

This is one thing I like about trading physical commodities as opposed to the companies that deal in them; non-correlation.



			
				noirua said:
			
		

> No doubt, some commodities will fall in price as more production comes onstream. This however, does not point to a collapse, as total expenditure on the product may rise despite a drop in the price per defined traded weight of product




...highlighting the differences again between trading the actual commodity as opposed to shares.

I suppose we all need to be aware of the context in which people comment on these things.

However, I would defy the the SPs of these businesses to stay resilient in the face of declining prices in the commodity of their choice... hypothetically speaking.


----------



## noirua

wayneL said:
			
		

> However, I would defy the the SPs of these businesses to stay resilient in the face of declining prices in the commodity of their choice... hypothetically speaking.




Yes, that's fair enough, as so often in the past I've heard the comment "all the future bad news is priced into the sector", then when the bad news duly arrives, all the stocks plunge.


----------



## ducati916

*BSD*



> They have decided to pay US$26bn to buy Phelps Dodge at a 20% premium to the market.




I'll have to crunch the numbers on this one and see if your 20% premium was an intelligent purchase price for those involved.



> 3. I do not believe in reversion to mean as grounds for a change in the price of a scarce resource




Well I would disagree with you here.
The reason that I disagree would be the following;
*The Law of Diminishing Returns
*The US is a far larger market in % terms than China et al, and the US GDP has been slowing, this accounts additionally for the fall in oil prices.
Will the US head into recession? Who knows, but, while GDP growth falls, so will the prices commodities. Further, European growth is again falling, with Germany in particular being anaemic.
*The high price, reduces demand, and increases supply, thus, reversion to the mean becomes a very powerful statistical tool.



> 6. The Hedge Fund speculation story is difficult to fathom too. Are these guys saying that the short term momentum addicted hedge funds are still long and getting longer in the copper market? A market that has now fallen 25% since May? A fascinating argument. Surely there would be blood on the streets if this were true.




Hedge Funds will undoubtably have contributed to a component of the price rises, and in most commodities. How much, is slightly difficult to calculate, as there are no reliable proxies by which to estimate the cash asset inflows.
Therefore, an open question.



> The hedge funds are short and not long. They are not manipulating the market. CHINA is the only party in town and they have far more ammo than the hedge funds.




You state that the Hedge Funds are short.
Based on what evidence?

China, the only party in town.
Based on what evidence?

The economic data would suggest that the largest player, by a country mile to be the US.



> 7. *The market is not in massive oversupply*. How could it be? Supply has hardly moved and demand continues (and will continue) to rise. One month of negativity and the bears call a surplus. Noise would be a better description.




Assume for a moment that this is true [highlighted section]
*What happens to price when supply equals demand?
*What happens to price when supply exceeds demand?
*What if your assertion is incorrect?

*Demand will continue to rise.* This seems an outright prediction.
Predictions tend to be dangerous as;
*They can be wrong
*They tie you psychologically to a bias



> From my research, China has been drawing down their State Reserves and delivering into the LME to take advantage of the higher prices in Europe and to mark down the price of Cu before they are buyers again.
> 
> While Frank claims unreported stockpiles of metals -many believe the biggest private stockpile (that run by the Chinese) has been drawn down by 500,000tn this year.
> 
> China talks down their economy every year the iron ore negotiations start and they are at it again.
> 
> In September China imported 528,000tn of scrap Cu (the highest ever) and 380,000tn of concentrate (third highest ever) and in October they imported 75tn of refined copper (second highet this year).
> 
> The Chinese are buying again and anyone with a view beyond a couple of trading sessions would be more interested in the 400m Chinese moving to cities in the next decade than the noise that floods the markets hourly.



In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.

jog on
d998


----------



## ducati916

An article regarding the takeover offer.




> Is Freeport-McMoRan's Offer Enough?
> Some analysts think a higher price is in order for the mining company's purchase of Phelps Dodge
> by Aaron Pressman and Sonja Ryst
> 
> 
> The rapidly consolidating global mining industry now has two more major players planning a trip to the altar. On Nov. 20, Freeport-McMoRan Copper & Gold (FCX) announced that it is buying Phelps Dodge (PD) for $25.9 billion, in an effort to grow its copper production. Worth about $126 a share, the offer represents a 33% premium for Phelps Dodge shareholders but still may be a bargain for Freeport, analysts said.
> 
> The two are creating the largest M&A deal in the mining sector's history, according to Thomson Financial. The new company, to be called Freeport-McMoRan Copper & Gold, will become the biggest copper producer in the world, passing Australia-based BHP Billiton (BHP). The deal, subject to shareholder and regulatory approval, is expected to close at the end of the first quarter of 2007.
> 
> Phelps Dodge has taken its shareholders on a wild ride this year, hitting an all-time high along with the price of copper in a spring rally and then subsequently selling off as the metal cooled. In June, Phelps tried to acquire Canadian nickel producer Inco in a $41 billion three-way merger that also included Falconbridge. But the deal fell apart in September after Brazil's Companhia Vale do Rio Doce (RIO) swooped in with a more appealing all-cash bid. Phelps shares started rising again in October after Atticus Capital, a New York-based money manager with a 10% stake in the company, said it was searching for someone to buy Phelps.
> 
> Better Offer Out There?
> Analysts say the combination of Phelps Dodge's current operations, which brought in revenue of $8.7 billion and net income of $1.7 billion for the first nine months of the year, along with its untapped holdings around the world are worth far more than $126 a share. Prudential Equity Group analyst John Tumazos estimates Phelps Dodge is worth $182 a share, even as copper prices decline from more than $3.00 a pound to $2.00 in the next few years.
> 
> Tumazos expects major shareholders may balk at Freeport's offer in the hopes another buyer like Norilsk Nickel, Rusal, or even metal trading firm Glencore will enter the bidding. There's a "very large likelihood" that more than half of Phelps Dodge shareholders "reject any bid under $150 per share as inadequate or ridiculous," he says.
> 
> Standard & Poor's ratings analyst Thomas Watters said in a note issued Nov. 20 that given the current M&A activity in the sector, "it is quite possible further, more aggressive competing bids could emerge." S&P Ratings thinks a successful acquisition of Phelps Dodge would "markedly" enhance Freeport's position in the mining industry. "However, we are concerned about the combined entity's aggressive debt levels," said Watters.
> 
> Mining's M&A Explosion
> If Freeport-McMoRan closes the deal with its current offer of $88.00 in cash plus 0.67 of a common share of the company for each Phelps Dodge share, the deal will immediately add to its earnings per share (EPS), the mining outfit said. Combined, the two companies expect almost $8 billion of earnings before depreciation, depletion, and amortization and $6.5 billion of operating cash flow in 2006.
> 
> Mining companies are gobbling one another up this year as commodities prices soar. Freeport-McMoRan's recent megadeal brings the total dollar amount of M&A in the industry so far in 2006 to $35.7 billion on 162 deals, according to Thomson Financial. During 2005, 118 deals only amounted to $1.6 billion.
> 
> Freeport-McMoRan is paying a 33% premium to Phelps Dodge's closing price on Nov. 17. Phelps Dodge shares surged 27% to $120.47 per share on Nov. 20. Freeport-McMoRan's share price fell 3.1% to $55.63 per share.
> 
> Giant Capacity
> Demand for copper has been rising recently, and there aren't that many large copper development projects in supply. Freeport-McMoRan currently operates the copper and gold Grasberg mine in Papua, Indonesia. Phelps Dodge has mines in North America, South America, and Africa, including the Tenke Fungurume development project in the Democratic Republic of the Congo.
> 
> As a combined company, Freeport-McMoRan and Phelps Dodge think they can deliver nearly 1 billion pounds of additional copper production capacity in the next three years. Their projects include the expansion of Phelps Dodge's Cerro Verde mine in Peru, the development of the Safford mine in Arizona, a potential project to extend the life of the El Abra mine in Chile, the expected 2009 production from the Tenke Fungurume copper and cobalt project in the Democratic Republic of the Congo, and the expansion of Freeport-McMoRan's underground mine in Indonesia.


----------



## rederob

ducati916 said:
			
		

> In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.
> jog on
> d998



Well, I have seen folk trot out similar lines for 3 years now.
And for 3 years China has indulged in a commodity feast that has fed higher prices across th board.
Its a bit like in the morning being told the sun won't rise where you are pointing, because you weren't quite pointing in the right direction: And the sun rose....... again!
Now we discover China also has the world's largest US dollar reserves, overtaking Japan.  I guess some economist will point out that on a per capita basis this is not such a big deal.  Of course I would then point out to the economist that each person does NOT have an equal share.
There is nonsense, fabrication, calculation, mischief and stupidity in the markets, interspersed with very big money that always drives direction.
Much of that big money is joining the big party in town, in China.
Be there or be square!


----------



## wayneL

rederob said:
			
		

> There is nonsense, fabrication, calculation, mischief and stupidity in the markets,



Lets not forget rhetoric, hyperbole and misinformation.


----------



## ducati916

*enzo* 



> Well, I have seen folk trot out similar lines for 3 years now.
> And for 3 years China has indulged in a commodity feast that has fed higher prices across th board.
> Its a bit like in the morning being told the sun won't rise where you are pointing, because you weren't quite pointing in the right direction: And the sun rose....... again!




*Price 100% = China% + US% + Europe% + Asia% [India etc]*

Therefore if you calculate the relative values as of GDP, and the associated increases/decreases, you will gain an insight into the change on the margin [100%] and thus potential changes in price.

jog on
d998


----------



## dhukka

wayneL said:
			
		

> Found this on kitco metals
> 
> *The Coming Nuclear Winter Base Metals*
> 
> http://www.kitco.com/ind/veneroso/nov062006.pdf
> 
> Read it and weep.




Thanks for the article wayneL, very interesting reading. I posted elsewhere on this forum recently about the similarities between this current resource boom and the tech boom. However I had to acknowledge that current high commodity prices where supported by the fundamentals. This report tears a hole right through that and for me is the final piece of evidence I need to prove that we are experiencing a period of seriously over inflated resource stock prices. Funny how times change, I remember the late 90's when noone would touch resource stocks with a barge pole, most gold producers couldn't cover the costs of extracting it from the ground.  The cycle started to turn when I was still in the market in 2001 and now it looks as though it's ready to turn again. 

The demand statistics were particularly telling, we've actually undergone a period of lower than the historical average level of demand for base metals yet prices continued to rise on the pretense of a glut. The further it goes the more unhappy the ending will be. The revelation of huge stock piles will send prices tumbling and hedge funds tumbling after them unable to unwind their positions, then the mass exodus as all the punters try to clamber through the mouse hole at the same time. 

I'd be interested to see Veneroso's views on Oil and Uranium where there does seem to be a genuine supply shortage. Interesting times


----------



## rederob

ducati916 said:
			
		

> *enzo*
> 
> 
> *Price 100% = China% + US% + Europe% + Asia% [India etc]*
> 
> Therefore if you calculate the relative values as of GDP, and the associated increases/decreases, you will gain an insight into the change on the margin [100%] and thus potential changes in price.
> 
> jog on
> d998



WOW
It's that easy!

I wonder what "price" that would be:
Bread?
Petrol?
Oil?
Zinc?
Silver?


----------



## BSD

ducati916 said:
			
		

> China, the only party in town.
> Based on what evidence?
> 
> The economic data would suggest that the largest player, by a country mile to be the US.
> 
> *Demand will continue to rise.* This seems an outright prediction.
> Predictions tend to be dangerous as;
> *They can be wrong
> *They tie you psychologically to a bias
> 
> In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.
> 
> jog on
> d998




US GDP is greater than China's - but their effect on the copper market is not. 

China have a centralised State that operate directly in the market to create outcomes for their industry. The Chinese government jawbone and participate directly in the market, the US government do not. The Yanks dont have a copper stockpile.

US industrial production is not growing at 10%+ per annum. 

The hedge funds can leverage-up all they like, they cannot take on the Chinese government.

US demand is steady - their demand for copper is not the swing factor. The copper intensity per capita is not growing in the US - it is growing at an exponential rate in China. 

In supporting my 'predictions' (essential if one is to have a view) some of the following points from a dealer note from the last couple of days have been important.

They make some decent points that you should account-for when getting worried about the effect of a US slowdown compared to the effect of Chindia in the medium to long term on global markets


By 2020 almost 400 million people in China and India will move to cities. A multiple of the entire US population
China and India will represent 37% of the entire world population and they will be growing wealth at a faster rate than the US population
Chindia GDP will be double the Japanese economy and 60% of the US economy
Chindia will represent 30-50% of global commodity demand 

There will be bumps - but demand growth looks stunning. Regardless of a US slowdown or recession.

As for your valuation of Phelps, you may have difficulties extracting value if you use the same methodology that created your  $9 BHP valuation. 

I am of the view we are three years into a 20 year cycle being fuelled by demand from China.

As for supply, name one *new * Australian copper project of any scale to be brought to market beyond Prominent Hill that will have any effect on the global supply in the next three years.


----------



## wayneL

BSD,

I am a strong advocate of minimum prices in commodities. I.E when Ivory Coast Cocoa farmers started burning there crop in the streets in protest at prices, you can be pretty sure that that is pretty much the bottom.

Miners will close their mines, grain farmers will run sheep instead.. whatever. In other words when commodities become too cheap for producers to turn a profit, they'll cease production or do something else.

Basic stuff here. But I don't think anyone could disagree with this premise, therefore, we are all subscribers to the "minimum value theory", whether overtly aware of it or not.

Surely then, by default, we would have to recognise that there must be a maximum value for commodities. This is the point where producers increase supply and/or end users will try to find an economic alternative.

Where this is I do not know, but the signs will reveal themselves at the time it happens.

The commodities charts are littered with evidence of the above.

The thing is, the Chinese gu'mint being proactive as you say, I doubt will stand for perpetually increasing commodities prices. Maximum value will be reached at some point and the whole bull argument comes to an abrupt end.

Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)

The trick is how to react to these supply demand equations. It doesn't really affect me too much with my short/medium term swing/trend volatility style trading. 

An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.

Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time (an exercise in futility  )

The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the *nature* and risks of commodity markets, particularly when overleveraged as newbs tend to do.

$0.02


----------



## BSD

wayneL said:
			
		

> An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.
> 
> Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time
> 
> The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the *nature* and risks of commodity markets, particularly when overleveraged as newbs tend to do.
> 
> $0.02




A very valuable $0.02 too

Risk management is a place we are on the same sheet. 

_____________________________________________________________

I do not think commodities will continue to move up in a steady line - just maintain stunning prices that continue to amaze; despite short term noise.

I certainly dont use $4 Cu (let alone $3) in my models - as much as I dont use $1.20 as a long term number.

But I maintain we have never had a China before - it makes the industrialisation of Japan look minor.


----------



## rederob

wayneL said:
			
		

> BSD,
> 
> Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices *and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)*
> 
> The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the *nature* and risks of commodity markets, particularly when overleveraged as newbs tend to do.
> 
> $0.02



Wayne
Although the future elusive, an interesting aspect of the "substitution" argument for the likes of copper etc is that the prices of substitutes have increased as substitution increased: In other words, demand for substitutes has pushed up their prices!  The cost advantages of substitution are therefore short term, and the quality of the original metal product reverts.  This was well shown with nickel and chrome in Chinese manufacturing production, where ultimately quality arguments won the day. And we know where nickel prices have gone this year.

Your point on copper is moot. Currently there is only one reason that copper prices remain subdued - the US housing market has slumped.  we all know these slumps are temporary.  Moreover, whether or not the US likes it, it remains THE preferred destination of most emigrants, so the cycle will swing back soon enough.
More importantly, if the "destocking" consensus is correct, China will have reduced demand to the point that copper prices have become acceptable to them again.  Should this be the case, then we will have seen a substantial consolidation phase that is ready to turn into a new-born bull market.  If i were a betting person, my money would be  stacked heavily on the latter prospect.

I have no sympathy for newbies or others that chase a quick buck, and do not understand the risks of derivatives, or other leveraged products: They can equally burn themselves on the banks as commodities, although present risk suggests commodities will expose one to the third degree.

Reversion to the mean will occur, at some point, and this actually means prices will fall below that number, whatever it is, at the time.  My strong present view is that we will have ample warning to quit the commodity bull before being trampled by it.  That said, whatever indicators one wants to use, the present cycle is moving firmly ahead (overall).


----------



## clowboy

wayneL said:
			
		

> BSD,
> 
> I am a strong advocate of minimum prices in commodities. I.E when Ivory Coast Cocoa farmers started burning there crop in the streets in protest at prices, you can be pretty sure that that is pretty much the bottom.
> 
> Miners will close their mines, grain farmers will run sheep instead.. whatever. In other words when commodities become too cheap for producers to turn a profit, they'll cease production or do something else.
> 
> Basic stuff here. But I don't think anyone could disagree with this premise, therefore, we are all subscribers to the "minimum value theory", whether overtly aware of it or not.
> 
> Surely then, by default, we would have to recognise that there must be a maximum value for commodities. This is the point where producers increase supply and/or end users will try to find an economic alternative.
> 
> Where this is I do not know, but the signs will reveal themselves at the time it happens.
> 
> The commodities charts are littered with evidence of the above.
> 
> The thing is, the Chinese gu'mint being proactive as you say, I doubt will stand for perpetually increasing commodities prices. Maximum value will be reached at some point and the whole bull argument comes to an abrupt end.
> 
> Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)
> 
> The trick is how to react to these supply demand equations. It doesn't really affect me too much with my short/medium term swing/trend volatility style trading.
> 
> An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.
> 
> Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time (an exercise in futility  )
> 
> The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the *nature* and risks of commodity markets, particularly when overleveraged as newbs tend to do.
> 
> $0.02





WayneL

Excellent post

I would dispute that anything has a absolute bottom (besides 0) or a maximum top but agree fully that farmers burning crops is an indication that a bottom is reached, now if only when a top is reached there was some kind of smoke signal 

Once again, great post.


----------



## nizar

clowboy said:
			
		

> now if only when a top is reached there was some kind of smoke signal




There is.
When the masses are buying.


----------



## specman

wayneL said:
			
		

> BSD,
> 
> Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market.
> 
> $0.02



wayneL,I am under the impression after exhaustive research that there are no viable alternatives for zinc as far as galvanizing is concerned http://www.bbosch.cl/src1/?seccion_id=622193a5f4fc16e77923fb0b741349dc&unidad=8

If I am wrong,I certainly want to know about it as soon as possible.Can you elaborate on what the viable alternatives are?


----------



## 2020hindsight

specman said:
			
		

> wayneL,I am under the impression after exhaustive research that there are no viable alternatives for zinc as far as galvanizing is concerned http://www.bbosch.cl/src1/?seccion_id=622193a5f4fc16e77923fb0b741349dc&unidad=8
> 
> If I am wrong,I certainly want to know about it as soon as possible.Can you elaborate on what the viable alternatives are?




Not so much an alternative to zinc as a lesser amount required with painting i.e. an alternative to galvanising:-

There are some very efficient paints that are labelled "zinc rich epoxies" - I guess 10 or 20% of the zinc is used compared to galvanising (bit of a guess).    Many even outperform pure zinc for long term protection.

But hek, don't get me wrong- I'm still buying zinc stocks


----------



## wayneL

Spec,

Been trying to find the article where I read that... no luck so far, still looking.


----------



## specman

2020hindsight said:
			
		

> Not so much an alternative to zinc as a lesser amount required with painting i.e. an alternative to galvanising:-
> 
> There are some very efficient paints that are labelled "zinc rich epoxies" - I guess 10 or 20% of the zinc is used compared to galvanising (bit of a guess).    Many even outperform pure zinc for long term protection.
> 
> But hek, don't get me wrong- I'm still buying zinc stocks




Yes,painting is an alternative but being viable is questionable.Painting is very labour intensive and does not offer the all round protection of zinc.http://www.asia.indgalv.com.au/indonesia/benefits.htm http://www.gaa.com.au/benefits_10rbgs.html

In any case,zinc is the product of choice by the steel companies and their manufacturing process is built around it.I have yet to read about steel companies considering alternatives.I believe some have added a surcharge to recover the cost of higher zinc prices.


----------



## ducati916

*BSD*

I'll quickly restate the principals that will limit price appreciation;



> *The Law of Diminishing Returns
> *The US is a far larger market in % terms than China et al, and the US GDP has been slowing, this accounts additionally for the fall in oil prices.
> Will the US head into recession? Who knows, but, while GDP growth falls, so will the prices commodities. Further, European growth is again falling, with Germany in particular being anaemic.
> *The high price, reduces demand, and increases supply, thus, reversion to the mean becomes a very powerful statistical tool.




Returning to some of your points raised in counter-argument.



> US GDP is greater than China's - but their effect on the copper market is not.




That is the equivalent of saying, an Institutional buyer of stocks [Mutual Fund] has less effect on stock prices than a retail buyer of stocks.
I have exaggerated the difference to illustrate the point.
A larger economy, will always have a greater effect on prices than a smaller one. 



> China have a centralised State that operate directly in the market to create outcomes for their industry. The Chinese government jawbone and participate directly in the market, the US government do not. The Yanks dont have a copper stockpile.




Yes the Chinese have an economy that is controlled in part [greater, or lesser] by the government. You are incorrect in stating that the US government does not intervene in markets, as obviously tarriffs are one simple example.

However, you are referring in a general sense to price floors and price ceilings.
Again, your statement regarding the US is incorrect. [US agriculture]

Taking *price floors * as our first example.
Price floors have the effect of creating surpluses, as the price is higher than the equilibrium clearing price.

*Price ceilings* on the other hand create shortages.

Steel is an excellent example of the Chinese government failing in the market intervention strategy. China was a net importer of steel up until some 18mths/2yrs ago. Heavily subsidised, the steel industry is inefficient, and produces at a net loss. China is now a net exporter of steel, but, at a loss.
This is an example of a price floor.



> US industrial production is not growing at 10%+ per annum.




No, it is not.
I therefore invoke the *Law of Diminishing Returns.*
We have already seen one example in Steel.



> US demand is steady - their demand for copper is not the swing factor. The copper intensity per capita is not growing in the US - it is growing at an exponential rate in China.




Nonsense.
The plotting of a basic supply & demand curve invalidates such a shallow analysis. Add in the complexities of elasticities to both curves based on non-linearity and the fundamental error of your premise can be illustrated.
It is at the margins, we as traders/investors try to operate, thus we are very exposed to the risks inherent at the margins.



> In supporting my 'predictions' (essential if one is to have a view) some of the following points from a dealer note from the last couple of days have been important.
> 
> They make some decent points that you should account-for when getting worried about the effect of a US slowdown compared to the effect of Chindia in the medium to long term on global markets
> 
> By 2020 almost 400 million people in China and India will move to cities. A multiple of the entire US population
> China and India will represent 37% of the entire world population and they will be growing wealth at a faster rate than the US population
> Chindia GDP will be double the Japanese economy and 60% of the US economy
> Chindia will represent 30-50% of global commodity demand




Interesting.
Let me address your [dealers] points;

On, or around October 17 2006, the US population hit 300 million.
This is an increase of 100 million from 1967
At this growth rate, the US population will hit 400 million circa 2047

How calculated?
Through fertility rates;
US = 2.1
Spain = 1.28
EU = 1.47
Hong Kong = 0.98
*China = 1.7*



> I am of the view we are three years into a 20 year cycle being fuelled by demand from China.




Based on the replacement rate, the population of China will reduce by almost half [50%] over the next 42yrs. 

Immigration, is an alternative to *growing* your population, so, what are the figures for immigration into China?
Unsurprisingly, they are so low as to be almost insignificant.
The US has a number of migration issues, and very long waiting lists for legal immigration.

Therefore, contrary to the general opinion, the numbers do not support currently the premise put forward by your dealer.



> The hedge funds can leverage-up all they like, they cannot take on the Chinese government.




This type of generalised statement, that makes a sweeping claim, without any substance can be dismissed. However, there is a strong case to be made in regards to the *speculators* currently operating in the commodity markets that can be made in a follow on post.

jog on
d998


----------



## rederob

ducati
Of the people that post on this site, you take the cake for misconstruction and distortion.
The very simple reality is that China continues to have a predominant effect on the price of many hard and soft commoditities.
Distort that reality as much as you like, but don't expect reality to change.
Your use of arcane economic jargon and its application to to unfolding market events, particualry your comments about copper, reflect a significant lack of understanding of recent market fundamentals.
Please keep posting, however, as I get great joy from your creative elaboration of misrepresentations and untruths.

BSD
I have subscribed to much that you post on for many years now.
Wayne rightly points out that a contrary view is useful.
But so too is following a clearly defined long term trend that has barely faltered.


----------



## BSD

Duc 

I will address some more of your comments later.


But would like to note the growth figures (400m people) are not based on population growth they are based on numbers forecast to move to cities to join the developed world. 

People who will move from a subsistance lifestyle to buying a TV and Air Conditioner for an apartment. 

*20 million per annum* have been making the shift in China alone, in recent years. Increasing their copper consumption at multiple of before. 


Here is an interesting article that goes a little way to backing some of my claims concerning investors being short and consumers being long, as well as the broad US based  disbelief in the cycle and the removal of the backwardisation in the copper market

http://www.investor.reuters.com/Art...&src=112106_1406_INVESTING_comment_n_analysis

Have a great day


----------



## ducati916

*rederob* 



> ducati
> Of the people that post on this site, you take the cake for misconstruction and distortion.
> The very simple reality is that China continues to have a predominant effect on the price of many hard and soft commoditities.
> Distort that reality as much as you like, but don't expect reality to change.
> *Your use of arcane economic jargon and its application to to unfolding market events, particualry your comments about copper, reflect a significant lack of understanding of recent market fundamentals.*
> Please keep posting, however, as I get great joy from your creative elaboration of misrepresentations and untruths.




The economic theory that I relate, is hardly obscure, I am only utilizing basic supply/demand theory & introducing the Law of Diminishing Returns, which explains the rationale for falling prices.

That you posts contain a vacuum of information, but a plethora of opinion somehow suggests a verisimilitude to the topic under discussion; however, we have been down this road before with your bullish stance on gold.



> Originally Posted by *rederob*
> Not asking you to buy gold as I am happy to do that.
> But would you like to do another of your detailed analysis so that we can see what range prices for gold we can look forward to over the next year or so?
> 
> Or would you prefer a brief history lesson: Recall my challenge to you -
> 
> 
> And one of your multitude of sweeping conclusions:
> 
> In the light of the fact that gold has breached your preferred upper range of $720 I think it only fair to give you another opportunity to prove yourself. On the other hand, I will concede utter defeat if gold’s “parabola” collapses and by year’s end POG is trading under $800 (which I believe is generous in that my expectation was for gold to be near that level by year’s end, rather than be as “support”).
> 
> For the moment, I am hoping for another $50 or greater retrace in gold near term, but will not hold my breath: Corrections in the metals complex as a whole are running to about 3 days instead of 3 weeks or more.
> 
> Wayne
> I will put you into ducati’s camp. Do you recall an earlier post where you mooted a $500 correction and I replied:
> 
> My concluding remark for now is that playing the markets means taking a forward view, and that view can be based on your decision to trade a safe “yield” equity, or a highly speculative futures contract. You enter the trade with a “view”, never a “knowledge”. Posting that “view” can mean a loss or gain of “reputation”, but in the case of ducati, he has my respect for at least trying to work out gold: A little knowledge can be a dangerous thing.




So forgive me that I shall just dismiss your opinion, as just so much nonsense.

jog on
d998


----------



## ducati916

*BSD*



> But would like to note the growth figures (400m people) are not based on population growth they are based on numbers forecast to move to cities to join the developed world.
> 
> People who will move from a subsistance lifestyle to buying a TV and Air Conditioner for an apartment.
> 
> 20 million per annum have been making the shift in China alone, in recent years. Increasing their copper consumption at multiple of before.




Noted.
However, there resides in this analysis a rather dangerous assumption.
This is, that the transition from *subsistance* to the *consumption that you assume*

This does not just happen, overnight, or otherwise.
Jobs that pay enough to raise consumption to those levels is required.
This is a function of wealth, measured by *PPP*

*China
GDP - per capita (PPP):    
$6,800 (2005 est.)  * 

*Net migration rate:   
-0.39 migrant(s)/1,000 population (2006 est.)  * 

*US
Net migration rate:   
3.18 migrant(s)/1,000 population (2006 est.) 

GDP - per capita (PPP):    
$41,600 (2005 est.)   * 

So, the figures while on the surface are impressive, under the figures, the PPP tells a rather different story, one of still great poverty, building wealth takes time.

China is a growth story.
China does have an impact.
It is just that the impact has been taken to the extremes as a valuation.



> Here is an interesting article that goes a little way to backing some of my claims concerning investors being short and consumers being long, as well as the broad US based disbelief in the cycle and the removal of the backwardisation in the copper market




I have read the article, and, it is bullish in its conclusions & implications.
It is only one side of the story.

Speculation, or investment in Commodities was advocated as a rational diversification away from Equity & Bond markets, as the argument went, they were *uncorrelated, viz. a low coefficient*

Then something went wrong.
The GSCI index shows losses.
Part of the reason is due to the inability to trade a positive roll yield.

The more important reason however resides in the fact that the negative correlation with Equities & Bonds has turned positive.
Commodities in the "90's were pretty neglected by retail investors.
Now they are the hot topic and mainstream via numerous funds.

For example;
Over 5yrs to 2005, the correlation between oil and gold was *0.13*It now sits at *0.64*

The herd psychology of markets [behavioural finance] explains in part the attraction of retail several years into a bullmarket.
A measure of this speculative excess is the *spread between prices of listed commodities and unlisted commodities*

It currently sits at an all time record of *60%+*

Therefore, although there is a case for commodities, the current climate suggests caution rather than outright plunging.

jog on
d998


----------



## rederob

ducati916 said:
			
		

> *rederob*
> 
> 
> 
> The economic theory that I relate, is hardly obscure, I am only utilizing basic supply/demand theory & introducing the Law of Diminishing Returns, which explains the rationale for falling prices.
> 
> That you posts contain a vacuum of information, but a plethora of opinion somehow suggests a verisimilitude to the topic under discussion; however, we have been down this road before with your bullish stance on gold.
> 
> 
> 
> So forgive me that I shall just dismiss your opinion, as just so much nonsense.
> 
> jog on
> d998



You are forgiven.
I don't worry too much about the impact of economy theory if the markets are telling a definitive story.
I also am reluctant to count golden chickens before they hatch.
So remind me again in January about the gold price: I regret that my gold equities have only given me an 80% return in the last few years, but i guess we can't win them all!


----------



## ducati916

For those interested, the analysis of* PD* is now posted here;
http://grantmacdonald.blog.co.nz/

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> *BSD*
> 
> Noted.
> However, there resides in this analysis a rather dangerous assumption.
> This is, that the transition from *subsistance* to the *consumption that you assume*
> 
> This does not just happen, overnight, or otherwise.
> Jobs that pay enough to raise consumption to those levels is required.
> This is a function of wealth, measured by *PPP*
> 
> So, the figures while on the surface are impressive, under the figures, the PPP tells a rather different story, one of still great poverty, building wealth takes time.
> 
> Therefore, although there is a case for commodities, the current climate suggests caution rather than outright plunging.
> 
> jog on
> d998



I don't know dood. All the town planning stuff I've done seems to say otherwise. I am dead set against you here. Your opinions seem to fly in the face of all the data that I have.


----------



## ducati916

> I don't know dood. All the town planning stuff I've done seems to say otherwise. I am dead set against you here. Your opinions seem to fly in the face of all the data that I have.




And the data is.................?
Town planning. Go on, knock me out.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> And the data is.................?
> Town planning. Go on, knock me out.
> 
> jog on
> d998



Irrespective of GDP and overall demand, rapid industrialisation creates huge demand pressures on resources. An already industrialised nation like the US will have a relatively low impact on prices, because either way in demand, it is mostly steady in comparison to one that is becoming rapidly modernised.

Take testosterone levels in males. One can have a huge amount of testosterone, but if the levels are steady, then testosterone linked behaviours are limited. Compared to someone who has them swinging all over the place.

The point is, it is not about overall demand, it is about the rate of movement within the demand. Already industrialised nations have relatively low swings, developing nations do not.

China aims to have 50% of all the world's manufacturing capacity by 2020, or 2030, I forget, but regardless, this is going to create massive demand shifts on resources.


----------



## ducati916

*chops*

So where is the data that supports the gaggle of opinion that suddenly appeared?

The short answer, is that you have none, you have read some experts commentary, and adopted it as fact. So be it. I shall comment on your opinion.



> Irrespective of GDP and overall demand, rapid industrialisation creates huge demand pressures on resources.




Incorrect.
If my quantity demanded is backed by $1M
And your quantity demanded is backed by $100
The resultant Demand/Supply curves will look very different.

Therefore the size of GDP is very relevant.
If Madagasca decided to go industrial, how much impact would it have?
I accept that China is large, and growing its GDP, but, China is not yet large enough that it can invalidate demand dynamics of the US & EU.



> An already industrialised nation like the US will have a relatively low impact on prices, because either way in demand, it is mostly steady in comparison to one that is becoming rapidly modernised.




Nonsense.
Back to economics 101 for you.



> Take testosterone levels in males. One can have a huge amount of testosterone, but if the levels are steady, then testosterone linked behaviours are limited. Compared to someone who has them swinging all over the place.




Firstly, testosterone is subject to a physiological negative feedback loop.
Therefore, only in pathological states, will concentration levels fluctuate, possibly effecting emotional fluctuations.

Supply/Demand dynamics follow very similar negative/positive feedback loops.
Are you suggesting that there is a pathology present in the global markets currently effecting a breakdown, or suspension of these basic economic laws?



> The point is, it is not about overall demand, it is about the rate of movement within the demand. Already industrialised nations have relatively low swings, developing nations do not.




No, it is about overall demand.
How that overall demand interacts with overall supply at the various price levels. Developed nations are not static. The Law of Entropy.



> China aims to have 50% of all the world's manufacturing capacity by 2020, or 2030, I forget, but regardless, this is going to create massive demand shifts on resources.




Aiming & Achieving, two different concepts.
The figures [already posted] suggest that this is far from a given.

jog on
d998


----------



## Kauri

Wonderfull intellectual argy bargy but, in short, what conclusions can we in Economics 001 draw from it in relation to the threads subject..  "Commodities tipped to collapse"...


----------



## chops_a_must

ducati916 said:
			
		

> *chops*
> 
> So where is the data that supports the gaggle of opinion that suddenly appeared?
> 
> The short answer, is that you have none, you have read some experts commentary, and adopted it as fact. So be it. I shall comment on your opinion.
> 
> 
> 
> Incorrect.
> If my quantity demanded is backed by $1M
> And your quantity demanded is backed by $100
> The resultant Demand/Supply curves will look very different.
> 
> Therefore the size of GDP is very relevant.
> If Madagasca decided to go industrial, how much impact would it have?
> I accept that China is large, and growing its GDP, but, China is not yet large enough that it can invalidate demand dynamics of the US & EU.
> 
> 
> 
> Nonsense.
> Back to economics 101 for you.
> 
> 
> 
> Firstly, testosterone is subject to a physiological negative feedback loop.
> Therefore, only in pathological states, will concentration levels fluctuate, possibly effecting emotional fluctuations.
> 
> Supply/Demand dynamics follow very similar negative/positive feedback loops.
> Are you suggesting that there is a pathology present in the global markets currently effecting a breakdown, or suspension of these basic economic laws?
> 
> 
> 
> No, it is about overall demand.
> How that overall demand interacts with overall supply at the various price levels. Developed nations are not static. The Law of Entropy.
> 
> 
> 
> Aiming & Achieving, two different concepts.
> The figures [already posted] suggest that this is far from a given.
> 
> jog on
> d998



Wonderful straw-man arguments you keep pulling out in this thread. You keep doing that.


----------



## ducati916

Kauri said:
			
		

> Wonderfull intellectual argy bargy but, in short, what conclusions can we in Economics 001 draw from it in relation to the threads subject..  "Commodities tipped to collapse"...




Well I would have thought quite obvious.
If you reject my arguments as irrelevant etc, you will no doubt feel that the bulls are correct, and thus accrue, maintain, or increase exposure to commodities via Futures, Options, Funds, or Equities.

If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.

Failing either of those options, you may simply wish to partake of the discussion via an analysis and interpretation of the data............... or just vent your opinion.

There is something for everyone.
jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.



Who would? Had a look at the ZFX share price in the last two days?


----------



## ducati916

chops_a_must said:
			
		

> Who would? Had a look at the ZFX share price in the last two days?




Here is the chart of ZFX.
You can talk me through your analysis if you choose and I presume the case for the Bulls.


----------



## chops_a_must

ducati916 said:
			
		

> Here is the chart of ZFX.
> You can talk me through your analysis if you choose and I presume the case for the Bulls.



Ahhh, it's going up.

But seriously, it's just following the zinc price. A weeks worth of losses recovered in two days. Zinc inventories running low, with no viable alternative leads to the price of zinc going up.

I don't think this is a case of bulls, it's just a case of market reality.


----------



## CanOz

ZINC CHART for you guys.


----------



## ducati916

chops_a_must said:
			
		

> Ahhh, it's going up.
> 
> *But seriously, it's just following the zinc price. * A weeks worth of losses recovered in two days. Zinc inventories running low, with no viable alternative leads to the price of zinc going up.
> 
> I don't think this is a case of bulls, it's just a case of market reality.




chops, I have highlighted the relevant section, as it beautifully illustrates a previous point, and that is;



> The more important reason however resides in the fact that the negative correlation with Equities & Bonds has turned positive.
> Commodities in the "90's were pretty neglected by retail investors.
> Now they are the hot topic and mainstream via numerous funds.




Lets examine some further figures;
The US accounted for 19% of world GDP growth since 2001
Asia [China + India + Japan + Aus + NZ + Taiwan + Korea + etc] = 21%

The US is huge.
If the US goes into a slowdown [which currently is the case] or into a recession, the demand for commodities will fall.
There will be excess supply.
Price will fall.

Asia, currently runs a $400 Billion current-account surplus with the US.
If US demand falls, that surplus will shrink, stunting GDP growth in Asia.
Falling GDP, increasing supply = falling demand for commodities = falling price.

Exports account for over 40% of China's GDP.
Falling exports = increased supply = falling price.
China's domestic spending = 42% [this is very small]
Capital spending has been increasing at 10%.
However, much of this spending has been inefficiently allocated, viz. Steel.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> The US is huge.
> If the US goes into a slowdown [which currently is the case] or into a recession, the demand for commodities will fall.
> There will be excess supply.
> Price will fall.



Well, why hasn't the price fallen already? Why has corn skyrocketed despite the downturn for instance?


----------



## Kauri

ducati916 said:
			
		

> Well I would have thought quite obvious.
> If you reject my arguments as irrelevant etc, you will no doubt feel that the bulls are correct, and thus accrue, maintain, or increase exposure to commodities via Futures, Options, Funds, or Equities.
> 
> If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.
> 
> Failing either of those options, you may simply wish to partake of the discussion via an analysis and interpretation of the data............... or just vent your opinion.
> 
> There is something for everyone.
> jog on
> d998




   Failing any of those options, I simply do not have an opinion. If you read/quote opinions of enough experts you will find compelling reasons that validate almost any future scenario you may come up with. Eventually (time frame??) someone is going to be right, but is being right really so important, apart from bragging rights? 
  If you look back through the last couple of weeks postings on the Gold thread you will see several bearish calls, yet I posted a live gold trade that returned 2.5R on the long side. Must have been lucky. Gold has lifted about 5% since then and now the calls are bullish!! I still have no opinion on the direction of gold, but am watching for what I would consider a trade, I'm not concerned if it is a long or short, so long as I consider that the  odds (not probability   ) are with me. 
  Who put their overalls in Mrs Murphys chowder?


----------



## ducati916

chops_a_must said:
			
		

> Well, why hasn't the price fallen already? Why has corn skyrocketed despite the downturn for instance?




Let's examine the scenario for corn.
Corn can of course be consumed as an agricultural commodity.
Also, corn & sugar cane can be processed into bio-fuels, [ethanol]
Therefore with increasing financial viability of ethanol as a fuel source due to high oil prices, we have a bullmarket in sugar & corn.

The economic slowdown is in this quarters figures.
You will note that many commodities are off their highs.
What should that tell you?

jog on
d998


----------



## ducati916

> Failing any of those options, I simply do not have an opinion. If you read/quote opinions of enough experts you will find compelling reasons that validate almost any future scenario you may come up with. Eventually (time frame??) someone is going to be right, but is being right really so important, apart from bragging rights?
> If you look back through the last couple of weeks postings on the Gold thread you will see several bearish calls, yet I posted a live gold trade that returned 2.5R on the long side. Must have been lucky. Gold has lifted about 5% since then and now the calls are bullish!! I still have no opinion on the direction of gold, but am watching for what I would consider a trade, I'm not concerned if it is a long or short, so long as I consider that the odds (not probability  ) are with me.
> Who put their overalls in Mrs Murphys chowder?




Good grief!
The volatility of gold has been tremendous.
One winning trade to the long side says absolutely nothing about anything.

Odds are derivatives of probability.
Thus total nonsense.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> You will note that many commodities are off their highs.
> What should that tell you?
> 
> jog on
> d998



Well, if many commodities are off their highs, logically, some are setting new ones. It cannot be any other way. What should that tell you?


----------



## wayneL

ducati916 said:
			
		

> Let's examine the scenario for corn.
> Corn can of course be consumed as an agricultural commodity.
> Also, corn & sugar cane can be processed into bio-fuels, [ethanol]
> Therefore with increasing financial viability of ethanol as a fuel source due to high oil prices, we have a bullmarket in sugar & corn.



Yes,

The dynamics in the grain markets are totally different, and cannot be used as a barometer for general economic activity. You have factors such as ethanol, drought, too much rain, not enough or too much acreage planted, disease, pestilence etc etc


----------



## Kauri

ducati916 said:
			
		

> Good grief!
> The volatility of gold has been tremendous.
> One winning trade to the long side says absolutely nothing about anything.
> 
> Odds are derivatives of probability.
> Thus total nonsense.
> 
> jog on
> d998








			
				ducati916 said:
			
		

> Most foreign governments have a large stake in maintaining the US trade deficit, and thus, a strong dollar. Thus Central banks keep accumulating dollars.
> 
> The practice of buying dollars for this purpose is reinforced by a further very important consideration, and that is the ever increasing needs of the worlds markets to transact in a single currency.
> 
> That currency is the US$.
> Once a currency achieves this status, it is very difficult to unseat the King.
> Currently, the US$ accounts for 88.7% of all transactions. This drives the requirement for an ever expanding supply of dollars [read increased demand] thus maintaining the dollar strength.
> 
> Thus in this context, what does that say about Gold?
> 
> jog on
> d998







			
				ducati916 said:
			
		

> If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities



 .


   One long trade of course means nothing, the point is that had I held one of your many opinions ( volatile, bearish?? maybe just bearishly volatile??) there would have been no trade,  but hey, I could have talked up a storm justifying why taking a trade was unwise.


----------



## ducati916

chops_a_must said:
			
		

> Well, if many commodities are off their highs, *logically, some are setting new ones. It cannot be any other way*. What should that tell you?




Logic, is a component of philosophy, that adheres to erudite argument.
The highlighted section illustrates a logical fallacy.
This is the case, as, should one commodity be off a high, it is not a 100% correlation that another is setting a new high.

It tells me that you are extremely confused, and confused young men lose money in the financial markets.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> Logic, is a component of philosophy, that adheres to erudite argument.
> The highlighted section illustrates a logical fallacy.
> This is the case, as, should one commodity be off a high, it is not a 100% correlation that another is setting a new high.
> 
> It tells me that you are extremely confused, and confused young men lose money in the financial markets.
> 
> jog on
> d998



No, I was exploiting a gap in your language.


----------



## ducati916

Kauri said:
			
		

> One long trade of course means nothing, the point is that had I held one of your many opinions ( volatile, bearish?? maybe just bearishly volatile??) there would have been no trade,  but hey, I could have talked up a storm justifying why taking a trade was unwise.




Possibly you are long red wine?
Really get a grip of the context if you wish to quote posts.

jog on
d998


----------



## ducati916

chops_a_must said:
			
		

> No, I was exploiting a gap in your language.




Same rejoinder, if you wish to quote, leave the entire quote for context;



> The economic slowdown is in this quarters figures.
> You will note that many commodities are off their highs.
> What should that tell you?




Better learn to read first son.
jog on
d998


----------



## Kauri

ducati916 said:
			
		

> Possibly you are long red wine?
> Really get a grip of the context if you wish to quote posts.
> 
> jog on
> d998




      Please explain in your inimitable style without resorting to childish comments. Or not, but do try to stay on the subject.


----------



## chops_a_must

ducati916 said:
			
		

> Same rejoinder, if you wish to quote, leave the entire quote for context;
> 
> 
> 
> Better learn to read first son.
> jog on
> d998



"Many" does not equal "all".


----------



## fleathedog

I am personally undecided in commodities for 2007. Of course it will depend on China and the US. But I have 2 ideas about where they could go (a bull and a bear case) and was wondering if anyone had any thoughts:

Bear case - pretty straightforward. The US goes into recession or at least slow growth (depending on how hard Mr Bernanke wants to run the presses) dragging Chinese growth down, commodities demand falls etc.

Bull case - US goes into a recession (it couldn't keep going could it!!!), BUT, the Chinese allow their currency to appreciate, allowing them to buy a lot more oil, copper, zinc etc at a relatively cheaper price. 

I'd love to get stuck into the vast amounts of data on these matter but don't have the time so some more informed opionions would be appreciated.

Given my indecision i'm staying out of base metals, but there are some ripper bargains out there in base metals even on some modest base metal corrections so I'd love to buy in... I have a feeling though if my bear thesis is right that the correction will be pretty savage. And it seems choosing _which_ commodities to go for is going to be the key.

Good luck all!


----------



## rederob

chops_a_must said:
			
		

> "Many" does not equal "all".



Chops
Ducati may not understand what you mean.
I suggest at least 3 paragraphs, ideally including the word *nonsense * a few times, and *economics 101 * as well.

I generally will avoid a thread that ducati is posting in unless I want a good laugh.

People who use latin, philosophy, economics and other erudite material in posts are clearly superior beings and I think we should appreciate them for what they bring to us.

I learned a long time ago about what should be cut, and paste.


----------



## Sean K

I am sitting on the fence. 

In the short term, I actually think a lot depends on a US housing soft landing. If things cool and not freeze, then US may stay bouyant, and Chindiapan will continue to grow, therefore keeping demand up, until supply catches. Maybe 5 more years. If US housing crashes, then commods have just began their decline.


----------



## chops_a_must

rederob said:
			
		

> Chops
> Ducati may not understand what you mean.
> I suggest at least 3 paragraphs, ideally including the word *nonsense * a few times, and *economics 101 * as well.
> 
> I generally will avoid a thread that ducati is posting in unless I want a good laugh.
> 
> People who use latin, philosophy, economics and other erudite material in posts are clearly superior beings and I think we should appreciate them for what they bring to us.
> 
> I learned a long time ago about what should be cut, and paste.



LOL!

He's not using philosophy though, he's just a sophist. There's a difference.


----------



## wayneL

<mod hat on>Folks lets leave the personal taunts out of what is a really good discussion.</mod hat off>

Thanks


----------



## Kauri

Kennas,
             Best way to be for mine    , the Great Gold Bear since the $730 top has actually given $304 total of possible bearish trades and $210 total (to date) of possible bullish trades. I find it more profitable to trade what I actually see in front of me rather than what my or others intellectual opinion says I should see.


----------



## rederob

kennas said:
			
		

> I am sitting on the fence.
> 
> In the short term, I actually think a lot depends on a US housing soft landing. If things cool and not freeze, then US may stay bouyant, and Chindiapan will continue to grow, therefore keeping demand up, until supply catches. Maybe 5 more years. If US housing crashes, then commods have just began their decline.



Kennas
US housing will significantly impact copper, slightly impact aluminium, and have little "fundamental" effect on the other base metals.
The general disconnect of zinc/lead with copper occurred recently when zinc went into backwardation.  However, from time to time expect copper's pull to have an influence, albeit not the extent it formerly had.
As for the duration of this commodity bull, I expect it to be fully generational - ie at least 20 years.  Within that period there will be cycles of oversupply and undersupply that influence specific metals, and occasionally the complex.
Those with Canute-like views that believe GDP is an arbiter of so many things, including metals prices, need to take care if they use those same principles to trade in the markets over the longer term.  Short term traders, perhaps like Kauri, can be successful irrespective of their general knowledge of the market.
My average "holding period" for an equity is around 2 years, although my *core * holdings are around double that.  So when I put money into the market, I do it based on a rather long term view.
I suffer no delusions about a prospect of getting things wrong, or the market changing on a sixpence.  However, the probability of market calamity near term is exceptionally low, so investing now is relatively safe.
Does this mean that commodities are equally safe?
I don't know.
I do know that medium term prospects for some base metals is exceptionally good.  That is, I expect nickel and zinc and lead will hit new highs, with the latter 2 metals likely to outperform the others.
Additionally, in the short term I expect copper will do an about turn and head up to $8000 again.  However, unless Chinese demand perks up a lot more, in the medium term I see consolidation occurring, rather than record highs being reclaimed.  Reversal of US housing trends would alter that and give a significant boost to copper's fortunes.
Moving away from the metals, and onto the equities, and we have a different game again.
Looking at RIO and BHP or even OXR and you would have to wonder whether the commodity bull had pulled up stumps and knocked off for the day.
Then you look at some zinc and uranium-based equities - the PDNs and ZFXs of the world - and you begin to see that we have cycles within cycles.
Some months ago I thought I would never invest in the BHPs of the world, again.  But as I do the sums, I discover the average received prices of almost every commodity they produce (except oil) is presently higher now than for the corresponding (financial year to date) period 12 months ago.  Accordingly, I am very likely to buy back into BHP on any price weakness. 
As I am a long term investor, my preference for BHP is strongly in the camp of a commodity market that is unlikely to disintegrate any time soon, and has the capacity to ride through a substantial correction: Perhaps even a series of commodity-specific corrections that have an insignificant effect on BHP's true bottom line.


----------



## Sean K

rederob said:
			
		

> Kennas
> US housing will significantly impact copper, slightly impact aluminium, and have little "fundamental" effect on the other base metals.
> The general disconnect of zinc/lead with copper occurred recently when zinc went into backwardation.  However, from time to time expect copper's pull to have an influence, albeit not the extent it formerly had.
> As for the duration of this commodity bull, I expect it to be fully generational - ie at least 20 years.  Within that period there will be cycles of oversupply and undersupply that influence specific metals, and occasionally the complex.
> Those with Canute-like views that believe GDP is an arbiter of so many things, including metals prices, need to take care if they use those same principles to trade in the markets over the longer term.  Short term traders, perhaps like Kauri, can be successful irrespective of their general knowledge of the market.
> My average "holding period" for an equity is around 2 years, although my *core * holdings are around double that.  So when I put money into the market, I do it based on a rather long term view.
> I suffer no delusions about a prospect of getting things wrong, or the market changing on a sixpence.  However, the probability of market calamity near term is exceptionally low, so investing now is relatively safe.
> Does this mean that commodities are equally safe?
> I don't know.
> I do know that medium term prospects for some base metals is exceptionally good.  That is, I expect nickel and zinc and lead will hit new highs, with the latter 2 metals likely to outperform the others.
> Additionally, in the short term I expect copper will do an about turn and head up to $8000 again.  However, unless Chinese demand perks up a lot more, in the medium term I see consolidation occurring, rather than record highs being reclaimed.  Reversal of US housing trends would alter that and give a significant boost to copper's fortunes.
> Moving away from the metals, and onto the equities, and we have a different game again.
> Looking at RIO and BHP or even OXR and you would have to wonder whether the commodity bull had pulled up stumps and knocked off for the day.
> Then you look at some zinc and uranium-based equities - the PDNs and ZFXs of the world - and you begin to see that we have cycles within cycles.
> Some months ago I thought I would never invest in the BHPs of the world, again.  But as I do the sums, I discover the average received prices of almost every commodity they produce (except oil) is presently higher now than for the corresponding (financial year to date) period 12 months ago.  Accordingly, I am very likely to buy back into BHP on any price weakness.
> As I am a long term investor, my preference for BHP is strongly in the camp of a commodity market that is unlikely to disintegrate any time soon, and has the capacity to ride through a substantial correction: Perhaps even a series of commodity-specific corrections that have an insignificant effect on BHP's true bottom line.




Great commentary mate. Thanks. Will be back at you on this. Must go to bed. Rach is home.


----------



## Julia

rederob said:
			
		

> Kennas
> US housing will significantly impact copper, slightly impact aluminium, and have little "fundamental" effect on the other base metals.
> The general disconnect of zinc/lead with copper occurred recently when zinc went into backwardation.  However, from time to time expect copper's pull to have an influence, albeit not the extent it formerly had.
> As for the duration of this commodity bull, I expect it to be fully generational - ie at least 20 years.  Within that period there will be cycles of oversupply and undersupply that influence specific metals, and occasionally the complex.
> Those with Canute-like views that believe GDP is an arbiter of so many things, including metals prices, need to take care if they use those same principles to trade in the markets over the longer term.  Short term traders, perhaps like Kauri, can be successful irrespective of their general knowledge of the market.
> My average "holding period" for an equity is around 2 years, although my *core * holdings are around double that.  So when I put money into the market, I do it based on a rather long term view.
> I suffer no delusions about a prospect of getting things wrong, or the market changing on a sixpence.  However, the probability of market calamity near term is exceptionally low, so investing now is relatively safe.
> Does this mean that commodities are equally safe?
> I don't know.
> I do know that medium term prospects for some base metals is exceptionally good.  That is, I expect nickel and zinc and lead will hit new highs, with the latter 2 metals likely to outperform the others.
> Additionally, in the short term I expect copper will do an about turn and head up to $8000 again.  However, unless Chinese demand perks up a lot more, in the medium term I see consolidation occurring, rather than record highs being reclaimed.  Reversal of US housing trends would alter that and give a significant boost to copper's fortunes.
> Moving away from the metals, and onto the equities, and we have a different game again.
> Looking at RIO and BHP or even OXR and you would have to wonder whether the commodity bull had pulled up stumps and knocked off for the day.
> Then you look at some zinc and uranium-based equities - the PDNs and ZFXs of the world - and you begin to see that we have cycles within cycles.
> Some months ago I thought I would never invest in the BHPs of the world, again.  But as I do the sums, I discover the average received prices of almost every commodity they produce (except oil) is presently higher now than for the corresponding (financial year to date) period 12 months ago.  Accordingly, I am very likely to buy back into BHP on any price weakness.
> As I am a long term investor, my preference for BHP is strongly in the camp of a commodity market that is unlikely to disintegrate any time soon, and has the capacity to ride through a substantial correction: Perhaps even a series of commodity-specific corrections that have an insignificant effect on BHP's true bottom line.




A really helpful overview, Rederob.  Thank you.

Julia


----------



## markrmau

http://www.smh.com.au/news/business/consumer-revolution-in-asia/2006/11/23/1163871545419.html

The rise of non-us consumers is an important development. This is the bigger picture to focus on.


----------



## wayneL

There seems to be some cognitive dissonance with this whole Asia business.

On the one hand it's:

OH NO! Golbal warming! Rising sea levels! Ozone holes! We're all doomed and it because of human impact. Millions will die, starve, get washed away!

On the other hand it's:

OH YES! Chindia is growing, they're all going to buy cars, computers, airconditioners, build McMansions and we're going to get rich selling commodities to them.

********************************************

Can anyone see the conflict here??


----------



## markrmau

It is morally bankrupt to sit amongst the wealth (assetwise and healthwise) that the western nations have built up (primarily through consumption of the earth's natural resources) and then to deny other people the opportunity to lift themselves out of poverty.

So IF it is true that further consumption will cause long term damage to the earth, we have two possible 'moral' solutions:

1. Drastically reduce all consumption, and for the rich nations to share thier wealth with poor nations. Because of the population imbalance, this would probably dilute everyones wealth to about 10% of thier current holdings.

2. Do nothing and sort out the problems of earth as they occur.

I think the 2nd option would result in the most efficient allocation of capital and resources.


----------



## wayneL

markrmau said:
			
		

> It is morally bankrupt to sit amongst the wealth (assetwise and healthwise) that the western nations have built up (primarily through consumption of the earth's natural resources) and then to deny other people the opportunity to lift themselves out of poverty.
> 
> So IF it is true that further consumption will cause long term damage to the earth, we have two possible 'moral' solutions:
> 
> 1. Drastically reduce all consumption, and for the rich nations to share thier wealth with poor nations. Because of the population imbalance, this would probably dilute everyones wealth to about 10% of thier current holdings.
> 
> 2. Do nothing and sort out the problems of earth as they occur.
> 
> I think the 2nd option would result in the most efficient allocation of capital and resources.




There is no doubt that humanity will go for option 2

However I contend that the problems *will not* be sorted out as they occur. e.g. what is being done to address global warming? Effectively, precisely nothing apart from window dressing designed to sooth our conscience.

Rainforests are being pillaged, the ocean is fast becoming a lifeless rubbish tip. etc etc

But it won't be us who pay, it will be our children...well maybe some of you young wipper snappers will still be around.

As far as efficient allocation of capital and resources... What makes you think humanity will change it's extreme wastefulness? There is no evidence that will occur at all!

Eat, drink, be merry, for tomorrow.........


----------



## ducati916

chops_a_must said:
			
		

> LOL!
> 
> He's not using philosophy though, he's just a sophist. There's a difference.




A sophist, no not really.
More a Rational eudemonist that subscribes to Res cogitans.

jog on
d998


----------



## rederob

ducati

A bit earlier in this thread you posted a quote of mine lifted from the gold thread, and used it as a basis for not replying to me.
You took an opportunity to not reply to *chops * because you reckoned he had quoted out of context, while you have used other tactics in order to not reply respectfully to others (typically the tactic of belittling the person).

Your actions are simply disingenuous, and I trust the moderators note this.

You perhaps are not aware of your own deception - that of deceiving yourself in this case.

If you wish to defer to logic and higher authorities you must be consistent and well intentioned.  My view is that you put these aspects aside to pursue more selfish personal agendas.

So as to keep this relatively succinct, I would refer you and readers to the gold thread and its posts early this year (esp. February). We both posted copiously around the time. Although gold was trading in the low $500s and was just setting cycle highs, I stated quite clearly that it would hit $700 some time this year (see post #275 in that thread).  Readers can also check out post #268 and note the equity I bought (the only gold equity I bought this year) and check out the price of gold that day (yes, it was the "low" for gold this year).

While you, ducati, may wish to dismiss the idea of replying considerately to me and others, at least you will not be able to diminish my track record (which I will never claim to be perfect) which is open for others to see.

I will continue to espouse my forward view of the markets, and learn from my mistakes. Indeed, I hope that aspect never changes.


----------



## ducati916

*rederob*



> A bit earlier in this thread you posted a quote of mine lifted from the gold thread, and used it as a basis for not replying to me.
> You took an opportunity to not reply to chops because you reckoned he had quoted out of context, while you have used other tactics in order to not reply respectfully to others (typically the tactic of belittling the person).




Nonsense.
In respect to *chops* he referred to *analysis via data* and he then proceeded to batter me with unadulterated *opinion*

You, are not quite as bad, but, much of your posting revolves around opinion, and or charts, masquerading as pseudo-analysis.

I posted your quote regarding gold, as it currently is unarguably horribly wrong, and, you owe me a concression of total defeat [albeit in 6wks time]



> Originally Posted by *rederob*
> Not asking you to buy gold as I am happy to do that.
> But would you like to do another of your detailed analysis so that we can see what range prices for gold we can look forward to over the next year or so?
> 
> Or would you prefer a brief history lesson: Recall my challenge to you -
> 
> 
> And one of your multitude of sweeping conclusions:
> 
> In the light of the fact that gold has breached your preferred upper range of $720 I think it only fair to give you another opportunity to prove yourself. On the other hand, I will concede utter defeat if gold’s “parabola” collapses and by year’s end POG is trading under $800 (which I believe is generous in that my expectation was for gold to be near that level by year’s end, rather than be as “support”).
> 
> For the moment, I am hoping for another $50 or greater retrace in gold near term, but will not hold my breath: Corrections in the metals complex as a whole are running to about 3 days instead of 3 weeks or more.
> 
> Wayne
> I will put you into ducati’s camp. Do you recall an earlier post where you mooted a $500 correction and I replied:
> 
> My concluding remark for now is that playing the markets means taking a forward view, and that view can be based on your decision to trade a safe “yield” equity, or a highly speculative futures contract. You enter the trade with a “view”, never a “knowledge”. Posting that “view” can mean a loss or gain of “reputation”, but in the case of ducati, he has my respect for at least trying to work out gold: A little knowledge can be a dangerous thing.




With regards to the charge of;


> while you have used other tactics in order to not reply respectfully to others (typically the tactic of belittling the person).




Again, check your facts, very rarely will I belittle a person, *if* they *stay on topic* Usually, and this is the case with *chops* my challenge to provide a reasoned reply to interpretation of data, results in a changing of the topic to a personality based one.

I have no problem accepting this, I also have no problem handing it out.
You don't like it?
Then stay on topic, don't cry like a baby.
I'll debate with anyone based on interpretations of data/facts/theory



> If you wish to defer to logic and higher authorities you must be consistent and well intentioned. My view is that you put these aspects aside to pursue more selfish personal agendas.




I'll keep it highbrow, or down in the dirt, irrelevant to me.



> While you, ducati, may wish to dismiss the idea of replying considerately to me and others, at least you will not be able to diminish my track record (which I will never claim to be perfect) which is open for others to see.




Really.
Where?

jog on
d998


----------



## rederob

ducati916 said:
			
		

> Really.
> Where?
> jog on
> d998



I guess there are some things that you will never see, ducati.
I have no interest in responding to your side tracks and irrelevances in this thread as it diminishes its value.
If you wish to simply and clearly state your position on the theme, please do so.
I am sure other readers are clear where I stand, and how I apply my knowledge of the markets to my trading decisions.


----------



## Dr Doom

Another issue to contend with in the context of a possible global slowdown is the reason all of this is happening in the first place ie excess global liquidity. Just as a 'developed' nation as the USA is supposedly in debt up to the eyeballs, so too has China's financial foundations been built on dubious financing infrastructure, with little room for error or reduction in demand for their goods. All the while Japan continues to be the lender of last resort able and willing to supply essentially free money to whoever wants it. The problem being that this money isn't going into productive areas, rather it is fueling bubbles globally, the biggest of which (the US housing market, is about pop spectacularly. 
This quarters US GDP figures will be watched closely for a continuation of the dramatic falls so far in the last three quarters. Soft landing, I don't think so.


----------



## noirua

Dr Doom said:
			
		

> Another issue to contend with in the context of a possible global slowdown is the reason all of this is happening in the first place ie excess global liquidity. Just as a 'developed' nation as the USA is supposedly in debt up to the eyeballs, so too has China's financial foundations been built on dubious financing infrastructure, with little room for error or reduction in demand for their goods. All the while Japan continues to be the lender of last resort able and willing to supply essentially free money to whoever wants it. The problem being that this money isn't going into productive areas, rather it is fueling bubbles globally, the biggest of which (the US housing market, is about pop spectacularly.
> This quarters US GDP figures will be watched closely for a continuation of the dramatic falls so far in the last three quarters. Soft landing, I don't think so.




One popular notion is that shares rise when the property market slides. That seems to be the case in Australia and the USA. Some European property markets boom on and a few markets experiencing a property slide seem to be the exceptions, time will tell as always.


----------



## Sean K

Dr Doom said:
			
		

> The problem being that this money isn't going into productive areas, rather it is fueling bubbles globally, the biggest of which (the US housing market, is about pop spectacularly.
> This quarters US GDP figures will be watched closely for a continuation of the dramatic falls so far in the last three quarters. Soft landing, I don't think so.



I'm starting to think hard landing here too. I think a reduction in interest rates could even be on the cards soon, but this of course will create other problems. Perhaps they'll have the housing crash they have to have, just as part of the 'normal' economic cycle.


----------



## YOUNG_TRADER

kennas said:
			
		

> I'm starting to think hard landing here too. I think a reduction in interest rates could even be on the cards soon, but this of course will create other problems. Perhaps they'll have the housing crash they have to have, just as part of the 'normal' economic cycle.




I think (hope) that late 07/08 Equity/Share Markets locally ie ASX won't offer much more value and we will see a graduall shift back to property which in Melb would have been stagnant in most parts since 2003, ie 5 years by then

Else my first property project will break me


----------



## noirua

My forecast is for the ASX 200 to continue on up for several more years yet and perhaps peak at around 8,000 by 2009. Commodities may well fall in price in the next few years, but quantities produced will rise even more steeply. Inflation will fall gradually and also interest rates. 

All this is guaranteed to come to pass, UNLESS I'm wrong.

Joking aside, I remain very confident about the direction of Australia and its position in the expansion of Asia and the Far East.


----------



## Smurf1976

kennas said:
			
		

> I'm starting to think hard landing here too. I think a reduction in interest rates could even be on the cards soon, but this of course will create other problems. Perhaps they'll have the housing crash they have to have, just as part of the 'normal' economic cycle.



House price crashes (real or nominal) historically lead to recession. I can't see why this time would be different so a general slowdown could well be on the way.


----------



## ducati916

rederob said:
			
		

> I guess there are some things that you will never see, ducati.
> I have no interest in responding to your side tracks and irrelevances in this thread as it diminishes its value.
> If you wish to simply and clearly state your position on the theme, please do so.
> I am sure other readers are clear where I stand, and how I apply my knowledge of the markets to my trading decisions.




That's fine.
Don't respond to my posts, entirely your perogative.
Here are some more of your gems from gold;



> RichKid
> If you have evidence to the contrary I would welcome a debate.
> The fact is that every time anyone posts a forward view it is likely to be wrong.
> The more into the future that view, the more likely it will be wrong.
> 2 months ago gold was about $500 and today it is almost $70 higher. Extrapolating this rate of increase gives us gold at about $900 by the end of 2006. But that is ramping!
> 4 months ago gold was about $100 less than today, so that only gives us gold at around $850 by year's end.
> 6 months ago gold was about $130 less than today, giving us a gold price over $800 by year's end.
> The questions all investors need to ask is if the past 6 months represent the prevailing trend, the past 4, the past 2, or none of the above.
> The undeniable fact is that on "recent" trend there is absolutely nothing stopping gold being over $800 by the end of this year.
> Accordingly, my suggestion/statement/forecast that gold would be $850 some time in 2007 is extremely conservative.
> By the way, if you believe it unlikely that such a strong trend could eventuate for gold in 12 months, ask why copper rose well over 50 in price last year alone - in defiance of almost every specialist metals forecaster in the previous year.
> If you want more "quality" I will return and dazzle with more correlations and extrapolations based on actual historical relationships between gold and a range of other commodities and indexes. Unfortunately some of these suggest gold will be well over $3000 but I am not so sure!




This rather lends to the lie, it would seem that in truth you don't actually want debate after all, especially when it makes you look like a peanut.



> Wayne
> Yes, as folk take to skinning cats I will hunt them down and report them to the RSPCA!
> I am more worried about the "pussy footing around" that's happening.
> Every time I look at the thread heading, I am giving my perspective and accept the consequences.
> But in posting bullishly I am hoping to entice out a bear that will bring me back to earth.
> There is no point holding a bullish perspective if there is bad or contrary news around. I do not want to be that blinkered racehorse that has crossed the finishing line so wide of the mark that “I can see I have won”, but in reality was beaten by every other thoroughbred on course.




Is this an example of your track record?



> I will be looking to buy more gold equities in late afternoon if gold holds during Asian trading, and have another crack at the markets tomorrow.
> Usually only a few "sales" present themselves each year - this one is truly excellent.




Or this?



> hope you are right.
> I have a low-priced bid on LHG shares as I regard them as the best valued gold equities in our markets at the moment.




Looks like you have cracked, the heat in the kitchen and all that;



> ducati
> You seem to have no understanding of intrinsic value from a market perspective or a theoretical perspective.
> In the fullness of time you will choose to ignore me.




Here we are, your portfolio, called in, hindsight time, strange how hindsight portfolios always seem to perform so well, must try and get one of those myself.



> While that may be true for ducati it does not explain why my rather meagre portfolio is over $100k up in 6 months, and I have made the grand total of a dozen trades in that period (mostly buys) all based on what I regard as "fundamental trading".




Seems to be a bit of an echo on this thread, my position on gold, commodities in general would be fairly obvious to all but the most challenged of readers surely?



> If ducati wants to make an "on topic" contribution to the thread he will need to indicate where his view of the "speculative" outcome finally lies, or at least he needs to give a clear view of gold's price going forward in the medium to longer term.




jog on
d998


----------



## ducati916

If you feel that the real estate bust is a possibility, you are unsure about commodities, there are some bullish commentators for equities;

Brian Reynolds, the chief market strategist at the boutique brokerage M.S. Howells in New York, sees the disconnect between corporations and average investors as the difference between believers and nonbelievers. Federal Reserve flow-of-funds data, he says, show that individuals have been selling equities the past three years as heavily as they did during the bear market while buyers on the other side of those transactions have mostly been the companies themselves who are repurchasing stock and going private.

Essentially, Reynolds noted, corporate bond investors are valuing companies' earnings as if they are going to grow for years to come, while individuals seem to think there's a depression coming. That Freescale deal is again a great example. At the time the buyout was announced, the stock was one of the most heavily shorted on the New York Stock Exchange, and bears decried the price offered as insane. Yet the bonds issued to pay for the transaction were oversubscribed by a factor of three.

"It's the exact opposite of 2000 and 2001, when it was corporate bond investors that were pessimistic and the public was optimistic," Reynolds said.
The veteran strategist says the last time he can remember this wide a gulf between smart money and the public was in late 1994 and early 1995 at the start of a five-year ascent for stocks. It's a matter of mistaken perceptions in some cases. For instance, many investors are leery of stocks due to a concern that a real-estate crash may crush stocks. But it doesn't work that way. Reynolds pointed out that in the last real-estate crash, from 1988 to 1993, 750 thrifts went bankrupt and the government created the Resolution Trust Corp. to sell real estate at pennies on the dollar. Yet the Standard & Poor's 500 Index ($INX) doubled in that period, as investors paradoxically came to consider the stock market a haven.

Phil Erlanger, an expert on investor sentiment and the publisher of the Erlanger Research Web site, said he thinks the current rally is sustainable because it has been a low-volatility advance -- not a screaming, one-sided race. "I haven't seen any kind of froth at all," he told me from his office in Boston. "We've seen nice, tight uptrend with no superstrong one-day moves. You can tell that there are lot of people still waiting to get in; they're paralyzed."

Charles Biderman, another veteran observer who publishes institutional research on market liquidity called TrimTabs, said the most bullish effect at work today is companies' efforts to reduce the number of outstanding shares for sale in the market at an annualized rate of 3%. A "float shrink" of this size is unprecedented, he said. The only faintly similar episode came in late 1994 through 1995, with share shrinkage of a bit more than 1%. Stocks went on to advance 33% in 1995 and 25% in 1996. He advises clients to align themselves with the corporate "smart money" and get fully invested now in exchange-traded funds tracking small-cap and large-cap indexes.

Bert Dohmen, a seasoned investor and research publisher in Los Angeles, noted that the big buyouts have done two things that benefit all investors: They take supply off the market and release more money back into the target's sector. Once this week's Equity Office Properties (EOP, news, msgs) deal is completed, for instance, most of its former shareholders will redeploy their money into other real-estate investment trusts, buoying their prices.

The bottom line, said Dohmen, is that there's a lot of money sloshing around the world economy, from tripled oil prices in the Middle East to windfall manufacturing profits in Asia. All that money needs to find a good home, and right now, billions of it is pouring into stocks. So no matter how much you may fear the economy is bound to slow or that the consumer is tapped out, or that Congress will overspend, or that North Korea will blow up the world, you need to realize that liquidity -- the fancy word for rivers of cash -- conquers all. "Sometimes you just need to pretend you're dumb and not look too closely at all the details," Dohmen said. "Just admit you don't know everything and go with the flow."

jog on
d998


----------



## Kauri

Love it...   



			
				ducati916 said:
			
		

> "Just admit you don't know everything and go with the flow."
> 
> jog on
> d998


----------



## chops_a_must

ducati916 said:
			
		

> A sophist, no not really.
> More a Rational eudemonist that subscribes to Res cogitans.
> 
> jog on
> d998



LOL!

It just keeps getting funnier.

What a pity that your philosophy would not have survived Kant.


----------



## chops_a_must

ducati916 said:
			
		

> In respect to *chops* he referred to *analysis via data* and he then proceeded to batter me with unadulterated *opinion*



I referred to it. Doesn't mean I can be bothered getting my books out to give information to people that wont even read it properly anyway.

I never stated a hard opinion, you just assigned me one. And then when I did point out commodities that were running contrary to your opinion, the goal posts shifted. That looks like Sophism if ever I've seen it.

And if you are that interested, you can find similar information to what I have very easily on the net. A recent interview with Paul Keating on China gives a very good overview of the sort of stuff that I have read.


----------



## Prime

noirua said:
			
		

> My forecast is for the ASX 200 to continue on up for several more years yet and perhaps peak at around 8,000 by 2009. ...
> 
> All this is guaranteed to come to pass, UNLESS I'm wrong.
> 
> Joking aside, I remain very confident about the direction of Australia and its position in the expansion of Asia and the Far East.




I'm also quite confident about the Aussie bourse ... I'd never considered a pt value though ...

8000 sounds good ... when is anyones guess.

Incidently I've been reading a book called "China Inc" by Ted C Fisherman. (veteran journalist and former commodities floor trader and member of the Chicago Mecantile Exchange)

Describes a lot about China and its hunger for commodities and resources. It's an interesting read and eludes to continuing growth for the next decade or two at least.  All of which bodes well for Australia ... provided we can supply!


----------



## ducati916

*chops*



> I referred to it. Doesn't mean I can be bothered getting my books out to give information to people that wont even read it properly anyway.




Same old excuses.
I know the answer, but I have to keep it secret, yada, yada, people won't read/understand, yada, yada.



> I never stated a hard opinion, you just assigned me one. And then when I did point out commodities that were running contrary to your opinion, the goal posts shifted. That looks like Sophism if ever I've seen it.




Did you not?
Interesting, what then exactly would you call this?



> I don't know dood. All the town planning stuff I've done seems to say otherwise. I am dead set against you here. Your opinions seem to fly in the face of all the data that I have.




What data?
My opinions, are backed by data.
You may disagree with my interpretation or analysis, however, the numbers are provided so that you can run your own calculations if you wish.



> *On, or around October 17 2006, the US population hit 300 million.
> This is an increase of 100 million from 1967
> At this growth rate, the US population will hit 400 million circa 2047
> 
> 
> How calculated?
> Through fertility rates;
> US = 2.1
> Spain = 1.28
> EU = 1.47
> Hong Kong = 0.98
> China = 1.7*
> 
> *Based on the replacement rate, the population of China will reduce by almost half [50%] over the next 42yrs.
> 
> Immigration, is an alternative to *growing* your population, so, what are the figures for immigration into China?
> Unsurprisingly, they are so low as to be almost insignificant.
> The US has a number of migration issues, and very long waiting lists for legal immigration.
> 
> Therefore, contrary to the general opinion, the numbers do not support currently the premise put forward by your dealer.*
> *China
> GDP - per capita (PPP):
> $6,800 (2005 est.)
> 
> Net migration rate:
> -0.39 migrant(s)/1,000 population (2006 est.)
> 
> US
> Net migration rate:
> 3.18 migrant(s)/1,000 population (2006 est.)
> 
> GDP - per capita (PPP):
> $41,600 (2005 est.) *
> 
> For example;
> Over 5yrs to 2005, the correlation between oil and gold was *0.13 * It now sits at *0.64*
> 
> The herd psychology of markets [behavioural finance] explains in part the attraction of retail several years into a bullmarket.
> A measure of this speculative excess is the spread between prices of listed commodities and unlisted commodities
> 
> *It currently sits at an all time record of 60%+*






> Irrespective of GDP and overall demand, rapid industrialisation creates huge demand pressures on resources. An already industrialised nation like the US will have a relatively low impact on prices, because either way in demand, it is mostly steady in comparison to one that is becoming rapidly modernised.
> 
> Take testosterone levels in males. One can have a huge amount of testosterone, but if the levels are steady, then testosterone linked behaviours are limited. Compared to someone who has them swinging all over the place.
> 
> The point is, it is not about overall demand, it is about the rate of movement within the demand. Already industrialised nations have relatively low swings, developing nations do not.




Oh, that data.
Looks remarkably like opinion.



> And if you are that interested, you can find similar information to what I have very easily on the net. A recent interview with Paul Keating on China gives a very good overview of the sort of stuff that I have read.




Not really, I'm interested in data [numbers] and calculating from the data my own figures.............not really interested in yet more opinion.

jog on
d998


----------



## chops_a_must

Yes. A billion people involved in rapid industrialisation, modernisation and middle class expansion, the likes of which we have never seen in history, is just pure opinion. It has no basis on anything.

And for the record, the Chinese are reducing the numbers of people in their society that they deem as unproductive. Not in the sectors that they need for rapid expansion.


----------



## ducati916

chops_a_must said:
			
		

> Yes. A billion people involved in rapid industrialisation, modernisation and middle class expansion, the likes of which we have never seen in history, is just pure opinion. It has no basis on anything.
> 
> And for the record, the Chinese are reducing the numbers of people in their society that they deem as unproductive. Not in the sectors that they need for rapid expansion.




Really.
Is that data...........or opinion?

Let's have a look at some data......you know, numbers.

*Labor force - by occupation:   
agriculture: 49% 
industry: 22% 
services: 29% (2005 est.)  * 

*Unemployment rate:    
9% official registered unemployment in urban areas in 2004; substantial unemployment and underemployment in rural areas; an official Chinese journal estimated overall unemployment (including rural areas) for 2003 at 20% (2005 est.)  * 

*Oil - production:    
3.504 million bbl/day (2004)  
Oil - consumption:    
6.391 million bbl/day (2004)  
Oil - exports:    
340,300 bbl/day (2004)  
Oil - imports:    
3.226 million bbl/day (2004)  * 

*Exports:    
$752.2 billion f.o.b. (2005 est.)  
Exports - commodities:   
machinery and equipment, plastics, optical and medical equipment, iron and steel  
Exports - partners:   
US 21.4%, Hong Kong 16.3%, Japan 11%, South Korea 4.6%, Germany 4.3% (2005)  * 

So from the numbers, [you can go first] what conclusions do you draw?
For the second part of your assertion, viz. the death rate, or the reduction of non-productive population, are these numbers supporting, or contradicting your assertion?

*Death rate:    
6.97 deaths/1,000 population (2006 est.) 

Net migration rate:   
-0.39 migrant(s)/1,000 population (2006 est.) 

Sex ratio:   
at birth: 1.12 male(s)/female 
under 15 years: 1.13 male(s)/female 
15-64 years: 1.06 male(s)/female 
65 years and over: 0.91 male(s)/female 
total population: 1.06 male(s)/female (2006 est.) 

Infant mortality rate:    
total: 23.12 deaths/1,000 live births 
male: 20.6 deaths/1,000 live births 
female: 25.94 deaths/1,000 live births (2006 est.)  
Life expectancy at birth: 

total population: 72.58 years 
male: 70.89 years 
female: 74.46 years (2006 est.) 

Total fertility rate:    
1.73 children born/woman (2006 est.)  

HIV/AIDS - adult prevalence rate:    
0.1% (2003 est.)  
HIV/AIDS - people living with HIV/AIDS:    
840,000 (2003 est.)  

HIV/AIDS - deaths:    
44,000 (2003 est.)  * 

jog on
d998


----------



## rederob

rederob said:
			
		

> I guess there are some things that you will never see, ducati.
> I have no interest in responding to your side tracks and irrelevances in this thread as it diminishes its value.
> If you wish to simply and clearly state your position on the theme, please do so.
> I am sure other readers are clear where I stand, and how I apply my knowledge of the markets to my trading decisions.



ducati
*If you wish to simply and clearly state your position on the theme, please do so.*
It's a relatively simple ask.

As I said earlier, you are great amusement value.


----------



## BSD

ducati916 said:
			
		

> Really.
> Is that data...........or opinion?
> 
> Let's have a look at some data......you know, numbers.
> 
> *Labor force - by occupation:
> agriculture: 49%
> industry: 22%
> services: 29% (2005 est.)  *
> 
> So from the numbers, [you can go first] what conclusions do you draw?
> For the second part of your assertion, viz. the death rate, or the reduction of non-productive population, are these numbers supporting, or contradicting your assertion?
> 
> jog on
> d998




I will happily go first.

Let me just chip away at your facts slowly. I too have access to the CIA Factbook and can put a different spin on the numbers.

Being more interested in the future and not the past, my different spin may be more useful in establishing the supply and demand function for future years - the years in which being right in our assumptions will make us money.

We need to add these figures too (bold makes them look more important don't you think?)

*GDP - composition by sector:   
agriculture: 12.5% 
industry: 47.3% 
services: 40.3% 

GDP $2.225 trillion (2005 est.) 

Labor force:    
791.4 million (2005 est.) * 


While agriculture was the realm of 50% of the workforce in 2005 it was only 12.5% of the GDP. So 395 million working farmers ground out $278bn in GDP.

That is about $700 each per year. Not much buying power for copper or oil I would imagine.

The other sectors, those that are growing every year, generated 87.5% of the GDP. If you do the sums, it works out to be around $4928 per worker. 

Being able to generate 7 times as much wealth by moving to the city is why 20 million are doing it every year.

Further, the amount of oil and copper you consume on such a wage would be more than 7 times that consumed when on $700. The copper intensity argument.


Now my stat surrounding 400m (someone elses projection, not mine) of farmers making this transition to a modern lifestyle is the reason that underlying demand is going to grow at a fast clip in the next decades. The population doesnt need to go up - the transition is the important part. 


The demand from the US may move by a couple of percent either way from year to year - but their demand is already in the demand curve. 

New demand is continuing to grow as 400m become richer by a multiple of their previous income. Your concern regarding the aging workforce should be dwarved by the leverage involved in moving people off the farms and into cities. 

20 million people per annum earning an extra $4,000 per annum is the elephant in the room

____________________________________________________________

I will address supply later - but you may want to look up your Economic 101 definition of The Law of Dimishing Returns and apply it to metals and oil supply.

With grades getting lower and depths greater, the marginal volume of copper/oil from $1 of capital expenditure is getting lower and lower.

That capex needs to be amortised over the mine life and thus, the marginal cost is continuing to move up. 

__________________________________________________________

Another way you may wish to view it all

China growing GDP by 10% = $250 BILLION in new demand

US GDP Growth Stagant = $0 effect on demand

Savage US recession 2% drop in GDP = $250 BILLION

US GDP needs to fall by 2% every year now to wipe out the China effect. 
____________________________________________________________ 

This is not a new phenomena. 

"When Deng Xiaoping took over the economy in 1979 there were only 60 privately owned passenger vehicles in the entire country. 

In 2005 China had autobile sales of 5.92 million cars. 

More than Japan with 5.8

Chinese GDP has grown now by 9.5% per annum for the last 26 years." 

 - Donald Coxe, Global Portfolio Strategist, BMO Financial
Supply Side Mineral Economics, Basic Points, February 2006

________________________________________________

I though your 'valuation' of Phelps was rather interesting too

A couple of comments from a first semester accounting student studying balance sheet for signs of health - but a very precise $ valuation. 

No EPS forecasts, no comment on mine life, unit costs, your commodity price asumptions, your discount rate, your currency forecasts etc.

Just a very precise valuation at an 80% discount to what the rest of the world is willing to pay.
___________________________________


----------



## wayneL

BSD said:
			
		

> Just a very precise valuation at an 80% discount to what the rest of the world is willing to pay.
> ___________________________________



BSD,

Look what the rest of the world was willing to pay for rubbish in the late 90's.

Social proof  is a very strong influence, even in the institutional world... especially in the institutional world.

A nice quote I saw some years ago (ironically, on a church sign):

_"A foolish thing said by 500,000 people, is still a foolish thing."
_

Cheers


----------



## chops_a_must

BSD said:
			
		

> I will happily go first.
> 
> Let me just chip away at your facts slowly. I too have access to the CIA Factbook and can put a different spin on the numbers.
> 
> Being more interested in the future and not the past, my different spin may be more useful in establishing the supply and demand function for future years - the years in which being right in our assumptions will make us money.
> 
> We need to add these figures too (bold makes them look more important don't you think?)
> 
> *GDP - composition by sector:
> agriculture: 12.5%
> industry: 47.3%
> services: 40.3%
> 
> GDP $2.225 trillion (2005 est.)
> 
> Labor force:
> 791.4 million (2005 est.) *
> 
> 
> While agriculture was the realm of 50% of the workforce in 2005 it was only 12.5% of the GDP. So 395 million working farmers ground out $278bn in GDP.
> 
> That is about $700 each per year. Not much buying power for copper or oil I would imagine.
> 
> The other sectors, those that are growing every year, generated 87.5% of the GDP. If you do the sums, it works out to be around $4928 per worker.
> 
> Being able to generate 7 times as much wealth by moving to the city is why 20 million are doing it every year.
> 
> Further, the amount of oil and copper you consume on such a wage would be more than 7 times that consumed when on $700. The copper intensity argument.
> 
> 
> Now my stat surrounding 400m (someone elses projection, not mine) of farmers making this transition to a modern lifestyle is the reason that underlying demand is going to grow at a fast clip in the next decades. The population doesnt need to go up - the transition is the important part.



Thankyou.

This is exactly why the Chinese government are telling peasant farmers to move to the cities, work in mines or have their rights to breed taken away.


----------



## ducati916

*BSD* 



> Let me just chip away at your facts slowly. I too have access to the CIA Factbook and can put a different spin on the numbers.




Excellent, well spotted, and debate over the numbers is exactly what should be occuring, as interpretations will vary.



> Being more interested in the future and not the past, my different spin may be more useful in establishing the supply and demand function for future years - the years in which being right in our assumptions will make us money.




Fine.



> We need to add these figures too (bold makes them look more important don't you think?)
> 
> *GDP - composition by sector:
> agriculture: 12.5%
> industry: 47.3%
> services: 40.3%
> 
> GDP $2.225 trillion (2005 est.)
> 
> Labor force:
> 791.4 million (2005 est.) *




Agreed, lends a certain, je ne sais quoi.



> While agriculture was the realm of 50% of the workforce in 2005 it was only 12.5% of the GDP. So 395 million working farmers ground out $278bn in GDP.
> 
> That is about $700 each per year. Not much buying power for copper or oil I would imagine.
> 
> The other sectors, those that are growing every year, generated 87.5% of the GDP. If you do the sums, it works out to be around $4928 per worker.
> 
> Being able to generate 7 times as much wealth by moving to the city is why 20 million are doing it every year.
> 
> Further, the amount of oil and copper you consume on such a wage would be more than 7 times that consumed when on $700. The copper intensity argument.






> Now my stat surrounding 400m (someone elses projection, not mine) of farmers making this transition to a modern lifestyle is the reason that underlying demand is going to grow at a fast clip in the next decades. The population doesnt need to go up - the transition is the important part.




The crux of this argument revolves around employment, at or circa the figures that you calculate.

One of the problems in China is the provision of employment for the numbers moving from agriculture, to industry/services. One way currently, is to shore up failing businesses, thereby maintaining employment.

The recent decision by the Beijing government to suspend a new bankruptcy law for 2,116 of the country's worst-performing state-owned companies even before it goes into effect in June 2007 is a very bad sign. In a recent decision, the Beijing government decided to give these companies until August 2008 before they were covered by the new law.

These companies face claims for back pay and health-care costs from workers that could add up to billions of yuan.[Financial Times] The new bankruptcy law would have put workers behind other creditors in the event of a corporate bankruptcy. But the government is afraid of the political unrest that would result from closing hundreds of unprofitable state-owned companies.

The biggest effect of the decision may be to delay yet again the central government's attempt to force banks to lend only to projects that have a chance of a showing a profit. In addition, it may force the central government to spend some of its reserves on bailing out the banks that hold the loans on the worst of these enterprises. The bankruptcy law is intended to create a mechanism that would allow banks to sell off bad loans and the assets of bankrupt companies to investors (often overseas investors). Absent that mechanism, Beijing will have to pump cash into the country's banks to offset these bad loans.

The recent IPO of Industrial & Commercial Bank of China that attracted many institutional investors and retail, is an example of a Bank with huge non-performing loans on the books, prior to the IPO, receiving a huge cash injection from the Government, and floated. Apparently, still carrying a significant % of non-performing loans.

The second problem is one of education.
The Japanese, recently required a huge Call centre for consumer complaints, issues, help desk etc. Initially, they were going to locate it in China.
This plan was dropped, as the mastery of English was so poor. It instead went to India. [Economist]

Various US Tech companies, while eager to provide FDI to China, cannot hire Chinese to higher positions, as their education on paper while seemingly adequate, in practical terms it has been a washout [Economist]

Therefore the services sector, cannot cater for the number of jobs required, thus, the more that move from the agricultural sector, to the services or industrial sector, potentially the larger the unemployment problem will grow.



> The demand from the US may move by a couple of percent either way from year to year - but their demand is already in the demand curve.




Incorrect.
This very same argument was posited by *chops*
You both need to revisit some basic economics.



> New demand is continuing to grow as 400m become richer by a multiple of their previous income. Your concern regarding the aging workforce should be dwarved by the leverage involved in moving people off the farms and into cities.




If they can find employment.
Currently, the growth in job seekers, exceeds job creation.
Unless it is publically subsidised by the government.
Hence my previous post regarding *price floors*



> Taking price floors as our first example.
> Price floors have the effect of *creating surpluses*, as the price is higher than the equilibrium clearing price.






> 20 million people per annum earning an extra $4,000 per annum is the elephant in the room




$20M * $4000 = $80 billion not an insignificant number if it can be achieved.
But in context, the revenue of two DJI companies.



> I will address supply later - but you may want to look up your Economic 101 definition of The Law of Dimishing Returns and apply it to metals and oil supply.




Ready when you are.



> That capex needs to be amortised over the mine life and thus, the marginal cost is continuing to move up.




Agreed.
Which really then addresses two main issues;
*are commodity producers price takers, or price makers?
*new technology, lowering marginal costs
Both are important and relevant, I'm sure we have differing views on both.



> Another way you may wish to view it all
> 
> China growing GDP by 10% = $250 BILLION in new demand
> US GDP Growth Stagant = $0 effect on demand
> Savage US recession 2% drop in GDP = $250 BILLION
> US GDP needs to fall by 2% every year now to wipe out the China effect.




First, a savage recession is not 2%
That is a concern for politicians, newspapers will headline it, but not significant. 5%+ = recession.

Second, US GDP stagnant, will not have $0.0 effect on demand.
That simply displays an analysis of convenience, not of penetration.
Politicians hate zero or negative numbers.
They will tinker, via enactment of new laws, interest rates [via the Fed] tariffs, regulation, deregulation etc.

Changes in a trading partner the size of the US, will have consequences for all other economies, especially China. If WalMart finds cheaper supply, that will shave points off of China's GDP, as the orders from WalMart alone already accounts for points in China's GDP 



> This is not a new phenomena.
> "When Deng Xiaoping took over the economy in 1979 there were only 60 privately owned passenger vehicles in the entire country.
> In 2005 China had autobile sales of 5.92 million cars.
> More than Japan with 5.8
> Chinese GDP has grown now by 9.5% per annum for the last 26 years."
> 
> - Donald Coxe, Global Portfolio Strategist, BMO Financial
> Supply Side Mineral Economics, Basic Points, February 2006




Agreed.
China is growing. Historical fact. [you castigated historical evidence]
Can it keep growing [future]
And if yes, at what rate?
And if not, what are the consequences?
Which is where we are currently.
Hence, the utilization of growth rates of population, that if employed, at PPP levels, will be cumulative to GDP



> I though your 'valuation' of Phelps was rather interesting too
> A couple of comments from a first semester accounting student studying balance sheet for signs of health - but a very precise $ valuation.
> No EPS forecasts, no comment on mine life, unit costs, your commodity price asumptions, your discount rate, your currency forecasts etc.
> 
> Just a very precise valuation at an 80% discount to what the rest of the world is willing to pay.




Ahhh, so you hated it.
But why go to the esoteric, if the black & white suggests that they are utilizing very aggressive accounting, to mislead investors?

If, I were to purchase a business [via stock, or otherwise] that I suspected were utilizing such aggressive accounting tactics, would you not demand a significant discount to provide at least a fighting chance to make a profit?
Possibly your altruistic nature is more forgiving than my own.

As for precise, I calculated a fair value at something like $41 to $55, which is a range, precisely as an exact figure is a nonsense.
My purchase recommendation was $20 or less, again, a range.

In conclusion, while we are poles apart in our thinking, at least you have presented an argument that utilizes data in evidence of your argument.
A vast improvement on the gibberish currently on offer.
I shall look forward to your counter-arguments should you so decide.


----------



## ducati916

*enzo*



> Look what the rest of the world was willing to pay for rubbish in the late 90's.
> 
> Social proof is a very strong influence, even in the institutional world... especially in the institutional world.
> A nice quote I saw some years ago (ironically, on a church sign):
> "A foolish thing said by 500,000 people, is still a foolish thing."




Absolutely.
However, here we enter the psychological realm of price making, which as you allude to quite correctly *social proof* is a large component.

*chops & rederob*

doh.
Apparently this is now in the Oxford dictionary.

jog on
d998


----------



## rederob

deja vu:

ducati
If you wish to simply and clearly state your position on the theme, please do so.
It's a relatively simple ask.

You pretense over number crunching is wasteful f you are incapable of arriving at at a position.


----------



## wayneL

rederob said:
			
		

> deja vu:
> 
> ducati
> If you wish to simply and clearly state your position on the theme, please do so.
> It's a relatively simple ask.
> 
> You pretense over number crunching is wasteful f you are incapable of arriving at at a position.



Come on red

You are capable of high quality posts. You can do better than this.


----------



## rederob

wayneL said:
			
		

> Come on red
> 
> You are capable of high quality posts. You can do better than this.



Wayne
We can agree or disagree on historical numbers - that's all "facts" are.
In the case of China, there are BIG data problems and little of the data is up to date - we typically have to extrapolate to get a better feel.
We can argue the fact, or numbers, this way or that way.
That can be useful.
But at some point it's useful to distill that into a "view", "position", "forecast" or whatever.
ducati was equally reluctant to do that in the gold thread.
Is he tipping commodities to collapse?
I know they will, but not exactly when.
And then what do we do if they only collapse a little bit bit - say our definition of "collapse" came up short!
Are we presently in decline - base metal and oil commodity-wise?
Are we in consolidation?
Are we, in the immediate term, facing a collapse?
Is it best we only look at China for direction on this?
The problem we have in these forums is that the issues for consideration are very complex, and arguing the toss on one country's data, or another's GDP is not going to tell us what we really need to know.
My personal view on China is that while their consumption of commodities of every kind is important in terms of its effect on global supply and demand, it's their continued massive accumulation of US currency that will ultimately be more  important.


----------



## ducati916

*rederob*



> it's their continued massive accumulation of US currency that will ultimately be more important.




Agreed, their accumulation of US$ currency is, and will be a problem for all concerned.

Estimates place the foreign exchange reserves at $1 Trillion+
China's massive hoard is the result of;
*large current account surplus
*significant foreign direct investment [FDI]
*speculative capital

The Central bank, to protect the Yuan from appreciating has been forced to accumulate US$ primarily in the form of Treasuries [estimated at 70%]. Thus has this massive balance been created.

China could prevent this accumulation [estimated at $16 billion/month] by;
*set free its exchange rate
*relax restrictions on capital outflows 
*allow private citizens to own foreign assets

Alternatively a big shift out of US$ into an alternative asset, could push up Bond yields, and further pressure the US housing market.
For example a shift into Euros, however, this would cause a falling dollar, causing capital losses to remaining balances, and, cause an appreciation in the Yuan, forcing a further purchase of US$.

Spending 5% on gold, would buy the entire years production.
On oil, six months reserves would cost 8%
Prices on both would be pushed up dramatically. Likely?

Spend on infra-structure?
Already overspent.
Writing off of banks non-performing loans, already underway, some $60 billion.
The problem that to spend at home, you must convert $ to Yuan.
That causes a rise in the Yuan, and is again self-defeating.

jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## rederob

ducati
If you wish to simply and clearly state your position on the theme, please do so.

Mine's up.


----------



## 3 veiws of a secret

I was in the bath a few nights ago listening to the radio ABC news with(Gee&Tee in hand) and they played an interview with Jimmy Rogers (spelling ...it could have been Jimmy Rodgers? but definetly not Ginger Rodgers).....his total slant on commodities seemed to me Bullish! be it agri/resources /power.........it might be an interesting podcast download from the ABC.....suggest you listen to it, whether its gospel it's up to yourselves to figure.


----------



## rederob

ducati916 said:
			
		

> *rederob*
> 
> Agreed, their accumulation of US$ currency is, and will be a problem for all concerned.
> 
> jog on
> d998
> http://grantmacdonald.blog.co.nz/



A more detailed elaboration on ducati's post is at http://www.economist.com/finance/displaystory.cfm?story_id=8083036


----------



## ducati916

rederob said:
			
		

> ducati
> If you wish to simply and clearly state your position on the theme, please do so.
> 
> Mine's up.




Hey peanut, I'm not here to educate you, I'm here to entertain you.

Irrespective, the key to growing GDP and wealth, which is a fair proxy for commodity consumption [or demand] is;

Population + Productivity

BSD and I disagree on population trends, and their interpretation.
We will possibly disagree on productivity trends as well.
But in amongst all the data lies a fair stab at the answer.

jog on
d998


----------



## ducati916

And from Bloomberg just now;



> By Helen Yuan and Allen T. Cheng
> 
> Nov. 25 (Bloomberg) -- China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.
> 
> Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.
> 
> China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.
> 
> ``Given the pace of growth around the world, I don't think 10.7 percent is excessive,'' said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. ``China definitely needs some rebalancing'' in growth away from business investment.
> 
> Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.
> 
> The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.
> 
> Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.
> 
> Investment May Rebound
> 
> ``China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough,'' Hui said.
> 
> Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.
> 
> China's inflation rate will be ``as high as 1.5 percent for 2006,'' Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.
> 
> The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.
> 
> Money Supply
> 
> China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.
> 
> U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.
> 
> The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.
> 
> China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.
> 
> M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.
> 
> China's foreign exchange reserves exceeded $1 billion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.
> 
> To contact the reporter on this story: Allen T. Cheng in Beijing at acheng13@bloomberg.net Helen Yuan in Shanghai at hyuan@bloomberg.net




jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## rederob

ducati916 said:
			
		

> Hey peanut, I'm not here to educate you, I'm here to entertain you.
> 
> Irrespective, the key to growing GDP and wealth, which is a fair proxy for commodity consumption [or demand] is;
> 
> Population + Productivity
> 
> BSD and I disagree on population trends, and their interpretation.
> We will possibly disagree on productivity trends as well.
> But in amongst all the data lies .
> 
> jog on
> d998



ducati
It is for *you * to take *a fair stab at the answer*.
How about giving it a try!

What BSD has determined (quite correctly) is that economies in predominant supply/demand balance - via steady and moderate GDPs - will have a minimal impact on global commodity balances.  
The principal reason for this is that demand remains relatively steady, so consumers can lock into term supply contracts and producers schedule output to meet order books.
Over the past 3 years the disproportionately strong growth from BRIC nations has tipped the balance to demand, and while supply has ramped up, capacity constraints have again kicked in: In very simple terms, ramped up output to meet expected demand, has been exceeded at a global level.

Producers are now at a point where they are reluctant to commit heavily to new capacity as the numbers do not stack up.  That is, the risk of overproduction - which can lead to sharply declining prices - outweighs the commitment of funds for expansion, except for greenfield sites.


----------



## Dr Doom

Would it be fair to assume the case for continued bullish sentiment for copper in particular is detracted by the following - 
Demand - US housing - houses consume copper, probably the biggest consumer???
If the US housing market continues to recede at the current pace then demand from this sector will fall.
Supply - Increased production - As a combined company, Freeport-McMoRan and Phelps Dodge think they can deliver nearly 1 billion pounds of additional copper production capacity in the next three years. 
Along with other suppliers, is this amount enough to tip the supply/demand balance to excess supply.
Bottom line, is copper the first commodity to fall from bull to bear market??


----------



## rederob

Dr Doom said:
			
		

> Would it be fair to assume the case for continued bullish sentiment for copper in particular is detracted by the following -
> Demand - US housing - houses consume copper, probably the biggest consumer???
> If the US housing market continues to recede at the current pace then demand from this sector will fall.
> Supply - Increased production - As a combined company, Freeport-McMoRan and Phelps Dodge think they can deliver nearly 1 billion pounds of additional copper production capacity in the next three years.
> Along with other suppliers, is this amount enough to tip the supply/demand balance to excess supply.
> Bottom line, is copper the first commodity to fall from bull to bear market??



Dr Doom
Yes, if the extent of the decline impacts the "balance" significantly.
US housing is in decline, but industrial production is firm and commercial construction is robust.
We need in the US to see Comex copper inventories rapidly spin out.  Instead the past few weeks have seen demand wane and small inventory declines occur.
At the same time, China's Shanghai copper warehouse stocks have been in decline for some weeks.
And spare copper in Europe is at critical levels.
Remember that in the past year the so called ramp up of copper output, including post-strike action at major producers, has had a minimal impact on the global balance.  Moreover, if the supply situation was ameliorated by consumer destocking (especially in China), then a return to restocking will quickly erode inventories.
If we are near this latter point, then we shall soon see a global resumption of a broad based commodity bull.


----------



## ducati916

*rederob*



> What BSD has determined (quite correctly) is that economies in predominant supply/demand balance - via steady and moderate GDPs - will have a minimal impact on global commodity balances.




Correct.
However this currently is not the case.
US GDP [supply/demand] dynamics are shifting.
*Housing 
*Car Industry
*Steel
*Defense
*Agriculture

Are all examples of industries where there are large inputs of raw materials, [commodities] and or producing commodities themselves [agriculture] and there are dynamic changes in demand from the consumer, thus effecting changes in their [producer demand]

If this was some piddling small economy, it really wouldn't make much of a difference at international level.

This however is the US.
Still the largest economy in the world.
The US accounts for 21% of China's exports.
Thus if the US goes into recession, commodities get reduced demand from two sources; 

*falling demand from the US from its own falling demand, due to the aforementioned industries
*falling demand from China, as US demand for Chinese goods falls.

Thus the net result is falling demand [ & increased supply in agricultural commodities] from the two largest economies. This will I imagine affect the prices of commodities.



> Over the past 3 years the disproportionately strong growth from BRIC nations has tipped the balance to demand, and while supply has ramped up, capacity constraints have again kicked in: In very simple terms, ramped up output to meet expected demand, has been exceeded at a global level.




*And* because US GDP has been surprisingly robust *and above trend* that it is now falling, and possibly to fall below trend, this changes the scenario in a very material way.



> Producers are now at a point where they are reluctant to commit heavily to new capacity as the numbers do not stack up. That is, the risk of overproduction - which can lead to sharply declining prices - outweighs the commitment of funds for expansion, except for greenfield sites.




On what evidence?
I see the very industries, commodity based industries doing exactly the opposite, but via the aqusition route, as it is a quicker way to bring fresh supply. It however seriously weakens balance sheets, so that any downturn is magnified by the increased leverage, thus, many producers that were overvalued are becoming highly overvalued.

jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## BSD

ducati916 said:
			
		

> *rederob*
> 
> I see the very industries, commodity based industries doing exactly the opposite, but via the aqusition route, as it is a quicker way to bring fresh supply. It however seriously weakens balance sheets, so that any downturn is magnified by the increased leverage, thus, many producers that were overvalued are becoming highly overvalued.




Simply not true.

BHP and RIO are set to be free of all debt in coming years

They are buying back billions of dollars worth of shares.

Mining company balance sheets have not been stronger


Acquired mines do not increase supply. They probably reduce it in the medium term because money is being used to buy control of an existing business and not a new project.

The fact acquisitions at 40% above the already 'overvalued' share prices make sense economically compared to a greenfields project identifies that the majors think prices are going to remain strong in the next five-ten years and that the market is seriously undervaluing these businesses.


----------



## ducati916

BSD said:
			
		

> Simply not true.
> 
> BHP and RIO are set to be free of all debt in coming years
> 
> They are buying back billions of dollars worth of shares.
> 
> Mining company balance sheets have not been stronger
> 
> 
> Acquired mines do not increase supply. They probably reduce it in the medium term because money is being used to buy control of an existing business and not a new project.
> 
> The fact acquisitions at 40% above the already 'overvalued' share prices make sense economically compared to a greenfields project identifies that the majors think prices are going to remain strong in the next five-ten years and that the market is seriously undervaluing these businesses.




Couple of points;
BHP according to their Balance Sheet 09/25/06
Carry $7.648 billion in LT Debt
Notes Payable, $1.368 billion

Rio Tinto; 06/30/06
$1.686 billion LT Debt
$2.305 billion Notes Payable

So according to their filings, they are carrying debt.



> They are buying back billions of dollars worth of shares.




And destroying shareholder value, as the shares are selling at a premium.



> Mining company balance sheets have not been stronger




True enough.
Due to the current exceptional operating conditions; high demand, and high prices. The value always appears in bad times, low demand, low prices, if at this time it has an exceptional Balance Sheet, it will most likely be a true bargain.

Second point, many [most] aquisitions in the resource sector are based on gaining access to new inventory [supply] This supply, may or may not be currently under production, if it is not, very often it is placed into production, or existing production is increased, as the aquirers marginal costs are different. Either way, new supply is brought to market stimualated by the high spot prices and or futures prices.



> The fact acquisitions at 40% above the already 'overvalued' share prices make sense economically compared to a greenfields project identifies that the majors think prices are going to remain strong in the next five-ten years and that the market is seriously undervaluing these businesses




Then we would really need to discuss management as well.
If they think their shares [businesses] are undervalued, I guess they are busy buying shares for their personal accounts?

jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## Knobby22

ducati916 said:
			
		

> Then we would really need to discuss management as well.
> If they think their shares [businesses] are undervalued, I guess they are busy buying shares for their personal accounts?
> 
> http://grantmacdonald.blog.co.nz/




Or undertaking a buyback as is occurring.

Refer BHP thread.


----------



## rederob

ducati
This thread has a theme and despite every request that you address it, your preference is to change the subject.
Wat is your specific view on the notion that commodities will collapse: Near, medium or longer term?

If you wish to bring the US into the debate, you need to determine the extent that its GDP correction will impact base metals/oil - I do not bring soft commodities into discussion.

In a generally balanced commodity market, there will need to be some give and take.  If the US falters the worst that China will be impacted is a bit over 20% using China's exports as a basis.
In fact, there is nothing to indicate that China will lose its exports base to the US if its economy declines.  That's because there is a high probability that cheaper Chinese products will in fact continue to be preferred to their patriotic counterparts.

Given that you contend the dynamics of US GDP are shifting (a relative given as it is almost impossible for it to stay "constant"), what material impact has been observable?

So far we can attribute a small copper stock build to the US housing slowdown, but not much else that suggest the commodity bull is faltering.

I suggest you closely read your last paragraph in reply to me.  It suggests only that acquisitions are occurring, which do nothing for increasing supply.  And your contention that these acquisitions diminish a company's balance sheet similarly have no material impact on supply.  
What will make a difference is that companies spend considerably on new capacity.  No new capacity means no additional supply.


----------



## ducati916

Not good for commodities;



> NEW YORK (Reuters) - After a string of strong years, U.S. auto sales are slowing and an increasing number of forecasts say sales could fall next year to their lowest in nearly a decade, the Wall Street Journal reported on its Web site on Monday.
> 
> Slowing growth in the overall U.S. economy and a slump in the housing industry, particularly in big markets such as California, come at a bad time for General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, the paper said.
> 
> IRN, a Michigan market researcher, forecasts U.S. 2007 sales of 16.3 million light vehicles, or cars and trucks. That would be the lowest since 1998 and a drop of 300,000, or 1.8 percent, from this year's expected sales of 16.6 million vehicles.
> 
> Some auto makers are more optimistic, the paper says, with both GM and Toyota Motor Corp. forecasting 2007 industry sales of 16.5 million cars and trucks.
> 
> But analysts at Bank of America, Wachovia Corp. and Citigroup expect a sharper decline, as does investor Wilbur Ross, who has spent hundreds of millions of dollars in the past 18 months buying battered auto suppliers, the WSJ says.




Not good for China;



> CHICAGO (Reuters) - Wal-Mart Stores Inc. predicted a rare decline in monthly sales on Saturday, even as U.S. bargain-hunters jammed stores in search of gifts at the start of the crucial holiday shopping season.
> 
> Wal-Mart, the world's biggest retailer, sounded a cautious note for retailers as they began a second day of Thanksgiving weekend sales with deep discounts and early bird specials on items from cashmere sweaters to big-screen plasma televisions.
> 
> Wal-Mart estimated that November sales fell 0.1 percent at its U.S. stores open at least a year -- a closely watched retail measure known as same-store sales.
> 
> The retailer will provide a final monthly sales report on Thursday, when most other major chain stores report their November figures. This would mark Wal-Mart's first monthly same-store sales decline since April 1996.
> 
> Wal-Mart had expected same-store sales to be flat compared with the same period last year, which many Wall Street analysts had viewed as disappointing. Wal-Mart's four-week November sales period ended on Friday.
> 
> "We would frankly have expected better," Merrill Lynch retail analyst Virginia Genereux wrote in a note to clients dated Friday, pointing out that Wal-Mart had slashed prices on popular toys, electronics and other gift items to lure customers. The retailer's widely publicized $4 generic drug program should have drawn more shoppers.
> 
> Investors are watching holiday sales particularly closely this year to gauge how consumers are coping with a slowdown in the housing market that has already hurt home improvement retailers and furniture stores.
> 
> Consumer spending accounts for some two-thirds of U.S. economic activity, and the November-December holiday season makes up anywhere from 20 percent to 40 percent of retailers' annual sales.
> 
> The National Retail Federation trade group expects holiday sales growth of about 5 percent, which would be a slowdown from last year's surprisingly strong 6.1 percent gain.
> 
> $1,200 HAND-MADE TOYS
> 
> Department store chain J.C. Penney Co. Inc. said its holiday season was off to a good start, with brisk foot traffic and strong demand for categories such as home entertainment, jewelry, children's clothing and housewares.
> 
> Famed toy retailer FAO Schwarz kept its stores open on Thanksgiving Day, and reported strong demand for hand-made wooden toys -- some of which sold for $1,200 apiece.
> 
> At FAO Schwarz's flagship store in New York, Thanksgiving Day sales were flat, which the company attributed to badweather, while its Las Vegas store saw a 45 percent sales increase.
> 
> "I see people buying better, what I call 'antiquity', presents that are better made, more durable -- things I view as generational presents," Ed Schmults, the chief executive, told Reuters in an interview.
> 
> Wayne Best, a senior economist at Visa USA, said steep discounts helped spur the strongest sales on Black Friday at furniture and home furnishings stores and electronics and appliance stores. In the later category, the average ticket rose 9 percent, he said.
> 
> Discount and department stores saw much softer growth, Best said. Visa is expected on Monday to release its sales data for Black Friday -- so named because retailers traditionally become profitable for the year on the day after Thanksgiving.
> 
> A Wal-Mart spokeswoman declined to comment on its Black Friday sales, but said the retailer will provide those details along with its sales report on Thursday.
> 
> Stores were packed on Friday, the traditional start to the holiday shopping season, and retailers were pushing another round of discounts on Saturday to keep shoppers coming back. The NRF trade group expected some 137 million Americans to go shopping this weekend.
> 
> But big crowds don't necessarily mean strong sales.
> 
> Michael McNamara, vice president of research and analysis at MasterCard's SpendingPulse, noted that while hot items such as the PlayStation 3 video game system have generated buzz, they are only a tiny portion of retailers' overall sales.
> 
> He said rather than focusing on Black Friday crowds, investors should pay close attention to October sales trends, which showed a dramatic slowdown in growth year-over-year heading into the holiday season.
> 
> "You're looking at (sales) growth rates that are about half of what they were last year," he said. "The momentum that we have coming in is definitely down several notches."





jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## rederob

ducati
nice cut and paste post
not willing to put your views forward?

On the matter of vehicle sales - the report is about 2007 forecast levels and may or may not come true.

On the matter of retail sales, forecast growth of only 5% is not too bad a result.

I would welcome a correction in 2007 as it will mean that when demand springs back, we could well be ahead of where we are today with commodity prices.


----------



## Dr Doom

Hey Rederob,
I'm not too sure where you are going with this either, as the topic was 'commodities tipped to collapse' & Ducati & others have put forward ample evidence for their opinions, data trending to suggest a serious hard landing in the US. 
To quote Paul van Eeden, supporting the case for the reduced demand side of the argument - "Construction of new homes fell 14.6% in October (from September) to the lowest level in six years while data previously released for August and September were revised lower. Homebuilders are facing record numbers of cancellations: D.R. Horton, one the largest home builders in the country by number of units, said its cancellation rate had increased to 40%, up from 29% in the previous quarter. Its historical cancellation rate is 16% to 20%. Toll Brothers, which builds luxury homes, said its cancellation rate had increased from 2% a year earlier to 7% -- the highest level of cancellations in the company's history.

To get rid of the glut of unsold homes, builders are slashing prices. The median price of a new home is down 9.7% from a year ago and building permits for new houses fell 6.3% in October. Single-family home starts were down 32% in October as compared to last year, but in January 1991 year-on-year starts fell 45% and in March 1980 they fell 52%."

US consumers not being able to borrow against their homes as they have in the past means less spending eg Wal Mart, less Chinese goods consumed etc etc. This is the first domino to fall

Maybe the parties over, so position yourself best to mitigate your losses or gain from the coming recessionary/deflationary environment.

Speaking of which, what would be the best defense in such a scenario?. Gold maybe??


----------



## rederob

Dr Doom
Every cycle comes to an end.
Otherwise it is not a "cycle".
The commodity bull will come to an end, too.
But when?
Surely that is the question we need to address.
This will be the third full year that I have seen the bears out in force.
Had I taken notice of them I guess my portfolio would not be overweight commodities.
Over the next 3 months I believe the commodity bull (and I am talking mostly hard commodities) should remain reasonably intact.
Beyond the first quarter 2007 we should get seasonal weakness, but will it be enough to end the bull run.
I do not know.
My view is that we continue to place too much importance on the US a principal dynamic to the bull cycle.
My view will definitely change if the US capitulates and global economies fall like dominos.
My "defense" is that the commodity sector turns as quickly and as visibly as a supertanker.
My position would be to go predominately to cash and, yes, to have a core gold holding.

So my plus-6 month view is presently one of uncertainty, and of being more watchful than now.

Going forward, we will be able to see the supply side response to both present demand, and any change in demand.  There remains a chance that demand will be maintained at a level that prevents stockbuilds, and maintains commodity prices at an elevated level.  There is certainly nothing preventing the giant mining houses from doing and OPEC and simply reducing output to keep prices high - what do they have to lose?

It is also my view that any correction will be relatively (from a cyclical perspective) short-lived.  I have little doubt that the shift of wealth from West to East is multi-generational.  And it is apparent already that what most of us take for granted here is going to be on the wish list of those that aspire to our living standards. 

So my long term strategy is to move back into the next commodity run early, as a lot of catch will be played to accommodate a new Asian middle class that may not immediately have the disposable income of Westerners, but will attempt to mimic our lifestyles to the maximum extent.  That means a productive capacity the likes of which we are not even close to right now.


----------



## ducati916

> WASHINGTON (Reuters) - The U.S. economy grew faster than first thought in third quarter on strong business investment, even as the housing sector posted its biggest decline in more than 15 years, the government said Wednesday.
> 
> After-tax corporate profits during the quarter were far stronger than expected, and will likely reinforce expectations that Federal Reserve policy-makers would keep interest rates unchanged for the next few months.
> 
> "Net/net, I think the data is not going to change too many opinions (about Fed policy)," said Adam Brown, co-head of U.S. Treasury trading at Barclays Capital in New York.
> 
> Gross domestic product, which measures total economic activity within U.S. borders, expanded at a 2.2 percent annual rate during the third quarter, higher than the 1.6 percent gain first estimated and above Wall Street expectations for a 1.8 percent gain.
> 
> *"This kind of cools the talk that the economy is edging closer to the brink of recession," * said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi in New York.
> 
> *U.S. Treasury debt prices turned lower after the release of the higher-than-expected third quarter GDP reading.* The euro held steady against the dollar, which was relatively unchanged against the yen.
> 
> The third quarter gain was still weaker than the 2.6 percent advance in the second quarter.
> 
> Even so, business spending was stronger than first thought according to the Commerce Department report, which was the second estimate of the third quarter figures after an initial report issued last month.
> 
> Business spending rose at a 10 percent annual rate, up from the 8.6 percent rise first estimated. Corporate profits during the quarter, after taxes, advanced by 4.6 percent. That was far above the scant 0.3 percent advance in the second quarter and surprisingly higher than the 0.4 percent gain economists in a Reuters poll were expecting.
> 
> Business spending on inventories increased at a $58 billion rate, sharply higher than the $50.7 billion earlier estimated.
> 
> Investment in housing tumbled by 18 percent during the quarter, a slightly bigger decline than the 17.4 percent decrease in the government's earlier estimate. It was the biggest decline since a 21.7 percent slide in the first quarter of 1991.
> 
> Adding more evidence to a weakened housing market, applications for U.S. home mortgages fell last week, pulled down by a shortened holiday week and namely by a decline in mortgage refinancing, according to separate data released Wednesday by the Mortgage Bankers Association.
> 
> *CONSUMER SPENDING WEAKENS*
> 
> Consumer spending, which accounts for roughly two-thirds of national economic activity, advanced at a 2.9 percent annual rate during the quarter, a weaker reading than the 3.1 percent advance first estimated.
> 
> A key inflation measure favored by the Federal Reserve -- personal spending excluding food and energy -- advanced at a 2.2 percent rate during the quarter, down slightly from the 2.3 percent first estimated and close to Wall Street expectations.
> 
> So-called core prices, measured on a year-over-year basis were up 2.4 percent, the same as first estimated and the strongest rate since 1995.




*Consumer spending weaker than expected. Thus it would be rational to assume weakening demand [from consumers] next Xquarters?

*Business spending higher, thus increasing either; inventory [supply] or productive capacity [future supply]

*Corporate profits higher, from previous higher consumer spending.

*Inflation steady [driven via PPI] thus Fed policy will be driven in this scenario by commodity [high] prices. Thus any further rise in commodity prices could lead to a continuation of interest rate rises. This is already being priced into the Bond market [highlighted section] with increasing yield [falling debt prices]



jog on
d998


----------



## chops_a_must

I fail to see how this is bad news, considering most of the indicators are better than expected.

Plus the weaker USD is good for the automobile sector.


----------



## wayneL

chops_a_must said:
			
		

> I fail to see how this is bad news, considering most of the indicators are better than expected.
> 
> Plus the weaker USD is good for the automobile sector.




There is no such thing as bad news any more.

Even a 10 megaton burst over NYC would be seen as bullish for the building sector.

Goldilocks rules.


----------



## BSD

wayneL said:
			
		

> Even a 10 megaton burst over NYC would be seen as bullish for the building sector.




Not the same - but is anyone factoring-in the rebuild of New Orleans as a cushion against the housing bust?

I have heard some very big numbers quoted.

____________________________

Also, oil is looking good again despite the dire forecasts from a month ago. 

Did it snow in Manhattan this week?


----------



## wayneL

BSD said:
			
		

> Not the same - but is anyone factoring-in the rebuild of New Orleans as a cushion against the housing bust?
> 
> I have heard some very big numbers quoted.
> 
> ____________________________
> 
> Also, oil is looking good again despite the dire forecasts from a month ago.
> 
> Did it snow in Manhattan this week?




Oil is one market I am a committed, unreasonable, frothing at the mouth bull, and have been long (with limited risk) since the congress of criminals election.

Re; N.O. cushioning the housing bust? It may save the @rses of a few builders, but the bust will take the US down IMO. It will be the long awaited last straw.




USD looking to be in the schtook as well.

Metals in Euros must be looking a bit shabby.


----------



## rederob

ducati
Perhaps if you cast your gaze to Japan, Europe, China, Russia and a few other nations you will see media reports that differ markedly from your Reuters aticle.



> Metals Insider - 29 November 2006
> Japan is doggedly refusing to perform to the accepted market script for a significant slowdown in economic activity through the end of this year and into early next year.
> After the first estimate for Q3 GDP of 0.5% growth surprised the market with its strength, this morning it has been the turn of the latest industrial production report.
> Analysts were looking for a contraction of around 0.4% month-on-month in October, not least because the Ministry of Economy Trade and Industry’s own monthly survey in September had suggested a 0.2% contraction. Instead, the report showed a sharp 1.6% month-on-month gain with the (seasonally adjusted) headline index hitting a record high.


----------



## noirua

Commodities will not, I feel, collapse in US Dollar prices, however, in Aussie Dollar prices at around A$1.27 to the greenback, the price fall is around 10%.  This, combined with an overall reduction in prices of commodities in US Dollars will cause a further fall of around 15%, making an average drop of around 25%, for Aussie companies. 
Costs may well drop, but general wage rises are unlikely to fall back with so many new mines coming onstream.


----------



## dhukka

rederob said:
			
		

> ducati
> Perhaps if you cast your gaze to Japan, Europe, China, Russia and a few other nations you will see media reports that differ markedly from your Reuters aticle.
> 
> Metals Insider - 29 November 2006
> Japan is doggedly refusing to perform to the accepted market script for a significant slowdown in economic activity through the end of this year and into early next year.After the first estimate for Q3 GDP of 0.5% growth surprised the market with its strength, this morning it has been the turn of the latest industrial production report.Analysts were looking for a contraction of around 0.4% month-on-month in October, not least because the Ministry of Economy Trade and Industry’s own monthly survey in September had suggested a 0.2% contraction. Instead, the report showed a sharp 1.6% month-on-month gain with the (seasonally adjusted) headline index hitting a record high.




It's rarely difficult to find a contrarian view to support your own. Just a note on Japan's suprising figure for last month's IP._ "Credit Suisse economist Hiromichi Shirakawa wrote in a research note e-mailed Wednesday that the higher production figures were tempered by a rise in inventories, which grew 0.8% on month. "Surprisingly strong figures for October are not enough to dispel concerns over the prospect of inventory adjustments among Japan's high-tech manufacturers," Shirakawa wrote"._ Source Takes some of the gloss off the figures. Who is going to suck up this inventory buildup? All indications are that it certainly won't be the US consumer and the weak Japanese retail figures suggest the Japanese aren't either although the Japanese central bank keeps telling us retail spending will pick up. Might get a bargain on a flat screen TV in Akihabara this Christmas.


----------



## rederob

dhukka said:
			
		

> It's rarely difficult to find a contrarian view to support your own. Just a note on Japan's suprising figure for last month's IP



dhukka
Yes, it's easy to find an opposite view.
However, I see the issue as one of which we take a position on - ie, bullish or bearish (that is, collapsing), and what we do in response.
My position is very clear.
I remain medium term bullish and am heavily overweight commodity-based equities.
In this regard I actually purchased 2k BHP shares on Monday (before their AGM), so have gone even more overweight.
I am very unsure of what the second half of 2007 might bring, and my thinking at present is that great vigilance is required to determine the extent that this present (generally bullish) commodity market might break down.
My view is that any major correction to commodities will be relatively short-lived in terms of historical market cycles - I would see it as difficult for a correction to drag into a few years duration.


----------



## CanOz

There are so many views out there at the moment regarding this topic. I wonder if that is in part due to the infrequency of commodity booms in resource based industries, like mining. Isn't it true that they happen once or twice, maybe three times a century and last many years. The supercycle would be like any other bull market but just longer, and having impulsive waves as well as corretive waves we should see small corrections along the way. 

Sometimes i think this is so hard to call because there aren't many people left that experienced the last one that are in the business of making these kinds of claims. 

Also, given that the follow through to the actual resource prices, inventories etc., from a slowing U.S. economy, and then a slowing BRIC could take sometime, it seems to me that there would be plenty of notice.

This is just a general sort of view, any comments?


----------



## Halba

In all practical terms the chinese industrialisation is the biggest known to man. Over 900mil ppl industrialising into cities. Imagine the amounts of steel and materials required, especially as they are building about 20-50 cities. The actual boom hasn't really started as these are currently in the design stage..


----------



## chops_a_must

Halba said:
			
		

> In all practical terms the chinese industrialisation is the biggest known to man. Over 900mil ppl industrialising into cities. Imagine the amounts of steel and materials required, especially as they are building about 20-50 cities. The actual boom hasn't really started as these are currently in the design stage..



That's up for debate, because some of their main cities have just about reached the limits. However, the port and rail development is more than worth keeping an eye on.


----------



## dhukka

rederob said:
			
		

> dhukka
> Yes, it's easy to find an opposite view.
> However, I see the issue as one of which we take a position on - ie, bullish or bearish (that is, collapsing), and what we do in response.
> My position is very clear.
> I remain medium term bullish and am heavily overweight commodity-based equities.
> In this regard I actually purchased 2k BHP shares on Monday (before their AGM), so have gone even more overweight.
> I am very unsure of what the second half of 2007 might bring, and my thinking at present is that great vigilance is required to determine the extent that this present (generally bullish) commodity market might break down.
> My view is that any major correction to commodities will be relatively short-lived in terms of historical market cycles - I would see it as difficult for a correction to drag into a few years duration.




Rederob,

Your recent puchases are proof that you have the courage of your convictions and nothing more. My point is that the Japanese IP numbers aren't as bullish as they might look on the surface. Here is another article from the FT on the same story, granted the IP numbers were strong however note the last paragraph _"The strong figures could be a reflection of a deliberate build-up of inventories ahead of the year-end, economists said. This could backfire if US and or domestic demand does not materialise as expected, leading production to fall in the new year."
_


----------



## rederob

dhukka said:
			
		

> Rederob,
> 
> Your recent purchases are proof that you have the courage of your convictions and nothing more. My point is that the Japanese IP numbers aren't as bullish as they might look on the surface. Here is another article from the FT on the same story, granted the IP numbers were strong however note the last paragraph _"The strong figures could be a reflection of a deliberate build-up of inventories ahead of the year-end, economists said. This could backfire if US and or domestic demand does not materialise as expected, leading production to fall in the new year."
> _



dhukka
I have employed these "convictions" for some years, and also had the courage to continue to debunk the doom and gloom merchants for the past few years.
I could hide behind dozens of cut and pastes from article after article to "represent" my view.  But I prefer to simply state what I believe is most likely, given my reading of the market, and say what I am doing in response to it.
I believe that degree of transparency allows my record to be accessible to anyone who wants to throw it back at me when I am caught out badly by the market.
I think we all know that one month's data is pretty "iffy", and that we need to get confirmation as time goes by.  Maybe Japan's IP was aberrant last month, maybe not.
I won't have any problem waiting another few months, and then a few more.
The issue of "inventory build" specifically relates to IT: I don't think it will impact to any degree on hard commodities.
Some interesting facts and figures that tend to debunk the perceived importance of the US to global market actions:
http://www.moneyweek.com/file/22255/the-commodities-bull-is-alive-and-kicking.html


----------



## ducati916

*rederob*



> ducati
> Perhaps if you cast your gaze to Japan, Europe, China, Russia and a few other nations you will see media reports that differ markedly from your Reuters aticle.




Of course.
However the case for commodities to this point has revolved around two major points; the bulls, have continually pointed to China as being the driver of commodity prices. I have argued that the US as the largest economy deserves much closer analysis.

China is [in economic terms] the marginal producer [consumer] and prices are *set at the margin* however, the supply that China produces [that drives their demand] is set by predominantly the US consumer, be it socks or steel.

Therefore, logically, if the US drives the supply curve of the largest marginal producer, that will impact prices. Thus, the reason behind looking at US GDP.

Intrestingly you have introduced Japan & Europe et al.
The US went through a similar episode in the 1980's with the then dominant Japanese economy that created [in Japan] huge asset bubbles in the Nikkei & Real Estate [not to mention art etc]

China is driving [via the US] a commodities bull. 
In the same way that the Japanese economy and asset bubbles imploded, can the commodities bubble implode.

The drivers for this implosion are already in place, and they are in the form of *price floors * across myriad industries.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> China is [in economic terms] the marginal producer [consumer] and prices are *set at the margin* however, the supply that China produces [that drives their demand] is set by predominantly the US consumer, be it socks or steel.



I don't think China can keep up with its own demand.

Do you think the biggest market manipulators and shysters on the planet, i.e. the Carlyle group, would be tripping over themselves if they thought the rug was going out from beneath them? They don't ride waves, they make them, and they want in, big time.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aEgesfHX6ke0&refer=home


----------



## ducati916

chops_a_must said:
			
		

> I don't think China can keep up with its own demand.
> 
> Do you think the biggest market manipulators and shysters on the planet, i.e. the Carlyle group, would be tripping over themselves if they thought the rug was going out from beneath them? They don't ride waves, they make them, and they want in, big time.
> 
> http://www.bloomberg.com/apps/news?pid=20601109&sid=aEgesfHX6ke0&refer=home




You are horribly confused.
These guy's are a buyout fund.
They make money in a completely different way than retail investors.

Until you understand how they make money, you won't understand their strategy.

jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## chops_a_must

Nice avoidance of the argument... again.


----------



## wayneL

chops_a_must said:
			
		

> Nice avoidance of the argument... again.




As discussed earlier, instos are not immune to entering positions at the top.

The recent tech boom is resplendent with examples of this.

The activities of the Carlyle group mean precisely nothing.


----------



## chops_a_must

wayneL said:
			
		

> The activities of the Carlyle group mean precisely nothing.



Not necessarily. Back door deals. Conflict with North Korea, Taiwan and strong links to the Saudis. Sounds like politicial positioning to me.


----------



## ducati916

chops_a_must said:
			
		

> Nice avoidance of the argument... again.




Not at all.
You just do not understand the irrelevance of your post.
These guy's are a *Leveraged Buyout Firm*, in the same business as Kohlberg Kravis & Roberts, the infamous Barbarians at the Gate

As such, their money is made in a completely different way, viz 4% of asking price in Fee's + disbursements as a special dividend from cash reserves of the business...........all financed via junk.

Assets are then stripped, and debt reduced. The remaining debt is serviced by cash-flow, or not, as the case maybe. The risk is thus transferred to the bond holders.

This of course is simply the tip of the iceberg.

However, none of this has any real applicability to the topic under discussion, save buyout frenzy tends to occur at liquidity highs, for obvious reasons.

jog on
d998
http://grantmacdonald.blog.co.nz/


----------



## rederob

ducati
If you have got the "drivers" of your collapse worked out, you should have some view on timeframes.

For several years "economists" have badly misjudged this commodity bull.  There are probably many reasons, but one is definitely that they have failed to understand the mechanics of raw material markets, or hard commodities as I preder to call them.

My view is that the US becoming increasingly less relevant and it may be possible for the US to go through a "soft landing" in the medium term without impacting on the present commodity bull in the manner you suggest.


----------



## ducati916

*rederob*



> My view is that the US becoming increasingly less relevant and it may be possible for the US to go through a "soft landing" in the medium term without impacting on the present commodity bull in the manner you suggest.




You contradict yourself.
If the US is becoming, or is, less relevant, then it matters not whether they have a hard or soft landing.

If they have a soft landing [a real possibility] then it is also possible that the commodity bull may continue............but that argues the US is still very relevant..........see the contradiction?

jog on
d998


----------



## rederob

ducati916 said:
			
		

> *rederob*
> 
> 
> 
> You contradict yourself.
> If the US is becoming, or is, less relevant, then it matters not whether they have a hard or soft landing.
> 
> If they have a soft landing [a real possibility] then it is also possible that the commodity bull may continue............but that argues the US is still very relevant..........see the contradiction?
> 
> jog on
> d998



Do yourself a favour and read the full sentence ducati.
I wrote a complete sense, and parsing it is not useful.

In each of your posts I continue to note an absence of capacity to state a view that encapsulates this thread's theme.

A moderator has asked me to stop the "bickering" with you.
I simply ask, and continue to ask,  that if you have a specific view you enunciate it.

I personally think the notion of a price floors as the driver of commodity prices is drawing a very long bow.  But if that's what you reckon, you should have some view on the timeframes that reasonably predicate a decline in commodity prices overall.

The fundamentals of metals suggest to me continued market tightness, with several metals sequentially claiming all time record highs - eg zinc, lead and nickel.  If a theme of destocking has been occurring, as many analysts have been suggesting, the real picture of tightness is more extreme than that visible in the numbers: The visible numbers are not close to a teddy bear's picnic.


----------



## ducati916

> Stocks Falter After Downbeat ISM Report
> Friday December 1, 10:44 am ET
> By Joe Bel Bruno, AP Business Writer
> Wall Street Stumbles As Purchasing Managers Report Slowing in Manufacturing Sector
> 
> 
> NEW YORK (AP) -- Wall Street stumbled Friday after a key survey showed that manufacturing activity declined in November and raised concerns that the economy won't be able to achieve a soft landing.
> Stocks and the dollar were socked after the Institute for Supply Management said its index on manufacturing fell to 49.5 from 51.2 in October. Economists had been expecting 51.5, while anything under 50 indicates the manufacturing sector is contracting and could prompt the Fed to cut rates.
> 
> The weak manufacturing report was seen as an indication that the Federal Reserve overshot the mark in more than two years of interest rate hikes that ended in June. Many on Wall Street believed the Fed would hold interest rates steady at 5.25 percent at its next meeting on Dec. 12.
> 
> The dollar, which is supported by higher rates, fell on the prospect of a Fed cut.
> 
> Investors will be closely watching speeches by Chicago Fed President Michael Moskow, Richmond Fed President Jeffrey Lacker, and Fed Vice Chairman Donald Kohn during the session. Fed Chairman Ben Bernanke made no comment on current monetary policy or the economic outlook during a speech Friday morning, although on Tuesday he said risks from inflation could further complicate an economy suffering from a general slowdown.
> 
> In morning trading, the Dow Jones industrial average fell 37.98, or 0.31 percent, to 12,183.95.
> 
> Broader stock indicators also declined. The Standard & Poor's 500 index dropped 5.09, or 0.36 percent, to 1,395.54, and the Nasdaq composite index fell 19.29, or 0.79 percent, to 2,412.48.
> 
> Speculation that an interest rate cut looms ahead triggered a rally in the fixed income market. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to an 11-month low of 4.42 percent from 4.46 percent late Thursday.
> 
> However, the dollar continued its slide against major currencies. Also hitting the dollar was a Commerce Department report that U.S. construction spending took its biggest tumble in five years during October.
> 
> Among Dow components, General Motors Corp. rose 8 cents to $29.31 after a report that financier Kirk Kerkorian dumped his 10 percent stake in the world's largest automaker for more than $800 million. He had about 28 million shares left, which were sold off late Thursday, according to The Wall Street Journal.
> 
> H&R Block Inc. declined after the nation's largest tax preparer reported a wider-than-expected loss during the second quarter as its mortgage lending arm continues to lose money. H&R Block fell 28 cents to $23.72.
> 
> Home Depot Inc. shares surged $1.40, or 3.7 percent, to $39.37 on speculation the home improvement chain might be an acquisition target by several private equity firms.



jog on
d998


----------



## ducati916

*rederob*



> Do yourself a favour and read the full sentence ducati.
> I wrote a complete sense, and parsing it is not useful.




Which I did, and unfortunately, you contradict yourself, c'est la vie.



> In each of your posts I continue to note an absence of capacity to state a view that encapsulates this thread's theme.
> 
> A moderator has asked me to stop the "bickering" with you.
> I simply ask, and continue to ask, that if you have a specific view you enunciate it.




I would suggest that even the most challenged simpleton could probably reach a conclusion on my views, or stance on hard commodities, or base metals.........I am bearish, as this definition seems to exclude you.

I too received the same e-mail, I guess there are some sensitive souls who require harmony and a concensus, so that if you fail, you all fail together, somewhat akin to the lemmings.



> I personally think the notion of a price floors as the driver of commodity prices is drawing a very long bow. But if that's what you reckon, you should have some view on the timeframes that reasonably predicate a decline in commodity prices overall.




Of course you are entitled to your opinion.
I note a lack of anything resembling a logical, reasoning argument to support your opinion with regards to price floors.

With regards to timeframes, why should I have a strong view, and even if I have a strong view, why should I share it with such an uncouth rascal as yourself? You need to butter me up, stroke my ego, smooth my ruffled feathers...........



> The fundamentals of metals suggest to me continued market tightness, with several metals sequentially claiming all time record highs - eg zinc, lead and nickel. If a theme of destocking has been occurring, as many analysts have been suggesting, the real picture of tightness is more extreme than that visible in the numbers: The visible numbers are not close to a teddy bear's picnic.




All conjecture.
But continuing on the theme of pure speculation; *with several metals sequentially claiming all time record highs - eg zinc, lead and nickel.* does this not suggest caution in such a notoriously cyclical asset class?

*If a theme of destocking has been occurring, as many analysts have been suggesting, *  I am quite willing to accept this as I have no doubt there are numbers regarding inventory that support this assertion; however, those numbers [inventory] will be affected by inventory levels of the producers, and consumer demand...........which currently do not look potentially that healthy.

jog on
d998


----------



## chops_a_must

ducati916 said:
			
		

> *If a theme of destocking has been occurring, as many analysts have been suggesting, *  I am quite willing to accept this as I have no doubt there are numbers regarding inventory that support this assertion; however, those numbers [inventory] will be affected by inventory levels of the producers, and consumer demand...........which currently do not look potentially that healthy.
> 
> jog on
> d998



China is taking in sub standard nickel to make up the short fall.

Manufacturing figures are bad, but we knew that already. I'd say we are in for a correction in copper early next year, what is your guess?


----------



## ducati916

*chops*

From page1



> The increases were scored against very thin trading in the absence of buying from China and Japan, the major consuming nations that begin week-long holidays this week.
> 
> "If the natural buyers go away you would expect the market to come off a bit but it's not happening - it shows you that it's a financial market, not a market between physical sellers and physical buyers," one fund manager said.
> 
> The International Wrought Copper Council (IWCC), a trade association for copper users, has written to the Financial Services Authority and the London Metal Exchange (LME) warning about the increasing role of speculators.




Commodities, gold, copper, you name it have all been suffering from an in-rush of very speculative money. That means that the underlying fundamentals have suffered a dislocation.........thus prices have increased based on two premises;

*that fundamental demand from US/China/Japan/etc will continue to support prices at these and increasing levels +
*speculative money going long in [financial instruments] linked to these commodities.

Therefore, when the underlying fundamental demand from producers starts to falter, thus will the speculators start selling long positions + selling short positions..........the result?

A double whammy, thus quite a brutal correction.

From my post on page12



> The herd psychology of markets [behavioural finance] explains in part the attraction of retail several years into a bullmarket.
> A measure of this speculative excess is the spread between prices of listed commodities and unlisted commodities
> 
> *It currently sits at an all time record of 60%+*




Therefore I would expect the price of copper to fall.

jog on
d998


----------



## rederob

ducati916 said:
			
		

> Therefore I would expect the price of copper to fall.
> jog on
> d998



I could ask "when", but would get the same answer as always.
I am a natural born market bear.
My whole approach to investing is based on the notion markets fall.
However, before they fall, they must rise.
I take advantage of fundamental price drivers in the commodity market to "pick" what will rise, and buy into the trend using an equity that I am comfortable with.

Of the 6 main base metals - aluminium, copper, nickel, tin, lead and zinc - only copper at present is likely to succumb to significant near term weakness on fundamental grounds.
The principal reason for copper's weakness is the lack of cancellations (and therefore accumulation of warehouse metal) in the US as a result of vehicle manufacturing and housing downturns.  Outside the US copper remains relatively firm, with Shanghai warehouses now at their lowest level this year.
Within China, an increased use of scrap copper is maintaining the relative balance of copper supply with demand.
From an historical perspective, with global warehouses holding slightly over 200k tonnes of copper, and the pace of resupply confined to the US, the global "balance" does not give the consumer market much confidence.
In 2007 we will need to see significant concentrate inflows (more so than cathodes) from greenfield sites and brownfield capacity expansions, before we get a clear signal that copper prices will fall substantially.
At present the prognosis is inclined to favour relative price stability at around the $7k/tonne level.


----------



## rederob

> My view is that the US becoming increasingly less relevant and it may be possible for the US to go through a "soft landing" in the medium term without impacting on the present commodity bull in the manner you suggest.



Parsing:
*My view * = it is my judgement
*the US becoming increasingly less relevant* = ie, the US is relevant to this consideration, but its degree of relevance is reducing
*it may be possible for the US to go through a "soft landing" in the medium term* = equally, it may not be. However the assumption contained in this "sense" is that if the US is to go through a *soft landing in the medium term* then a consequence shall follow
viz;
*without impacting on the present commodity bull in the manner you suggest*

This latter parsing has 2 components: The first implies we are in a commodity bull (from a long term perspective there is little doubt).  The second implies you have a bearish view on commodities and that you place the US as the first domino to fall, as an analogy.

If the fully quoted sense were to contain a "contradiction",  it would be obvious as there would be a notable gap in its logic.

ducati suggests a contradiction occurs because he has added a new sense to the quoted statement, viz
"_If the US is becoming, or is, less relevant, then it matters not whether they have a hard or soft landing._"
This is typical of how ducati presents his responses to posters: Change the sense and argue against the newfound proposition.
If I thought that the commodity bull could sustain itself through a "hard landing in the US", I would have said so.

Logic requires that we can deduce from information provided that something should follow (a deduction) and we could be reasonably certain it was true.
If we could reasonably deduce that there was no difference between a hard and a soft landing, then ducati may have been onto to something (assuming the remainder of the statement required no further deduction).
The average reader jumping off a two story building will have no difficulty differentiating between a hard and soft landing


----------



## CanOz

http://www.kitco.com/ind/charnock/nov242006.html


----------



## chops_a_must

rederob said:
			
		

> Parsing:
> *My view * = it is my judgement
> *the US becoming increasingly less relevant* = ie, the US is relevant to this consideration, but its degree of relevance is reducing
> *it may be possible for the US to go through a "soft landing" in the medium term* = equally, it may not be. However the assumption contained in this "sense" is that if the US is to go through a *soft landing in the medium term* then a consequence shall follow
> viz;
> *without impacting on the present commodity bull in the manner you suggest*



I think what Ducati is overlooking is the shifting of the world economic balance. I have stated before that China is looking to have 50% of the world's manufacturing capacity by 2030. This can only happen by reducing market share from the US.

The US auto sector has been hammered, but all that has happened is that that market share is being taken over by Asian markets. So overall demand for commodities might be a negligible change.

If the US has a rate cut next year, which looks increasingly likely, it will benefit companies such as GM and Ford. Not to mention, put the gold price up.


----------



## Dr Doom

I would say that there is a general consensus amongst the combatants here that the US will have a large influence on the general direction of the current bull market in commodities, as it should as it is still the largest economy in the world at the moment. It's relevance from the demand side is THE single most important factor in determining the strength of the bull and severity of the coming collapse/correction/blip (and the timing of it).
I think there has been an overemphasis on the importance of China's contribution to the demand equation as China just does not have the systems, mostly financial, to sustain a self sustaining economy if the US economy slows or  enters a recession.
China's growth has largely been sustained by the bubble creating liquidity excess in nearly all developed countries, which has fueled bubbles of it's own for example steel production, high rise developments etc.
China's financial system in particular is susceptible due to bad lending practices, typical of peaking markets. Because many of China's producers operate with low profit margins, any sustained reduction in their sales could force many to go bankrupt or put stress on the banking system.
I'm just not convinced the world can rely on China to sustain the commodity bull by itself, should the US enter a recession.
Not to mention the currency manipulation and huge excess of US dollars it holds, which are steadily loosing value  with each passing day. A mad scramble for the (US dollar) exits.


----------



## BSD

Not having posted for a bit, excuse me while I make a few rambling and random points

_____________________________________________________________



			
				CanOz said:
			
		

> http://www.kitco.com/ind/charnock/nov242006.html




This guy reiterates a couple of points made in the last month on this board:

"China has apparently been supplying copper to the LME to cool prices..."

"This is a new market force however they cannot keep this price management up for long, there is a real economic pressure from their demand pull inflation so they try to “manage” the situation as best they can under difficult circumstances. "

*Prices even at this current level are very profitable for many companies which will continue to earn huge profits and bolster balance sheets.  This will cause continuation of the rally, a bumpy ride with wonderful investment potential for experienced traders who thrive in times of volatility.*

Interesting is the mention of increased use of scrap copper - a one off opportunity and another sign of the scope of the movement of the supply curve for copper. 
____________________________________________________

I trade equities, my bull case is for equities alone.

I do not need/expect prices to continue upward vertically - I dont even need them to go up. Sustained prices would be marvellous. 

My argument is premised on base metals and energy continuing to beat the bearish analysts forecasts for prices in the next three years.

The existing valuations for the majors and many of the mids and emerging players are premised on the 'collapse' of prices. 

Cu $2.50 next year and $1.20 long term 
Zn $1.60 next year and $1.10 long term
Al $1.10 next year and $0.85 long term
etc, etc, etc

If you will, I am a "relative metals bull" and will be the happiest bull in town if copper sustains a price above $2.50 for the next three-five years. 

_________________________________________________________

Duc

You will need to do better to convince me of the overvaluation and lack of quality in the balance sheets and operational performance of the majors. 

You note that BHP and RIO carry $9bn and $4bn of debt respectively. 

You should also note that forecast free cashflow from BHP for this year (after investing in new projects) is well in excess of $9bn.

A value punter like yourself should get excited at the ROEs and ROAs at multiples of any other companies trading at 9 times next year earnings wth no debt.

Note that these numbers are predicated on earnings based on already bearish metals prices

Copper could fall as you expect and you could still be holding BHP and making heaps

I ask again - what are your calander average 07, 08 and long term Copper price estimates?

We can leave the other metals for now

*You cannot value BHP, RIO or Phelps Dodge without having formulated these. * 

I use $2.90 07, $2.50 08 and $1.40 long term and feel very conservative in doing so - despite the upside in valuations of copper players such numbers offer
________________________________________________________



			
				DR Doom said:
			
		

> I would say that there is a gen...Copper
> Iron Ore
> Oil
> Nickel
> 
> Shorts:
> USD


----------



## rederob

Dr Doom
I am only a small part player in your "consensus" view on the role of the US, unless the US were to have a hard landing.
I would have similar concerns if either Japan or Europe were to fall sharply.
And if the pace of growth were to substantially decline in China, I would liquidate my positions very quickly - much more quickly than my concerns over the US.

BSD
I believe your long term valuations of copper are off the mark (low) principally because the cost of production has now increased to such a level that there is no "margin" in $1.40 and producers would be mostly going backwards.
Those that do not follow the fundamentals are generally unaware that "head grades" (that is the percentage of payable metal in a given quantity) have declined substantially, on average, in recent years.  In other words, most of the "best" copper mines have been mined out, and high quality new finds are few and far between.


----------



## BSD

rederob said:
			
		

> I believe your long term valuations of copper are off the mark (low) principally because the cost of production has now increased to such a level that there is no "margin" in $1.40 and producers would be mostly going backwards.
> 
> Those that do not follow the fundamentals are generally unaware that "head grades" (that is the percentage of payable metal in a given quantity) have declined substantially, on average, in recent years.
> 
> In other words, most of the "best" copper mines have been mined out, and high quality new finds are few and far between.




I totally agree. 

But 90% of investment banks are still using a long term Cu number below mine. 

It has taken 2 years for them to get to $1.20 long term.

They are playing catch-up and just being a little ahead of them is still offering massive upside


----------



## wayneL

Just a frivolous interlude in this very good discussion to post this cartoon... I just had to post it somewhere


----------



## Dr Doom

BSD - "You will find many economists who do not care anymore about CADs. Too many have hung their hat on an assumption that did not prove true for three decades and many have given up worrying."

Amazing how 3 decades coincides with the demise of that barbarous relic, the gold standard. Who's to say that what we have been living with since 1971 is one enormous capitalist experiment that nobody knows for sure how it will end and continues to defy accepted economic theories. For example, is it ok to add liquidity to a financial system in excess of that needed to expand through proportionate advances in productivity?. Is it ok to allow that liquidity to go into areas that do not contribute to the productive capacity of a country, rather than into creating speculative bubbles?. Is it ok to live beyond your means, that is, to spend more than you earn?. Is it ok to buy more from other countries than you sell to other countries?. 

If you answer yes to all of the above then there is a high probability that sometime soon that one of those so called economic theories will be proven right in a big way, that is someone or some country is going to ask you to start living within your means, paying back your debts or going bankrupt. 

Applying these questions at a national level, how does the US stack up?. If the US was a company would you invest in it?

Who's to say that the 36 year experiment in central banking irresponsibility won't come home to roost in a big way a la depression.

BSD - "People losing their shirts on residential property in a few states in the US is noise. It is not something to worry the long term trend."

This is concerning if this is what you think of the US housing market. The facts are out there, all pointing to a sizable downturn in this market, and all of the flow-on domino effects down the line. The downturn that was once thought to have been confined to the residential market is now showing up in other sectors of construction. This is not noise, it is a secular contraction in the latest bubble financed with excess US dollars. 

How this plays out will have the biggest impact on commodities, maybe even breaking some of the commodity cycle theories that dictate the lifespan of commodity cycles in decades. On the one hand saying economic theories have been thrown out the door while saying that in the past commodity cycles usually run for many years.

The bottom line - the world is flooded with various currencies and derivative products. Together they make what seems to be unlimited continuance of our current lifestyles & bullmarket bubbles. The bursting of the US housing bubble may just be the X factor that brings rationality to the exuberance.


----------



## Sean K

Dr Doom said:
			
		

> BSD - "You will find many economists who do not care anymore about CADs. Too many have hung their hat on an assumption that did not prove true for three decades and many have given up worrying."
> 
> Amazing how 3 decades coincides with the demise of that *barbarous relic*, the gold standard. Who's to say that what we have been living with since 1971 is one enormous capitalist experiment that nobody knows for sure how it will end and continues to defy accepted economic theories. For example, is it ok to add liquidity to a financial system in excess of that needed to expand through proportionate advances in productivity?. Is it ok to allow that liquidity to go into areas that do not contribute to the productive capacity of a country, rather than into creating speculative bubbles?. Is it ok to live beyond your means, that is, to spend more than you earn?. Is it ok to buy more from other countries than you sell to other countries?.
> 
> If you answer yes to all of the above then there is a high probability that sometime soon that one of those so called economic theories will be proven right in a big way, that is someone or some country is going to ask you to start living within your means, paying back your debts or going bankrupt.
> 
> Applying these questions at a national level, how does the US stack up?. If the US was a company would you invest in it?
> 
> Who's to say that the 36 year experiment in central banking irresponsibility won't come home to roost in a big way a la depression.
> 
> BSD - "People losing their shirts on residential property in a few states in the US is noise. It is not something to worry the long term trend."
> 
> This is concerning if this is what you think of the US housing market. The facts are out there, all pointing to a sizable downturn in this market, and all of the flow-on domino effects down the line. The downturn that was once thought to have been confined to the residential market is now showing up in other sectors of construction. This is not noise, it is a secular contraction in the latest bubble financed with excess US dollars.
> 
> How this plays out will have the biggest impact on commodities, maybe even breaking some of the commodity cycle theories that dictate the lifespan of commodity cycles in decades. On the one hand saying economic theories have been thrown out the door while saying that in the past commodity cycles usually run for many years.
> 
> The bottom line - the world is flooded with various currencies and derivative products. Together they make what seems to be unlimited continuance of our current lifestyles & bullmarket bubbles. The bursting of the US housing bubble may just be the X factor that brings rationality to the exuberance.




Doom, what's your take on gold with the possibility of recession/depression triggered by US housing collapse? I'm a gold bull but only because of theories, research and knowledge that someone like yourself has articulated. The reports I have read leading from your premise all point to very bullish cases for gold. However, you are calling it a relic? Or, are you talking about something else there? Cheers.


----------



## wayneL

For interest and FWIW, since backwardation was mentioned in this thread, here is a post regarding the same from another forum. 



> For consumption commodities people are willing to pay more to consume today than consume sometime in the future, that's pretty natural unless there's an abundance and big inventories etc. Especially if the commodity is non-storable (power), or there's a shortage of storage (natgas in the uk), people will pay up since they need to consume it now. If you're not tight on supply this will change though. If you for example in the summer get a lot of rain and melting water in a country with a lot of hydro power you can get more power than you need (assume you can't export to other regions), so close month power is dirt cheap, but there's no reason for next winter to have these conditions so you'll switch to contango in the front of the curve, but most likely remain in backwardation behind the range of impact of the current conditions.
> 
> Another example could be a shiping firm that needs fuel oil for operating its ships. If they have obligations to send a ship from Rotterdam to Singapore next week it's not a great idea to sell fuel oil inventory and buy futures delivering next month. Even though you may make good money it's not going to get your ship to asia, and you'll have to pay damages and will lose customers if doing it repetedly.
> 
> Another factor at play here is transportation - the harder it is to transport the more you appreciate actually having it available in your warehouse.
> 
> Expectations about future prices are definitly part of the picture as well. Going back to power as an example the curve will definitly react if someone comes and says he's building a new 3000MW nuke that goes online in 3y. That's a lot of supply coming to the market so the curve out after 3y will most likely move down (but not the front). Another example would be if someone came and said they had a gigantic gas storage facility that will be finished in 2y - that would definitly smooth out the seasonality in the gas forward curve.


----------



## noirua

kennas said:
			
		

> Doom, what's your take on gold with the possibility of recession/depression triggered by US housing collapse? I'm a gold bull but only because of theories, research and knowledge that someone like yourself has articulated. The reports I have read leading from your premise all point to very bullish cases for gold. However, you are calling it a relic? Or, are you talking about something else there? Cheers.




The US property market is in recession but the falling value of the greenback will benefit the US as imports become more expensive and exports cheaper. I expect a fairly quick reversal of the property and associated markets.


----------



## Sean K

noirua said:
			
		

> The US property market is in recession but the falling value of the greenback will benefit the US as imports become more expensive and exports cheaper. I expect a fairly quick reversal of the property and associated markets.



So, you're in the soft landing camp Noirua?


----------



## wayneL

noirua said:
			
		

> The US property market is in recession but the falling value of the greenback will benefit the US as imports become more expensive and exports cheaper. I expect a fairly quick reversal of the property and associated markets.




Noirua,

I'm interested in your connection here with the USD and the RE market.

It seems a tenuous connection when the reasons for the RE tankage are not currency related, but rather value/debt related. Can you expand on your reasoning?

Thanks


----------



## chops_a_must

kennas said:
			
		

> So, you're in the soft landing camp Noirua?



Aren't commercial developments on the rise?

How much of the negative figures are the result of massive population losses from areas like Detroit and Pittsburgh?


----------



## GreatPig

Worth having a read of John Mauldin's latest newsletter : The Recession of 2007. You may need to register an email address to access the article.

A couple of quotes:



> And while the economic data is not a total disaster, it has not been good this week. Yet the response of investors everywhere is defiance, or at the very least serious nonchalance.
> 
> Recession possibilities? "What recession? I spit on your talk of recession." They continue to assume that things will turn out much better than merely OK. All manner of investments are priced for perfection, perfection being defined as growth slowing enough to take out inflation risk yet not enough to hurt the ever upward rise of corporate profits. Goldilocks is the name of the game.
> 
> The stock market did close down somewhat today, yet as trading came to the end of the session, it rose over 100 points from its low of the previous few hours. All you can do is just marvel at the amazing capacity of investors to embrace risk in the face of this week's economic data, which we will look at in some detail today.






> But if I am right, the stock market is going to be under considerable pressure next year. The average drop of the markets is about 40% before and in a recession. There are reasons to think it will not drop that much this time, but it is hard to imagine it not dropping by some significant amount. Dow 9,000 is a real possibility, if not probability. Yet the market is unconcerned, with volatility as measured by the VIX at close to all-time lows.



Cheers,
GP


----------



## Dr Doom

kennas said:
			
		

> Doom, what's your take on gold with the possibility of recession/depression triggered by US housing collapse? I'm a gold bull but only because of theories, research and knowledge that someone like yourself has articulated. The reports I have read leading from your premise all point to very bullish cases for gold. However, you are calling it a relic? Or, are you talking about something else there? Cheers.




kennas, 
From my research the term 'barbarous relic' was used to describe 'the gold standard' as it was known from the early part of the 20th century, not gold itself.
In my view the only real reason why gold should be 'valuable' is as a reference to everything else that is 'perceived' to be of 'value', nothing more. Gold should be basically nothing more than a commodity and with a responsibly administered 'fiat ' monetary system should never have a currency value.

The trouble is that very few central banks are responsible enough to stick to the rules and start to make new ones (like fractional-reserve banking), leading to a devaluation of current currency. 

Gold therefore becomes, by default, the one item of exchangeable value that cannot be created out thin air so to speak, and so becomes a form of international exchange - a currency. And because the gold market is so small when compared to other stores of value then it's not hard to see how future values for gold are predicted to have 4 digits.

For me gold is just a means to an end - to preserve wealth. For each year governments & central banks increase the money supply (to keep voters happy and accustomed to the lifestyle they have been living), gold just goes along and appreciates accordingly, although there is a perceived lag at the moment for a fair value price, of which some have calculated to be around $850 to $900. Should there be a perceived threat to the current default world currency, the $US, there will be a flight to other currencies and assets, of which gold will be one. It doesn't take much to move the gold market, and as can be seen from the last spurt to $720 all it takes is for the hedge funds to get on board and it's of to the moon for the gold price. Then mom & pop investors get on board and you then have a bubble. 
If the US can get itself out of this one then 'Helicopter Ben Bernanke' should be president - deficets DO matter in the end. Even Paul Volcker (who wasn't afraid to induce the odd recession in order to contain irrational spending) gives the US 12 months before crunch time ie best case a recession, worst case depression. Don't say it can't happen, it just means you're not old enough to have lived through a real economic downturn. So, commodities to collapse within 12 months I reckon.


----------



## rederob

Dr Doom said:
			
		

> So, commodities to collapse within 12 months I reckon.



I remain uneasy about 2007 from April onwards, markets-wise.
However, Fed reserve Governors have more rabbits up their sleeve than is comfortable for a myxomatosis pandemic, so the "soft landing" scenario must be contemplated.
I also see China's US dollar holdings as a double-edged sword. I do not believe China will draw this sword unless the US first sabre-rattle: China has a sword of Damocles precariously perched over Bush's head and has the capacity to release it if the US try to play hard ball with its currency.  By maintaining an artificially low value on the yuan, Western nations will continue to buy its abundantly cheap products.
Little by little, however, China can raise the value of the yuan to symbolically show its willingness to play the game (without really ever getting wholly into it).
Having been an exceptional bear several years ago, I am now a cautious bear, looking more closely for the first signs of winter than ever before.  I have certainly learned that early snows are not necessarily indicative of winter, and global warming is moving the seasons beyond our reasonable limits.


----------



## Sean K

rederob said:
			
		

> I remain uneasy about 2007 from April onwards, markets-wise.
> However, Fed reserve Governors have more rabbits up their sleeve than is comfortable for a myxomatosis pandemic, so the "soft landing" scenario must be contemplated.
> I also see China's US dollar holdings as a double-edged sword. I do not believe China will draw this sword unless the US first sabre-rattle: China has a sword of Damocles precariously perched over Bush's head and has the capacity to release it if the US try to play hard ball with its currency.  By maintaining an artificially low value on the yuan, Western nations will continue to buy its abundantly cheap products.
> Little by little, however, China can raise the value of the yuan to symbolically show its willingness to play the game (without really ever getting wholly into it).
> Having been an exceptional bear several years ago, I am now a cautious bear, looking more closely for the first signs of winter than ever before.  I have certainly learned that early snows are not necessarily indicative of winter, and global warming is moving the seasons beyond our reasonable limits.




And in regard to this and Dooms post, what if the Chinese middle class reach a proportional state whereby they are the consumers replacing the US middle class losing their houses? If there can be an easy transition between these two events, then maybe global economic soft landing? I hope this is the case. China seems to be moving at such a pace to support this scenario, without even taking into consideration India, Brazil, Russia and Japan's re emergence? It is going to be a fine balance and relies on the US surviving for a couple more years perhaps.


----------



## ducati916

*BSD*



> I trade equities, my bull case is for equities alone.




Noted.



> *I do not need/expect prices to continue upward vertically - I dont even need them to go up. Sustained prices would be marvellous.
> *My argument is premised on base metals and energy continuing to beat the bearish analysts forecasts for prices in the next three years.
> *The existing valuations for the majors and many of the mids and emerging players are premised on the 'collapse' of prices.




My comments on this thread have mostly been in regard to the prices of the commodities in of themselves. I am however quite happy to address prices of Equities based on the commodity prices.

Staying with BHP, as we have predominantly dealt with this equity;



> Duc
> You will need to do better to convince me of the overvaluation and lack of quality in the balance sheets and operational performance of the majors.




Very well, I shall try to do so;



> _Originally Posted by BSD
> Simply not true.
> BHP and RIO are set to be free of all debt in coming years
> They are buying back billions of dollars worth of shares.
> Mining company balance sheets have not been stronger_




This from the following post is simply not the case.
The debt however, let me emphasise is not a problem per se.



> _BHP according to their Balance Sheet 09/25/06
> Carry $7.648 billion in LT Debt
> Notes Payable, $1.368 billion
> 
> Rio Tinto; 06/30/06
> $1.686 billion LT Debt
> $2.305 billion Notes Payable
> 
> So according to their filings, they are carrying debt._




Moving forward;



> _You note that BHP and RIO carry $9bn and $4bn of debt respectively.
> 
> You should also note that forecast free cashflow from BHP for this year (after investing in new projects) is well in excess of $9bn.
> 
> A value punter like yourself should get excited at the ROEs and ROAs at multiples of any other companies trading at 9 times next year earnings wth no debt._




Free cash-flow estimated at $9 billion is an impressive figure.
I have never argued that BHP is not self-funding, based on free cash-flow.
The figures from the last five years substantiate this; @ $1.9 billion.

There however is a gap [sizeable] between $1.9 billion & $9.0 billion.
The accurate way to evaluate the gulf twixt the two would be an analysis of unit production.........I personally don't currently have [nor have I looked at figures] for unit production.

I have calculated however a rough & ready estimate of where they may lie.
Revenues = 15.1% compounded growth [5yrs]
Net Profits = 50.9% compounded growth [5yrs]
Leverage = 6.2% thus the leverage apparent is not due to Capital Structure.
Profit Margins have increased from 22.6% to 31.5%

Thus we can infer that the increase in Net Profits is generated not via increasing unit sales, but via increased PRICES. Therefore, as prices fall, [if they fall] we have two impacts upon BHP earnings.

*Unit volume remains the same + price falls.
Revenue falls, Net Profit falls, but, Net Profit falls further & faster than Revenues, in the same way that it also increased faster. [Price leverage]

*Unit volume falls + price falls
The worst case scenario.
Falling unit sales * falling price accelerates and magnifies the fall in Net Profit.

*Prices in equilibrium + Unit sales increase.
The Bulls will profit from BHP revaluation upwards.
Unfortunately, very unlikely, due to the Law of Diminishing Returns.

*Prices rise + Unit sales increase.
The rising price will offset to a degree, the Law of Diminishing Returns.
However, the question becomes......rising prices + rising production how likely is this? Lets examine the Capacity Utilization of US Industry.

There is not a great deal of slack in the system currently, suggesting therefore at least from the US perspective, currently very little available manufacturing capability to utilize any further production of the raw materials, thus limiting the demand going into the near term future [1yr to 3yrs] Thus with steady, or falling demand from the US, it is my opinion that commodity prices are set to decline, until demand again picks up.

Therefore, if the wash-out results in highly leveraged falls in Net Profits, what do you think the market reaction will be? A rising share price? I don't think so, the share price will crumble, and short-term traders etc will sell out, and added to that will be the shorts.

Somewhere in that scenario, BHP will again become a buy. It will offer substantial safety at a low price, but very little at current valuations.

What is also becoming more apparent is the disconnect between playing commodities via equity exposure, and playing commodities via say Futures.This disconnect is apparent also in this thread. 

jog on
d998


----------



## ducati916

*BSD* Part II;



> _If China floats the RMB - a big piece of inflation is going to be exported into the consumer countries and we should be careful what we wish for. _




Agreed.
But that exported inflation will come at a price to China, via falling exports.
Thus, reduced demand for raw materials [commodities]



> _Perhaps the slow change advocated by the Chinese makes sense in this regard. Better to have a potentially massive inflation effect leaked into the market than jammed in one day on a new trading floor. _




Best for who?
Certainly it is a positive for China, not sure that other economies would agree, as it creates unequal competition, thus penalizes their domestic economies.



> _The accumulated USD position in China gives plenty of dough for bailing-out the dodgy financial system._




Which dodgy financial system are you referring to?



> _Never forget that the Trillon USD held by the government is essentially held by Chinese enterprise - the two remain closely linked. Hence the use of government money and jawboning to manipulate the copper and iron ore markets._




Incorrect.
The US$ reserve is held as foregin reserve accounts by the Chinese government.



> _Steel in oversupply? Then why are prices staying so strong and rising?_




Chinese steel production runs at a loss, and is subsidised via price floors by the government. There has been strong demand up until about now. Now, as [if] the US growth slows, especially via the automobile industry, we shall see the excesses of the system leak out. There has also been tremendous consolidation within the steel industry itself. 

On a speculative front, a Steel ETF has also been created, thus driving demand for steel equities in the short timeframes [last 6mths]

Demand for steel is rumoured to be strong due to planned, but not yet passed budgets for huge infrastructure spending in the US.



> _I do agree that a lot of Chinese business practice is silly and many bad debts will have been accumulated.
> 
> In my view however, the Chinese have the biggest pile of USD and the biggest demographic shift the world has ever seen pushing behind them and these effects will right many of the wrongs. _




The US$ stockpile cannot be used for domestic purposes, as, the US$ would have to be utilized to buy Yuan, which would revalue the Yuan upwards, thus triggering the dollar devaluation that would;
*damage asset values held as dollars
*revalue the Yuan upwards, damaging Chinese exports.

As previously detailed the demographic shift is not as it seems.
The birthrate is non-replacement, thus the population will halve in 40yrs
The age of the Chinese population is higher than the US
The wealth per capita is significantly lower.
Thus the demographic that you describe is far weaker than many realise. 
Japan in the 80's had a seemingly indestructable economy, the very problems that brought the Japanese economy to its knees currently exist in China.

jog on
d998


----------



## ducati916

And hot off the presses for the bulls out there..................



> _A 5% rise in steel ore prices? The world's major steel makers and iron-ore producers are now starting to talk about ore prices for next year. The industry consensus is that prices will rise between 5% and 10% and that the nearly 20% increase of this year won't be repeated, The Wall Street Journal reports today. Chinese steel makers, who failed in their attempt to resist iron-ore producers' demands this year, are intent on leading the talks and setting an industry pattern. Brazil's Companhia Vale do Rio Doce (RIO, news, msgs), the world's largest iron-ore miner, and Shanghai Baosteel Group, one of the largest steel makers in China, have been in early talks about the contracts, according to people familiar with the matter.
> 
> Just in time means just too much. Just-in-time inventories are turning into just-too-much at companies around the world, Bloomberg News says. From Dodge Ram pickups to Sanyo mobile telephones, unsold goods are piling up around the world. That may become a drag on global economic growth as companies idle workers and production lines to clear out the excess. Factory inventories worldwide rose faster than sales last quarter for the first time since 2001, according to economists at UBS in London. Behind the buildup: an unexpected slowdown in demand, especially in the U.S., brought on by the midyear surge in energy prices and a housing slump._




jog on
d998


----------



## legs

Read what Owen Hegarty thinks of the resource boom collapsing.. In a presentation:
http://www.oxiana.com.au/_data/docs/presentations/2006/essington lewis memorial lecture_1.pdf


----------



## BSD

*Doom*

If you really want to see a depression, return to the gold standard and get rid of fractional banking and derivatives. 

What interest rates do you think people would pay on a home mortgage? 15%?

I don't disagree with your view on the USD soon to cease being the world currency. I just don't see gold as taking the role. 

Gold is a pretty rock, that is it - it has limited industrial use and generates no income. A fiat currency will remain the worlds standard of exchange, it is just that the most valued and secure one could cease to be the USD and may become the Euro or Yuan. 

That said - I think gold will push through $1,000 USD in coming years. 

Being a store of 'real value' could easily apply to copper, nickel or oil too. 

I do agree also with your view that from time to time economies may need a recession to cool down and that reducing Fed rates to 1% to avoid such a fate is populist nonsense at best. 


*Duc*

*On BHP*
You must be an accountant. I have never seen someone so interested in the past. 

Prices are half of the riddle for BHP - volume growth has been and continues to be strong. See slides 18 and 25 of the recent BHP AGM Presentation for examples.

AS for debt I will quote directly from Macquarie Equities BHP note dated 25/10/2006 because you wont believe me:

*"BHP will generate US$35billion of free cashflow to the end of the decade and will be net debt free by the end of FY2008"*

As I said, these companies will be free of debt in the next few years. This cash flow number is AFTER spending on current growth projects. 

Your unit price analysis is completely useless and a waste of time:

"personally don't currently have [nor have I looked at figures] for unit production."

Get some broker research mate. They have teams of sharp guys focussing solely on the analysis of one business. 

I am still in the dark as to your Copper price forecasts. 

Stop using accounting 101 to value a business, you will continue to only invest in businesses that *were* good.


The disconnect in playing equities and futures??

If copper falls 10% per annum for the next five years in a row - long futures punters will lose but BHP will beat every analyst in the world and will make investors bucket loads

*On China*
Point by Point

An appreciating RMB wont kill China. The Yen has strengthed four-fold against the USD and take a look at their CAD

If the RMB were to revalue instantly, inflation would go to the moon and so would interest rates. I dont think any consumer nation is wanting this to happen

The banking system and the bad debt situation is the dodgy system I talk of. The trillion is in the Government coffers - but who do you think bails out banking systems when they implode?

The Chinese will do what they wish with their trillion. What other government manipulates the metals markets for the benefit of their industry?

As for demographics - forget the birthrate etc. Keep contemplating the effect of 400million people adding to their per capita production/spending at a multiple of 10.

Stop worrying about historic numbers

*Other Matters*
Anybody notice that the copper forward curve is in contango out to May next year?

I was talking of the backwardation reducing recently - the view of the future for metals investors has now improved to the point of forward prices are exceeding spot. 

Up we go!


----------



## rederob

> Being a store of 'real value' could easily apply to copper, nickel or oil too.



Maybe.
But "trading" these items of real value would be interesting to see.
The value of gold is largely a function of its rarity and (virtual) indestructibility.
The fact that it can look good is just a bonus.

Don't be too hard on ducati.  At least now he cuts and pastes with due acknowledgement.  In time he may learn to divine the future from a more balanced appreciation of key drivers of demand.  Of course if he reads more of our posts he will get a heads-up!


----------



## wayneL

BSD said:
			
		

> Anybody notice that the copper forward curve is in contango out to May next year?
> 
> I was talking of the backwardation reducing recently - the view of the future for metals investors has now improved to the point of forward prices are exceeding spot.
> 
> Up we go!



I doubt that contango/backwardation has any predictive qualities in and of itself. About as predictive as MACD.

Buuutttt..... Nicely supported at 3 bucks a lb. Bears will have another shot at support  I reckon.

...and US is still on track for a recession.


----------



## rederob

wayneL said:
			
		

> I doubt that contango/backwardation has any predictive qualities in and of itself. About as predictive as MACD.



I did note your previous similar comment.
The trend towards or away from either these points, if consistent, provides a strong measure of confidence as a predictive tool, at particular points of a commodity's cycle.
However, like any "indicator", looking at it in isolation is fraught with danger.


----------



## ducati916

*BSD*



> Prices are half of the riddle for BHP - volume growth has been and continues to be strong. See slides 18 and 25 of the recent BHP AGM Presentation for examples.




Prices are half the riddle, and currently they are the half that carry a disproportionate weighting in the share price of BHP common. Investors paying current premiums for the common will be sorely disappointed should prices fall in the future, as the leveraged contribution of prices can cut both ways.



> AS for debt I will quote directly from Macquarie Equities BHP note dated 25/10/2006 because you wont believe me:
> *"BHP will generate US$35billion of free cashflow to the end of the decade and will be net debt free by the end of FY2008"*




Well that's probably because you keep getting your facts wrong. As regards Macquarie, this is simply a forward prediction, they may be spot on, or horribly amiss, time will tell.



> Your unit price analysis is completely useless and a waste of time:




Not at all.
That you do not understand the implications however is quite clear. In fact I'll repost it; it is that good!



> _Revenues = 15.1% compounded growth [5yrs]
> Net Profits = 50.9% compounded growth [5yrs]
> Leverage = 6.2% thus the leverage apparent is not due to Capital Structure.
> Profit Margins have increased from 22.6% to 31.5%_




The analysis highlights the fact that;
*profit margins increased by 8.9%
Profit margins increase by either; price increases, and/or falling cost of production. Cost of production has risen by 12.3% compounded, thus a 15% increase in revenues, less 12.3% in Costs = 2.8% increase in gross margin.

Therefore, the 8.9% net profit margins are produced in one of two ways;
Increasing leverage [reducing the cost of capital]
Or, benefiting from increased prices. 
BHP has for it's Capitalization, an insignificant amount of debt, therefore through a process of elimination we can conclude, increasing prices are responsible for the increased margins.

Therefore, should gross margins contract, this will have a leveraged effect upon Net Profits, and they will shrink by the similar multiples as by which they have grown.............what would the effect of falling Net Profits have on the share price? And god forbid, what if falling prices are accompanied by falling unit sales.......then we have the double whammy, falling revenues & falling margins.

The answer of course being that the share price would fall.
Therefore, current buyers at the inflated level today, are paying a steep premium for a speculation that China etc can maintain their current meteoric growth......hmmmmmmm.



> _If copper falls 10% per annum for the next five years in a row - long futures punters will lose but BHP will beat every analyst in the world and will make investors bucket loads_




How naive.



> _Get some broker research mate. They have teams of sharp guys focussing solely on the analysis of one business. _




I am far more intelligent.



> _An appreciating RMB wont kill China. The Yen has strengthed four-fold against the USD and take a look at their CAD_




You seem to forget your previous post, and contradict yourself;



> _Gold bugs have called for the end of the USD/US Consumer/US borrower etc for as long as I have known what a current account deficit is.
> 
> You will find many economists who do not care anymore about CADs. Too many have hung their hat on an assumption that did not prove true for three decades and many have given up worrying.
> 
> Remember the effect the Banana Republic comments from PJK had on the AUD in the 90s? Australian foreign debt and CAD is a mess in comparison to those doom filled days, but nobody is callng for the demise of the AUD. _




So linking your two arguments just results in nonsense.
An appreciating RMB will damage China.
Because China understands this, they artificially manipulate the RMB to keep the exchange rate low against the US$.



> _If the RMB were to revalue instantly, inflation would go to the moon and so would interest rates. I dont think any consumer nation is wanting this to happen_




Such a shallow analysis, indicitative of the qualitative analysis based on opinion.



> _The banking system and the bad debt situation is the dodgy system I talk of. The trillion is in the Government coffers - but who do you think bails out banking systems when they implode?_




And what effect would that have on Chinese economic growth?
Do you think it would be a positive?
Or a negative?
I would argue that it would have a negative effect on economic growth. That it is already starting to happen, is an early warning that down the road, rather than continued double digit growth in GDP, there lies trouble ahead.



> _The Chinese will do what they wish with their trillion. What other government manipulates the metals markets for the benefit of their industry?_




And, for the sake of playing devils advocate, China has ASX resouce stocks at the top of their "to help" list?



> _As for demographics - forget the birthrate etc. Keep contemplating the effect of 400million people adding to their per capita production/spending at a multiple of 10._




Just a further example of an embedded bias.
Forget the data, and what that implies.
Don't think, pay some analyst to think for you, and go with their recommendation, after all, by a process of elimination, we can conclude that you believe them to be more intelligent than yourself.

*rederob*



> _The value of gold is largely a function of its rarity and (virtual) indestructibility.
> The fact that it can look good is just a bonus._




The value of gold, is psychological.
It possesses no intrinsic value.



> _Don't be too hard on ducati. At least now he cuts and pastes with due acknowledgement. In time he may learn to divine the future from a more balanced appreciation of key drivers of demand. Of course if he reads more of our posts he will get a heads-up!_




I always read your posts.
They are of great interest, and highly illustrative of trader sentiment.

jog on
d998


----------



## BSD

*Wayne *  I never really responded to the backwardation/contango point. 

I don't see the slope of the curve as being predictive as much as MACD(!) or the bond yield curve for that matter. 

I do see it as an insight into market player's views of the future and in copper this view has gone from being very negative (40% discounts over 27mths) to 10% discounts over the same timeframe. 

The predictive abilities of the forward curve have been rubbish in the last 2 years at picking the prices on the way up and stangingn stronger - so we can happily discount the accuracy of current forward prices also. But it is a view on current sentiment. 

I got a shock to find some out-months in contango after the barrage of bear talk around the red metal in the last month or so. 

I use a number below $3.00 for my Cu forecasts beyond end of this year, so I tend to agree with your assumptions. 

Recession in the next 12 months, being two 1/4s of negative growth, could happen. As a betting man I would be happy to lay odds of 25% or 4/1. 

But recoveries also occur and I cant see any such downturn being a protracted affair.  

*DUC*
I give up. 

You are too intelligent and me too naive and shallow to carry on. 

Your ability to avoid 'forecasting' by looking in the rear view mirror will ensure you continue to have a portfolio that doesnt beat the cash rate on a mark to maket basis. 

Is there an ignore function on the site?


----------



## ducati916

*BSD*



> *DUC*
> _I give up.
> You are too intelligent and me too naive and shallow to carry on. _




I understand.



> _Your ability to avoid 'forecasting' by looking in the rear view mirror will ensure you continue to have a portfolio that doesnt beat the cash rate on a mark to maket basis. _




Well of course that may be the case. But then again maybe not.
My success or failure will be easily followed on the public portfolio.



> _Is there an ignore function on the site?_




Love me/hate me, I am irresistible!

jog on
d998


----------



## rederob

ducati916 said:
			
		

> Love me/hate me, I am irresistible!
> jog on
> d998



Baaaaaa

..... where men are men and sheep run scared!


----------



## ducati916

rederob said:
			
		

> Baaaaaa
> 
> ..... where men are men and sheep run scared!




You seem to be in the habit of re-using the same old insults, can you not at least be a little more imaginative?



> _Why do namby pamby ducati types
> 
> I emailed ducati’s reply to a mining engineer I am in contact with and he’s probably still laughing. He wants to know if ducati is available to ferret around a few of his prospective tenements for a couple of years, or if he can just cheat and put something on the resource inventory that meets his theory about time frames and ability to replace reserves. He also said if ducati can get his hands on a drilling rig (better still a crew that has a clue), he can name his price.
> 
> Looks like ducati fell off his bike!
> 
> *You can pontificate over valuation theory till the cows come home, or sheep, or whatever else comes home where you are.* _




jog on
d998

ps; how's that $800 Gold target looking for Dec.31 2006?


----------



## rederob

ducati916 said:
			
		

> ps; how's that $800 Gold target looking for Dec.31 2006?



Pretty good:


----------



## ducati916

Well someone is telling porkie pies then aren't they;


----------



## rederob

ducati916 said:
			
		

> Well someone is telling porkie pies then aren't they;



Perspective is important.
That gold chart does not look bearish.
The "gold" thread can wait another year for US$800 - maybe less, maybe more.
I will return there "after" the number is breached, and then go for a "double or nothing".

I believe it is important for you to feel you can have *one * victory over me:  We could make it an annual event.

Merry Christmas


----------



## rederob

Sometimes a picture tells.....


----------



## Knobby22

Amazing, never realised the US use 1/4 of the worlds oil consumption in a year.


----------



## noirua

Merrill Lynch have downgraded RIO, BHP and Xstrata to neutral.


----------



## ducati916

And the story is misleading should you end your analysis at the pretty picture. As of course China consumes commodities in large part to manufacture for export.

Domestic consumption is estimated at 42% which is very low.
The remainder is exported to the rest of the world, and the US is China's largest customer. 

Therefore, if US consumption falls for any reason [if they have a recession] China's consumption of raw materials will fall, thus, demand for raw materials falls proportionately. Add in falling US demand [from same potential recession,] and further demand weakness.

What signals a recession?
A prolonged yield curve inversion. Something like this;


----------



## rederob

ducati916 said:
			
		

> Domestic consumption is estimated at 42% which is very low.
> The remainder is exported to the rest of the world, and the US is China's largest customer.



Perhaps the US has an important role, but China has a more significant dependence on other nations than the US for the bulk of its exports.
In fact, the European Union accounts for a greater value of exports than the US.
This was not the case 5 years ago, but China has consistently weaned itself off the US and nowadays is also a major financial backer of projects in countries the US openly shuns.

ducati
You can throw up every economic indicator in the world, but you need to get some credibility by putting some of it in place and adopting time frames to complement your thesis.
For example, what's your best estimate of inevitable collapse of global markets based on the yield curve inversion?


----------



## ducati916

rederob said:
			
		

> _Perhaps the US has an important role, but China has a more significant dependence on other nations than the US for the bulk of its exports.
> In fact, the European Union accounts for a greater value of exports than the US.
> This was not the case 5 years ago, but China has consistently weaned itself off the US and nowadays is also a major financial backer of projects in countries the US openly shuns.
> 
> ducati
> You can throw up every economic indicator in the world, but you need to get some credibility by putting some of it in place and adopting time frames to complement your thesis.
> For example, what's your best estimate of inevitable collapse of global markets based on the yield curve inversion_?




I think a good starting place might be in actually ensuring that your *facts* are accurate, and not just an opinion off the top of your head.

Exports, are not FOREIGN INVESTMENT. 
I would have thought that this basic difference would not need clarification.

If you understood the implications of the yield curve, a timeframe would suggest itself.

Data;



> _Exports:
> $752.2 billion f.o.b. (2005 est.)
> 
> Exports - commodities:
> machinery and equipment, plastics, optical and medical equipment, iron and steel
> 
> Exports - partners:
> US 21.4%, Hong Kong 16.3%, Japan 11%, South Korea 4.6%, Germany 4.3% (2005)
> 
> Imports:
> $631.8 billion f.o.b. (2005 est.)
> 
> Imports - commodities:
> machinery and equipment, oil and mineral fuels, plastics, optical and medical equipment, organic chemicals, iron and steel
> 
> Imports - partners:
> Japan 15.2%, South Korea 11.6%, Taiwan 11.2%, US 7.4%, Germany 4.6% (2005)  _




jog on
d998


----------



## Freeballinginawetsuit

Knobby22 said:
			
		

> Amazing, never realised the US use 1/4 of the worlds oil consumption in a year.





The US dont use a quarter of the worlds oil consumption   , surely not!.


----------



## nizar

Freeballinginawetsuit said:
			
		

> The US dont use a quarter of the worlds oil consumption   , surely not!.





Yes they do.
They use roughly 20million barrels a day.
Global consumption is 84million barrels/day.

Dont have any links sorry but iv read it in a number of sources (many of which are hard-copy).


----------



## Freeballinginawetsuit

It was a bit of sarcasm Nizar!, as well as Invading Iraq twice for the good of world security , or vesting arms in Iraq for a decade prior again for world security or constraining Japan and forcing their hand to go south before we were both born  . The US have a long history of being the worlds 'oil police' under the guise of nuances and yes their consumption of oil is disproportionate to the rest of the global community!.


----------



## rederob

ducati916 said:
			
		

> I think a good starting place might be in actually ensuring that your *facts* are accurate, and not just an opinion off the top of your head.
> If you understood the implications of the yield curve, a timeframe would suggest itself.
> jog on
> d998



ducati
There seem to be very few threads where you are taken seriously.
There is data available to end September 2006, rather than accounting estimates for 2005.
"The European Union remained the largest trade partner of China, with a bilateral trade volume of US$194.4 billion in the first three quarters, according to the customs administration. Then come the United States, Japan and the Association of South East Asian Nations." (http://www.chinadaily.com.cn/bizchina/2006-10/13/content_709732.htm)
As for yield curves, the question was put to you as it is you who has faith in its forecasting capacity.
Yet again you obfuscate.
You continue to castigate others with sweeping "nonsense" assertions as you hold true to arcane accounting methodologies that simply present numbers into an agreed set of books in accordance with international standards.
Then you suggest these numbers, typically quite outdated given the speed that markets move, have a capacity to forecast the future value of companies.
I shall continue to "read" the markets as I see them, continue to make mistakes, and continue to prosper in that manner that I do.


----------



## michael_selway

ducati916 said:
			
		

> What signals a recession?
> A prolonged yield curve inversion. Something like this;




Hi can you tell me more about "inverted yeild curve" in general

to be honest i have no idea why a prolonged inversion would "signal a recession"

thanks in advance

MS

https://www.aussiestockforums.com/forums/attachment.php?attachmentid=5452&stc=1


----------



## wayneL

michael_selway said:
			
		

> Hi can you tell me more about "inverted yeild curve" in general
> 
> to be honest i have no idea why an inversion would "signal a recession"
> 
> thanks in advance
> 
> MS
> 
> https://www.aussiestockforums.com/forums/attachment.php?attachmentid=5452&stc=1




<sarcasm> It's different this time </sarcasm>


----------



## theasxgorilla

Inverted yield curve means that longer term bonds (loans) are offering yields lower than shorter term.  An example of this in Australia might be the 2-year fixed rate mortgages being lower than the current variable rate.  In this scenario why wouldn't you fix?

The bond investors of the market opt for longer term bonds with lower yields because they're predicting that short term yields will fall below the levels of the long term soon enough, and for long enough, to make their longer term investment more profitable.

When you fix your mortgage in preference over the more expensive variable rate, you are betting against the bond investors.

Falling short term rates are usually indicative of an enconomy that has slowed (recessed even) and needs stimulus.  It doesn't always happen that an inverted yield curve means that a recession is coming but it happens statistically often enough for economists to pay attention.


----------



## clowboy

theasxgorilla said:
			
		

> Inverted yield curve means that longer term bonds (loans) are offering yields lower than shorter term.  An example of this in Australia might be the 2-year fixed rate mortgages being lower than the current variable rate.  In this scenario why wouldn't you fix?
> 
> The bond investors of the market opt for longer term bonds with lower yields because they're predicting that short term yields will fall below the levels of the long term soon enough, and for long enough, to make their longer term investment more profitable.
> 
> When you fix your mortgage in preference over the more expensive variable rate, you are betting against the bond investors.
> 
> Falling short term rates are usually indicative of an enconomy that has slowed (recessed even) and needs stimulus.  It doesn't always happen that an inverted yield curve means that a recession is coming but it happens statistically often enough for economists to pay attention.




Good explanation....

Particulary like how you made it revlevant to everyone with the fixed/var payments example


----------



## ducati916

*rederob*



> _ducati
> There seem to be very few threads where you are taken seriously._




I agree. Everyone hates the contrarian, you could almost add, by definition.



> _There is data available to end September 2006, rather than accounting estimates for 2005._




And it is from the 







> _(China Daily)
> Updated: 2006-10-13 08:37_




Which I'm quite happy to use as evidence, therefore;


> _It brought the country's trade surplus to US$109.9 billion in the first nine months, exceeding the US$101.9 billion for all of 2005.
> 
> Exports totalled US$91.64 billion in September, up 30.6 per cent from the same month a year earlier, and imports rose 22 per cent year on year to US$76.34 billion. _




Intresting however the ratio of Exports to Imports, as is noted here;



> _In a bid to keep trade balanced, the Chinese Government should encourage more imports instead of merely dampening exports, suggested Shen Danyang, a researcher with the Chinese Academy of International Trade and Economic Co-operation, a think tank under the Ministry of Commerce.
> 
> He said a decline in the growth rate of exports would result in a slowdown of GDP growth and loss of thousands of jobs.
> 
> "Increases in imports promote economic growth and create jobs and tax income although they might exert pressure on some industries or sectors," Shen said. _




As already discussed in this thread, China has subsidised unprofitable business, [and I used Steel as the example] to maintain exports at high levels, to maintain high[er] employment.

Shrinking exports to the US are a phenomenon of units shipped + dollar value or [exchange rate] If therefore exports are measured in dollar terms, a depreciating dollar and appreciating Euro, will change the value of the measured exports...........having said that, Europe has certainly on the basis of this article surpassed the US, so apologies for my _dated_ data.

Accepting that this is the case this suggests that;

*Europe is in economic expansion, and increasing imports from China as a component of an increase in total trade [exports + imports]

*The US is in decline in total trade [which has been the case argued by myself]

Europe taken as a whole has not been growing YOY.
Czech Rep. 6.2%
Hungary 3.8%
Poland 5.5%

These are the three leaders, France, Germany & the UK are in the doldrums, and they also happen to be three of the larger world economies, and the larger of the European economies.

Therefore, it would seem quite possible that the growth in exports to Europe from China, measured in dollars, exacerbated by exchange rates, is due more to the shrinkage in US imports from China, due to a consumer slowdown, than huge growth from Europe, that is sclerotic [excepting the 3 hotspots].



> _As for yield curves, the question was put to you as it is you who has faith in its forecasting capacity._




Really.....where?

However, I shall answer the question because the later explanation misses the point [not that the information is incorrect, just the wrong emphasis]

Yield curves are very important to forcasting recessions when they are of a maintained duration because they illustrate the tightning of the credit cycle, viz Banks borrow short and lend long.

When they cannot do this, they cannot lend, thus there is a tightning of credit, and liquidity of capital, this is the basis of any carry trade.
Therefore, if the curve stays inverted in the US for at least 12mths, the US will go into recession.

*If* is the word to focus on.
The Fed. will be aware of this, and [rightly or wrongly] will possibly act to prevent this from happening, they will possibly [attempt]to do this by lowering the Fed Funds rate. This is why currently the Bond market is discussing rate cuts.



> _You continue to castigate others with sweeping "nonsense" assertions as you hold true to arcane accounting methodologies that simply present numbers into an agreed set of books in accordance with international standards.
> Then you suggest these numbers, typically quite outdated given the speed that markets move, have a capacity to forecast the future value of companies._




This is in reference to BHP and related analysis [opinion].
Absolutely, and I shall continue to argue my point until I see something logical, coherent, sensible, or overwhelming mathematical evidence that incontrovertibly proves me incorrect.



> _Then you suggest these numbers, typically quite outdated given the speed that markets move, have a capacity to forecast the future value of companies._




Since I have valued BHP using my arcane, outdated, etc methodology, what has actually happened in the market?

Why, BHP has fallen in price, and *real* analysts have downgraded both BHP & RIO, while I *downgraded* them months ago. 

What valuation metrics do these guy's use?
Gee, they use forward NPV valuations.



> _I shall continue to "read" the markets as I see them, continue to make mistakes, and continue to prosper in that manner that I do._




Of course you will.
I shall also continue to read and disagree, [or agree] with said interpretations.

jog on
d998


----------



## coyotte

Whilst the big boys can borrow YEN  or EURO  @ st low rates , would this negate any analysis of the US yield curve ?

It would seem that CBs have lost control untill the BOJ decides it wants a higher yen 


Cheers


----------



## rederob

ducati
The simple question that you continue to avoid is "when will commodities collapse"?
By this I mean a time frame, not a set of circumstances which is self evident.


----------



## ducati916

rederob said:
			
		

> ducati
> The simple question that you continue to avoid is "when will commodities collapse"?
> By this I mean a time frame, not a set of circumstances which is self evident.




As to being self evident, you and BSD, totally missed the self evidency, nattering endlessly on about how China is the only story in town, dismissing any other attempt at a balanced analysis.

jog on
d998


----------



## EasternGrey1

rederob said:
			
		

> ducati
> The simple question that you continue to avoid is "when will commodities collapse"?
> By this I mean a time frame, not a set of circumstances which is self evident.




Let me have a go. I can only express my own opinion, the tealeaves haven't yet been picked that can give scientific certainty.

So that I don't have to heavily qualify every little statement I make, I'll begin with a general qualification: I really don't know much about commodities, so don't believe anything here. If I get anything totally wrong, this is where I warned you!!

Commodities (I mean metals) won't all collapse at the same time. Some will drift down, rather than "collapse". Some will stay strong for quite a while at least.

Overall demand will generally stay strong for all commodities for several years, thanks mainly to China. There looks like being a blip originating from the US at some time (which will hit commodity prices), but it might not last long so I am ignoring it for now and concentrating on the longer term picture. [If it's the timing of the blip that we're actually concerned about, then I would _guess_ around mid 2007).

IMHO the place to look for clues to commodity prices is supply. [Warning - I am entering an area of even lower knowledge]. My understanding is that copper supplies are quite flexible, so the copper price is more at risk of declining soon than, say, Nickel or Zinc, where I believe it will take a year or two or more to crank up supply significantly. Lead and Silver probably line up with copper.

Iron ore supply is pretty tightly controlled by the big 3(?) so iron ore prices are likely to remain firm.

Gold supply is inflexible and increasing Asian affluence will over time push up the gold price at a greater rate than inflation (Pierre Lassonde: "_The current price cycle is very similar to what we saw in the 1970s -- a very long, extended cycle, and this one is powered by China and India_"). The yellow book predicts a heavy drop in demand for gold in 2006, but it doesn't seem to be happening. I think gold miners will be a good place to look for investments that will ride out successfully any blip in the US economy or $.

I'll add in my feelings on oil: We are at or near "peak oil". If the world gets serious about greenhouse, and reduces demand while increasing alternative energy supply, the upward pressure on the price of oil will ease. However, the oil producers can and probably will stop the price dropping, and any disruption to supply will cause a price spike. I will remain invested in oil companies with long term supply reasonably well assured, but will take some profit on any price spike.

Was any of that any use?


----------



## noirua

The very recent downgrading of the mining majors is on the basis of a US slowdown and the affect of a possible rise in the US currency from here. Commodities may still drift in price across the board despite a US Dollar rise.

This slowdown world-wide will come even if some countries are hit first. The US and Australia have been hit with property price falls whilst many countries still have rising property prices. 
London, UK, saw a 12% rise in property prices in the last 12 months, as the UK is more a buy and rent culture with rich Eastern Europeans and Arabs arriving in their droves. 
Australia may well see this happen more as rich Asians, who trade with Aus, see opportunities not far across the waters.


----------



## rederob

ducati916 said:
			
		

> As to being self evident, you and BSD, totally missed the self evidence, nattering endlessly on about how China is the only story in town, dismissing any other attempt at a balanced analysis.
> 
> jog on
> D



I think there is a gulf of difference between the matter of the US being less relevant, which is my thesis, and that of China being the only story in town.
An issue that continues to escape the genius of ducati is that US manufacturers are continuing to move into China to make products for a global (rather than purely local, ie US) market.
Apart from that, we are a long way from seeing India hit its economic straps, while Russia and Brazil are also playing catch-up.
Hardly a single-focus on China!
Moreover, with the doomsayers continuing to be out in force, why have commodities - apart from copper - not yet got back to balance?

ducati yet again refuses to answer a simple question.

EasternGrey1
Thanks for your commentary.
I, too, am very keen on oil for the longer term.


----------



## stoxclimber

EasternGrey1 said:
			
		

> Was any of that any use?




Exactly what rederob is asking of ducati..a prediction which can be proved correct or incorrect in the future...which ducati for some reason will not provide.


----------



## wayneL

Some interesting analyst views from bloomberg, via TickerSense



> 2007 Expected Commodities Price Changes
> 
> The table below highlights the consensus opinion on where commodities prices will go in 2007.  The estimates are from numerous analysts polled by Bloomberg.  The expected percent change for each commodity is calculated by the difference in the year-end 2007 consensus and the current price.  Interestingly, the only three commodities that are expected to rise in 2007 are the three tracked mostly by the mainstream media -- oil, natural gas, and gold.  All other commodities are expected to decline, with lead expected to fall the most.


----------



## BSD

Would at least have to say from that graph that Nickel and Zinc are 'cum-upgrades'

40% falls are not happening with the current supply/demand functions. 

Consensus is fleeting and in many cases, lagging

This also gives a great picture of the banks hedging their bets again for another twelve months. Remember, most banks have copper long term prices at $1.20 (or less) - they need to draw a downward line through 2007 and 2008 to get to their ridiculously low long term number. 

These are the forecasts that the banks are using to get the forward PEs on the majors at 10 times in the coming years - so commodities can do pretty poorly before the equities are getting downgrades. 

On another note, that US jobs number on Friday night didnt look too recessionary to me. 

Goldilocks gets another win over the Bears for another month/quarter it appears!


----------



## rederob

At present I put tin and copper as most likely worst performers next year.
I think silver will be an outperform, while gold will do its usual annual spurt before its usual annual retreat - expect a 20% rise over today's gold price.
There is a general tightness to metals that is not going away.
Moreover, the longer it lingers the higher prices are likely to climb in the near term before further consolidation.
There is little present evidence that consumers are walking away from base metals, except for copper in the US.  However, this is being countered by a view that China may substantially increase its copper imports in 2007 after the SRB has discontinued destocking its strategic reserves.
Irrespective, production costs will ensure that if the likes of copper hit $1.50 any time soon, many producers will shut up shop as they won't have the margins to capitalise ramped up production.  So look for producers scaling back output if inventories begin to climb too rapidly.


----------



## wayneL

BSD said:
			
		

> On another note, that US jobs number on Friday night didnt look too recessionary to me.



Most economists who look deeper than the raw numbers point out that job creation has either been low paying jobs in the health (LOL) sector or McJobs. Hardly encouraging for long term job market strength.



			
				BSD said:
			
		

> Goldilocks gets another win over the Bears for another month/quarter it appears!




Goldilocks at least had empirical evidence as to the temperature of the porridge etc. 

I wouldn't categorize US investors as in Goldilocks mode at all... rather, spin induced delirium.

Cold porridge is "just right", hot porridge is "just right" too... even no porridge is "just right".

Some comments around:



> "THE FED'S STATEMENTS reflect how the members of the central bank's Federal Open Market Committee perceive the economy. The slightest changes are scrutinized for clues about where interest rates may be headed. The Dec. 12 statement announced that the Fed was keeping rates steady at 5.25%, its fourth pause in a row after 17 increases in 17 meetings. The Fed is betting slower economic growth and falling energy prices are easing inflation pressures -- meaning no reason to raise rates more, but no need to cut rates yet, either. Below are the differences between the October statement and the December one."




...and from Barry Ritholtz:



> Raymond James' Jeff Saut offers his take on the recent market action:
> 
> 
> 
> 
> As for the “here and now,” we have deemed the recent performance by the major market indices to be somewhat “unnatural.” Markets typically go up, correct by 25%, and then re-rally if they are going to trade higher.
> 
> This, ladies and gentlemen, has not been the case recently as the averages have “unnaturally” vaulted higher without so much as ANY correction. We have suggested this phenomena was triggered by Goldman Sachs’ re-weighting of its much institutionally indexed commodity index last July. Why Goldman would mysteriously reduce the weighting of gasoline from 7.3% to 2.5%, in a gasoline-centric economy, and stage those reductions incrementally right into the November elections is a mystery to us, but there you have it.
> 
> Following that, the Department of Energy mysteriously said it would not add to the Strategic Petroleum Reserve (SPR) until after the winter months, even though the SPR was below prudent norms. This is also a mystery to us, but once again there you have it.
> 
> Then, when it looked like the equity markets were set-up to correct (read: decline) in mid-October, the NYSE petitioned the SEC, and was granted, a mysterious reduction in margin requirements for an already over-margined hedge fund community. And that “mysterious surprise” gave the major market indices another leg-up (read: re-rally). Again, why in the world one would introduce more leverage into an already over-leveraged hedge fund community is a mystery to us!
> 
> Also mystical is why every time the equity markets look like they are set up for a downside correction, do “buyers from Mars” appear in the futures markets to prevent a decline? We have documented such occurrences in past missives where those “mysterious buyers” have shown up at 6:30 at night and “bid” the S&P 500 futures from 1375 to 1397 (or +22 points) in a mere two minutes, but that is a discussion for another time.
> 
> The current unnatural state of the equity markets continues to leave us cautious; although we have learned the hard way it is difficult to “break” the equity markets to the downside during the ebullient month of December. Consequently, our sense is that the markets will consolidate here and then attempt to trade higher into year-end. If the S&P 500 can vault above 1415, with conviction, we can see near-term objectives into the 1440 – 1445 level. While we are disinclined to play the indexes on a trading basis, we have purchased some stocks recently in investment accounts. (emphasis added)
> 
> 
> 
> 
> Jeff has been around a long time, has a great track record, and is a wizened Market observer. When someone like him says that market action is unnatural, its worth considering . . .
Click to expand...


----------



## BSD

wayneL said:
			
		

> Also mystical is why every time the equity markets look like they are set up for a downside correction, do “buyers from Mars” appear in the futures markets to prevent a decline? We have documented such occurrences in past missives where those “mysterious buyers” have shown up at 6:30 at night and “bid” the S&P 500 futures from 1375 to 1397 (or +22 points) in a mere two minutes, but that is a discussion for another time.




I read a lot of Ray Jay's stuff and find these comments remarkable. 

Are they saying the Fed/Govt are propping-up equity markets?

In my view, nobody (no matter how leveraged) could manipulate the US equity markets for very long. 

The 'buyers from Mars' could buy futures all they want; but if the physical doesn't catch-up they will quickly run out of ammo against the arbs. 


I haven't seen too much negativity about the employment number. 

The 'McJobs' comments regularly come from those who thumb their nose at 'service' jobs. These comments fly in the face of the orthodoxy from 10-20 years ago that said service industry jobs were simply a sign of a strong first world economy. 

Better to have a service industry than a 15% unemployment rate.


----------



## CanOz

You know if there wasn't an election coming up with GWB in it, i would think your all nuts and need to be locked up for extreme paranoia. But he changes everything................to be honest, i'm starting to feel a bit nervous too, and i'm looking for a safe place...but still just watching every day.

Thanks for the post Wayne, thought provoking.

Cheers,


----------



## rederob

Some analysts are also upgrading their metal price forecasts:
http://ctv2.theglobeandmail.com/ser...213/business/Business/businessBN/ctv-business


----------



## CanOz

hmmmm, i think we need to back that one up with major brokerage house upgrade....Dom Sec just doesn't cut it for me.

Cheers,


----------



## Dukey

CanAussie - I was under the impression Georgie Boy is on his last term now. I think It'll be someone else next time no matter which mob of jokers wins.
Can anyone confirm??
 -dukey


----------



## wayneL

BSD said:
			
		

> Are they saying the Fed/Govt are propping-up equity markets?
> 
> In my view, nobody (no matter how leveraged) could manipulate the US equity markets for very long.
> 
> The 'buyers from Mars' could buy futures all they want; but if the physical doesn't catch-up they will quickly run out of ammo against the arbs.



They don't have to do it for long... just long enough to affect sentiment.



			
				BSD said:
			
		

> I haven't seen too much negativity about the employment number.



You're not looking in the right places.

Here is a good blog to keep an eye on http://bigpicture.typepad.com/


----------



## CanOz

Dukey said:
			
		

> CanAussie - I was under the impression Georgie Boy is on his last term now. I think It'll be someone else next time no matter which mob of jokers wins.
> Can anyone confirm??
> -dukey




Same mob though right. I really think the ultra conservatives in the US have had thier time.

Cheers,


----------



## moses

CanOz said:
			
		

> Same mob though right. I really think the ultra conservatives in the US have had thier time.




mmm...and whats the odds on a return of Hillary and Bill? I'd like to see it just for the sheer historical novelty.

Not that this is relevant to the thread!!


----------



## Freeballinginawetsuit

moses said:
			
		

> mmm...and whats the odds on a return of Hillary and Bill? I'd like to see it just for the sheer historical novelty.
> 
> Not that this is relevant to the thread!!




Yep they're quite a laugh the Americans, past President couldn't say no! and the current President can't spell no! .

They haven't had much luck with the Guys, maybe its time for a sex change, I mean at least she's got half a brain.


----------



## wayneL

wayneL said:
			
		

> You're not looking in the right places.
> 
> Here is a good blog to keep an eye on http://bigpicture.typepad.com/



From Barry http://bigpicture.typepad.com/comments/2006/12/what_is_the_tru.html

Not about employment numbers, but highlights the dishonesty of financial reporting


----------



## wayneL

What effect would a dollar crisis have on commodities?

Precious metal boomage is the intuitive answer. But markets tend to do the opposite to what *everybody expects.

What about base metals? They might go up in US dollars, but what about in Pacific pesos?

Check out this video on dollar doom:

http://avalontrading.blogspot.com/2006/12/death-of-dollar.html


----------



## Realist

Freeballinginawetsuit said:
			
		

> Yep they're quite a laugh the Americans, past President couldn't say no! and the current President can't spell no! .
> 
> They haven't had much luck with the Guys, maybe its time for a sex change, I mean at least she's got half a brain.





Oh god, NO!!!      

I rate Bill Clinton very highly, the best since JFK I'd think.

I'm also not that disapointed with George W, although that is frightfully unfashionable to say of course, I do not think he has done a bad job, I wonder how JFK for instance would have reacted after Sept 11. What would Maggie Thatcher or Winston Churchill or John Howard have done?

Bush is no intellectual, but you will find intellectual's are not usually great leaders.

Bush has done an adequate job IMHO. He cops too much for what is an impossible job.  If he had done nothing after Sept 11 he'd cop all sorts of criticism, if he does something he cops criticism, he can't win.

And finally, Al Gore is a ********!!


----------



## Realist

wayneL said:
			
		

> What effect would a dollar crisis have on commodities?




Good question.

But what maybe more important is....


What effect would a soaring yuan have on commodities?


Once China fairly values their currency it will soar, they are deliberately undervaluing it quite significantly at the moment for obvious reasons - cheap t-shirts to stock $2 shops all around Australia.


----------



## Sean K

Realist said:
			
		

> Bush has done an adequate job IMHO.



 

I thought you were a value investor Realist.

This comment puts you in the 'I have no brain' basket! Please redeem yourself. Somehow.


----------



## Freeballinginawetsuit

Realist said:
			
		

> Oh god, NO!!!
> 
> I rate Bill Clinton very highly, the best since JFK I'd think.
> 
> I'm also not that disapointed with George W, although that is frightfully unfashionable to say of course, I do not think he has done a bad job, I wonder how JFK for instance would have reacted after Sept 11. What would Maggie Thatcher or Winston Churchill or John Howard have done?
> 
> Bush is no intellectual, but you will find intellectual's are not usually great leaders.
> 
> Bush has done an adequate job IMHO. He cops too much for what is an impossible job.  If he had done nothing after Sept 11 he'd cop all sorts of criticism, if he does something he cops criticism, he can't win.
> 
> And finally, Al Gore is a ********!!





Yep,

I certainly would rate Clinton highly, the sad point is that he will always be remembered for.............ML. Unfairly, perhaps, I mean for an old fella he showed extraordinary constrant to stop at just some throat action, most would have gone the whole hog with a carrot dangling in front. Not Bill though, best leave no evidence behind he was probably thinking (and I can always sack her if need be!) thinking he was the smart one. I would love to have been a fly on the wall when she said " Ahhh Bill but I kept the dress you so kindly dumped on", the poor bugger was stuffed then, a real conundrum  .

JFK was definately a man for the times and he had better taste than Clinton and didn't get caught, or had better minders .

As for Bush he's an absolute shocker. An unintellegent, misinformed, indecisive fool who resorts to threats and warmongering and preys on the week (who seem to follow his idiocy). Whats with the american public!, they have been in no hurry to get rid of him  
No way did bush act decisively after 9/11, he was at a loss what to do and flew around in circles for a couple of hours. It probably took 3 hours for his minders to drum in his 'dum dum' lines and feel that he could talk in public without dribbling.

5 years later, Afghanistan is still going on, Iraq's still going on and OBL is blowing in the wind having a fat old time. The US would have been a lot better just bying their time and getting him overtly when he popped his caftan up when he thought he was safe, they jumped the gun and went off half cocked to early.

I came across something the other day whilst in KAL that mentioned a mining pioneer in that neck of the woods that went on to become a US president, I bet he would have been well grounded.

Of all the world leaders, my fav's old Winnie, now he was a man for the times who left his predessor in his shadows. The world would be a much different place if it wasn't for him and his ability to drum up a Nations support (and the rest of the world) at such a crucial time for mankind. Without him Hitler would have been running amok, inviting the King for tea and laughing at the Americans with 'too little>too late' and nowhere to land.


----------



## nizar

Freeballinginawetsuit said:
			
		

> As for Bush he's an absolute shocker. An unintellegent, misinformed, indecisive fool who resorts to threats and warmongering and preys on the week (who seem to follow his idiocy). Whats with the american public!, they have been in no hurry to get rid of him
> No way did bush act decisively after 9/11, he was at a loss what to do and flew around in circles for a couple of hours. It probably took 3 hours for his minders to drum in his 'dum dum' lines and feel that he could talk in public without dribbling.
> 
> 5 years later, Afghanistan is still going on, Iraq's still going on and OBL is blowing in the wind having a fat old time. The US would have been a lot better just bying their time and getting him overtly when he popped his caftan up when he thought he was safe, they jumped the gun and went off half cocked to early.




Agree that Bush is a clown.
But when you are in a group of people, normally you pick the smartest person to become the leader. The Americans picked Bush. Tells you something about Americans ! :


----------



## chops_a_must

Freeballinginawetsuit said:
			
		

> They haven't had much luck with the Guys, maybe its time for a sex change, I mean at least she's got half a brain.



Hilary may have the brain, but Bill's got the head.


----------



## Sean K

*ABARE Releases Prophecies For 2007*
FN Arena News - December 18 2006

By Rudi Filapek-Vandyck

The Australian Bureau of Agricultural and Resource Economics (ABARE) has just published its outlook for 2007. As expected the Canberra based, government owned economic researchers and forecasters anticipate rather smooth sailing for most of the world economies predicting global economic growth will only fall a little from this year's anticipated 4.8% to 4.3%. Inflation is expected to remain contained.

One of the surprise predictions is that the US dollar is expected to depreciate a tiny little bit only against the euro in the year ahead: from an average 0.80 euro to 0.78 euro. The Australian dollar is expected to remain largely unchanged versus the USD: 0.76 for 2007 versus 0.75 for 2006. (An explanatory paragraph further down in the document suggests the forecast is for the first six months of 2007 only (year 2006/07) with ABARE playing it safe by adding the outlook for the currency currently comes with "considerable uncertainty").

The forecast for gold is more buoyant with ABARE forecasting an average spot price gain of 11% in 2007 predominantly fuelled by increased investor demand for the precious metal. The forecast is for the gold price to average US$670 an ounce in 2007 versus an estimated 2006 average gold price of US$606 an ounce.

Another stand out prediction is that prices for crude oil are forecast to average around US$56 a barrel in 2007. This is circa 15% lower than the estimated average of US$66 a barrel in 2006 as ABARE believes production will increase faster than demand and lead to a further build-up in global inventories.

World steel prices, however, are expected to fall only marginally in 2007 from the historically elevated levels in 2006. ABARE cites robust economic growth in China, India and other developing Asian economies in combination with solid economic growth in Japan and the US in 2007 as factors underpinning this forecast.

Australian economic growth is forecast to fall to 2.5% from 2.9% this year, while growth in the US is expected to fall to 2.5% from 3.3% this year. The Bureau does highlight there are still "considerable risks" with regards to the US economic outlook, specifically with regards to "build-in inflation" which could endanger the economic picture in 2007. Notes ABARE: "a marked weakening of economic growth in that country [the US] would pose a threat to economic prospects elsewhere in the world".

Economic growth in China is expected to continue its robust path: 9.5% in 2007 against 10.4% in 2006.

The worst drought in a long time in Australia is estimated to reduce the rate of economic growth in 2006-07 by around 0.7 percentage points from what would otherwise have been achieved. The local inflation rate is assumed to be around 3.0% in 2006-07, compared with 3.2% in 2005-06.

Earnings from Australia's commodity exports are forecast to be around $139.9bn in 2006-07, compared with $123.5bn in 2005-06, or a rise of circa 13%. ABARE explains the forecast increase in the value of commodity exports reflects "significantly higher earnings from mineral resources exports".

Export earnings of farm commodities are forecast to be around $25.4bn in 2006-07, 8% below the $27.6bn recorded in 2005-06. No surprise here as the fall in farm export earnings "mainly reflects lower export volumes for crops as a result of the drought".

Interestingly, ABARE forecasts world wheat production in 2006-07 is estimated to be 31m tonnes lower than in the previous season. As a direct result of this, the world wheat indicator price is forecast to increase by US$32 a tonne in 2006-07 to average US$208/tonne. The pool return for Australian premium white wheat (APW 10) is forecast to be A$248 a tonne in 2006-07, 30% higher than in the 2005-06 season.

The world indicator price for traded raw sugar is forecast to fall by 25% to average US11.9 cents a kilogram (New York no.11 fob Caribbean) in 2006-07. The price fall follows a global supply response to high prices in the middle of 2005-06 which has caused sugar supply to grow faster than sugar demand, the researchers note.

The value of Australia's minerals and energy exports is forecast to be around $110.7bn in 2006-07. This compares with $92.2 bn in 2005-06. Energy commodities export earnings are forecast to increase from $39.3bn in 2005-06 to $41.3 bn in 2006-07. Export earnings for metals and other minerals are forecast to rise by 31% to $69.3bn in 2006-07.

The price for aluminium is forecast to fall by 11% to average US$2260/tonne (US103c/lb) as global aluminium production is forecast to exceed consumption. The price fall for aluminium should beat copper's with ABARE forecasting a fall of more than 8% to an average of US$6250/tonne copper (US284c/lb) for the year ahead.

For nickel and zinc the price outlook should remain positive still with nickel's average price anticipated to increase by circa 3% to US$24,800/ tonne in 2007 while zinc prices are forecast to rise by circa 30% to average US$4200/tonne or US192c/lb.

ABARE notes in "real terms" (which means adjusted for inflation) nickel's price should come close to its all time high of 1988.


----------



## blueroo

Freeballinginawetsuit said:
			
		

> Of all the world leaders, my fav's old Winnie, now he was a man for the times who left his predessor in his shadows. The world would be a much different place if it wasn't for him and his ability to drum up a Nations support (and the rest of the world) at such a crucial time for mankind. Without him Hitler would have been running amok, inviting the King for tea and laughing at the Americans with 'too little>too late' and nowhere to land.



Don't forget that this is the bloke that done his apprenticeship as boss of the Galipoli campaign, caused thousands upon thousands of unneccessary deaths and came up smelling of roses later on in WW2. Was the price worth it?


----------



## Dr Doom

Here's another prospective scenario for commodities from an Australian sourced disruption to supply. What I'm hearing is that there is trouble ahead for the states electricity generators through lack of cooling water. For this particular area of the state, there is at best 7 months of cooling water left. Without *SUBSTANTIAL* rainfall there is the prospect of *power rationing* (as well as the current water restrictions). Now as the Eastern states are (loosely) interconnected, any disruption in one state adversely affects the other states (subject to the interconnector(s) capacity restraints). There is the real possibility that any mining operations connected to the grid will experience electricity supply interruptions. 
I would envisage this would reduce somewhat the output of these mines, and hence have some affect on prices?. 
How many mines are run on diesel generators? How many on grid power?. As well as the current restrictions on exporting capacity, miners would also have to deal with power blackouts. This could cause a  further appreciation in commodity prices, while Australian producers would have to sit on the sidelines unable to produce. 

The effect of climate change on the world economy

If this were to be the scenario that unfolds, power & water shortages could spread the current rural recession to the wider community in which case there would be less demand for raw materials.

If it doesn't rain soon then this will be a very real danger.

Who knows, just another angle maybe????

PS buy a generator while you can


----------



## chops_a_must

blueroo said:
			
		

> Don't forget that this is the bloke that done his apprenticeship as boss of the Galipoli campaign, caused thousands upon thousands of unneccessary deaths and came up smelling of roses later on in WW2. Was the price worth it?



Not true.

He was an Admiral, not a General.

He was instrumental in trying to get rid of Haig. He also forced the BEF to increase the ratio of machine guns to infatrymen, (despite Haig's objection) even though he was an Admiral and had only the lives of British soldiers on his mind. If you had read _British Butchers and Bunglers of World War One_ you might know a bit more. Churchill was at the time, one of the very few leaders who actually cared about the men he was leading.


----------



## Dr Doom

Another view of the direction of commodities prices - 

Read the story


----------



## wayneL

Dr Doom said:
			
		

> Another view of the direction of commodities prices -
> 
> Read the story






			
				the Bloomberg Article said:
			
		

> ``Copper is going to come a cropper,'' Moore said.




LOL I like that one


----------



## ducati916

*DD*

Certainly the article acknowledges the potential damage to commodity prices that a US slowdown/recession could entail. They also reiterate the China effect;



> _China Bulls
> 
> China's economy grew 10.4 percent in the third quarter, down from 11.3 percent in the prior three months. Chinese crude steelmaking climbed 24 percent in November from a year earlier. Fixed-asset investment in urban areas rose 26.6 percent in the first 11 months, the National Bureau of Statistics said.
> 
> ``The only countervailing force'' is China, said UBS's Hickson. Chinese metal consumers ``may increasingly re-enter the market in 2007, supporting the global fundamentals.'' _




However China has been, and still is over-investing, and this is potentially very dangerous to the continued unalloyed bullish outlook on China.

The average capital investment in developed economies is approximately 21%. The current capital investment in China is estimated at 38% at the low end to 44% at the high end. This will lead [and already is] to serious excess capacity and surpluses [good for the consumer].

ICOR has seriously imploded from $3.00 to $5.00 per $1.00. Much of this has been in infra-structure, which while impacting the GDP negatively in the short-term, will impact it positively in the longer term.

The above metric should imply that returns on Capital are falling. This is seemingly not the case. Profits from Chinese businesses are rising. The reason could be that in a command economy, the government via subsidy and support to businesses, is materially altering the profitability of business.

However, infra-structure has a long depreciation cycle, and the eventual slowdown in capital infra-structure projects would seriously impact the Chinese demand factor for raw materials.

jog on
d998


----------



## rederob

> However, infra-structure has a long depreciation cycle, and the eventual slowdown in capital infra-structure projects would seriously impact the Chinese demand factor for raw materials.



With over a billion people to accommodate via infrastructure projects that shoulds happen when, ducati?


----------



## constable

rederob said:
			
		

> With over a billion people to accommodate via infrastructure projects that shoulds happen when, ducati?



Yes interesting point , it seems everyone misjudged the volume of china's growth in the first place , i wonder if their  slowdown will be a little longer and little more protracted than we would ordinarily expect.


----------



## ducati916

rederob said:
			
		

> With over a billion people to accommodate via infrastructure projects that shoulds happen when, ducati?




You want an exact date, a bit like your one?



> _Originally Posted by *rederob*
> 
> Not asking you to buy gold as I am happy to do that.
> But would you like to do another of your detailed analysis so that we can see what range prices for gold we can look forward to over the next year or so?
> 
> Or would you prefer a brief history lesson: Recall my challenge to you -
> 
> 
> And one of your multitude of sweeping conclusions:
> 
> In the light of the fact that gold has breached your preferred upper range of $720 I think it only fair to give you another opportunity to prove yourself. On the other hand, I will concede utter defeat if gold’s “parabola” collapses and by year’s end POG is trading under $800 (which I believe is generous in that my expectation was for gold to be near that level by year’s end, rather than be as “support”). _




jog on 
d998


----------



## Freeballinginawetsuit

blueroo said:
			
		

> Don't forget that this is the bloke that done his apprenticeship as boss of the Galipoli campaign, caused thousands upon thousands of unneccessary deaths  and came up smelling of roses later on in WW2. Was the price worth it?





You obviously haven't read much of Churchill, I have! and your post is anything but accurate, it's dribble. 

Blue, show some informed opinion's on a 'leader' who played an integral and definitive role in your freedom of expressing an opinion at all! 

Or perhaps you are a 'Chamberlain', trader of the market and in that case by all means carry on with the flock


----------



## rederob

ducati916 said:
			
		

> You want an exact date, a bit like your one?
> jog on
> d998



At least I had the guts to give a date.
You need to go back to the gold thread to read the context that gave rise to the $800 figure - it was my attempt to get you to put your name to something you would own!
Anyone reading the gold thread will know that I came into the thread when the gold price was in the $500s and I tipped it to breach $700 within the year.
You gave your usual ramblings and were very quickly found to be caught out by a rapidly rising gold price.

Well, I don't want or need an exact date for this "commodity collapse", but some reasonably based timeframe within *months * or perhaps even the year it will collapse would be a start.
For example, do you think the "collapse" will start in 2007, or have completed in 2007, or the next year, etc?
Having read the doom merchants for several years now, their chances can only be improving!


----------



## nizar

rederob said:
			
		

> Having read the doom merchants for several years now, their chances can only be improving!




Exactly.
Gotta love those "analysts".
There's always been a few on CNBC calling for a correction in the US markets since i think October. It didnt happen so of course it was because of this and because of that. Then they said November. Ended up it was a good month. Of course some more excuses. Now they are saying December.

They will keep getting it wrong but when they get it right (eventually) they will come out and beat their chests 

But i suspect its when every1 starts turning bullish is when the bears will come out.


----------



## ducati916

*rederob*



> _At least I had the guts to give a date.
> You need to go back to the gold thread to read the context that gave rise to the $800 figure - it was my attempt to get you to put your name to something you would own!
> Anyone reading the gold thread will know that I came into the thread when the gold price was in the $500s and I tipped it to breach $700 within the year.
> You gave your usual ramblings and were very quickly found to be caught out by a rapidly rising gold price._




Nonsense.
The discussion centred around whether or not, gold possesses an intrinsic value. I did eventually provide my valuation range, and it was calculated as I recall at circa $400 to $740.

Oh, here it is all neatly summarized for me by the teaboy;



> _Summarising then for ducati:
> He puts the speculative range at $418.88 to $769.00
> So, support, he would *hope* to materialize at $418.88 odd, and Resistance to materialize circa $769.00 odd._




Notice the word "speculative" referring to the lack of an intrinsic value for gold, which confirms my assertion in regards to where I came in on this discussion.

Therefore you need to stop posting fabrications. 

jog on
d998


----------



## ducati916

> _Unemployment decreasing
> The latest survey conducted by the Ministry of Labor and Social Security shows China's unemployment is decreasing but there are still many unemployed.
> 
> According to the results of a survey taken in 62 major cities, the number of unemployed decreased during the fourth quarter of last year. There were 1.08 million jobs available but 1.45 million people looking for work leaving 370,000 unemployed.
> 
> Reports also show tertiary industries such as wholesale and social services offer the most jobs. _




Coupled to a high Savings Rate
http://www.fin24.co.za/articles/com...?Nav=ns&lvl2=comp&ArticleID=1518-1783_2034757

Why is this a problem?
If you subscribe to Keynesian economics, then you would like to see approximate equilibrium. Unemployment leads to deflationary scenarios. Excess saving can lead to increasing unemployment.

Excessive saving, or underconsumption, as China currently has, combined with its excessive capital investment relies on foreign consumption to maintain the growth rate, as increasing capital investment increases the supply, while high savings rates decrease demand.

You therefore have a situation of increasing supply, falling or stagnant demand, which lowers prices. Lower prices cuts into profit margins, lowering the requirement for labour [cutting costs] unless demand grows from internal or external sources.

A US slowdown, therefore through the multiplier effect [transmitted via globilization] will seriously impact China's growth rate. Commodities hit by a US slowdown, compounded by a China slowdown, would be expected to fall in price.

jog on
d998


----------



## rederob

Again ducati you post the obvious.
At noon it will be 12pm, and when global demand collapses we will have a collapse in commodities.

The teaboy forecasts gold will hit $800, and you have a speculative cap at $770.  You might like to add you timeframes again, just for the record.

And while you are at it, you can add a date to the collapse in commodities.


----------



## wayneL

Anyone notice the breakdown on the copper charts?

Closed yesterday in New York at less than $2.88/lb or something.

Key support was $2.97

Chart

Currently $2.84 on the overnight electro market


----------



## rederob

Wayne
The copper charts have been breaking down for some time, and you know that once $2.30 is breached we are in for some fun and games.
What is peculiar is that Shanghai copper inventories are tight by all historical standards and are refusing to increase at a rate commensurable with elsewhere in the world.  When that trend moves into overdrive the jig is up and copper-based equities will bleed the red metal from our poors.
Another unusual trend of late is the low rate of Comex stock build, to the point of occasional small daily declines: This is not consistent with a collapse, but it is neither cause for bulls to celebrate into the new year.
I expect continuing declines in copper for the foreseeable future, but nothing yet indicates a massive failure of the market "overnight"; more likely a steady as she goes - down!.
At the other end we have precious metals also refusing to capitulate, but not showing strength either.
All in all a very "wishy washy" metals market, with some continuing to trend higher and others lower.


----------



## Wysiwyg

wayneL said:
			
		

> Anyone notice the breakdown on the copper charts?
> 
> Closed yesterday in New York at less than $2.88/lb or something.
> 
> Key support was $2.97
> 
> Chart
> 
> Currently $2.84 on the overnight electro market




Hello....the 5 year warehouse stock of copper is still at a low so I would tend to believe that the pre Christmas easing in company production for maintenance,holidays etc. is the reason.Demand will be there for a while yet.


----------



## Wysiwyg

Wysiwyg said:
			
		

> Hello....the 5 year warehouse stock of copper is still at a low so I would tend to believe that the pre Christmas easing in company production for maintenance,holidays etc. is the reason.Demand will be there for a while yet.




Oh .... and by the way....keep tipping the commodities to collapse and one day you will be able to say ...I told you so ....phooooey. :bs:


----------



## wayneL

rederob said:
			
		

> Wayne
> The copper charts have been breaking down for some time,




This move is a bit more significant in technical terms, but yes ~$2.30 would be an altogether more exciting level to contemplate.


----------



## noirua

Which commodity prices will do well, recover to 2006 highs or hold their massive gains through 2007?  Top commodities are Uranium, coal and iron ore for the 2007 frame, but what do you think may surprise?


----------



## Dr Doom

Wysiwyg said:
			
		

> Hello....the 5 year warehouse stock of copper is still at a low so I would tend to believe that the pre Christmas easing in company production for maintenance,holidays etc. is the reason.Demand will be there for a while yet.




While they are low, stocks are steadily increasing, a YOY increase, as shown on the chart. You would attribute monthly variations to plant outages etc but on a 5 year chart the trend is definitely for stocks increasing, with the corresponding price decreasing. It also shows a correlation with the peak in the US housing bubble & subsequent decline to a certain degree, as it appeared to peak in 2005 also. So if there is a solid connection with the US housing industry then we can expect more inventory build-up and price falls.

More signs of slowing - 

"The report *confirms* a softening in factory output and *demand* seen in other reports in recent months, including the key Institute for Supply Management index, which broke below the break-even point of 50% last month. Most economists believe the easing is largely related to the *corrections* in housing and autos, as well as volatility in other key areas, such as aircraft and electronics."

Reduced demand for commodities used in cars - "Inventories of motor vehicles increased 1.1%, putting the inventory-to-shipments ratio at the highest level in six years"

And someone here alluded to the definition of a recession being when manufacturing starts to slow (also) - "The Philly Fed index fell to negative 4.3 in December from 5.1 in November. It was the *lowest* reading in the Philly Fed index since April 2003, and adds to evidence that the manufacturing sector is *slowing sharply* as the housing and auto industries work off large inventories."

The phrase "housing and auto industries" is being seen more frequently these day's when looking for reasons as to why the data is frequently negative. Even in Oz, car affordability has never been more favourable, but the home grown industry requires substantial subsidies from the Fed government to stay afloat. If it weren't for WA & QLD subsidizing the rest of the country via commodities exports then we would be in a recession. Which makes it all the more concerning should commodities take a tumble.

The question still remains as to whether it is an orderly decline or a domino over a precipice.  

_(prec·i·pice (prĕs'ə-pĭs) pronunciation

   The brink of a dangerous or disastrous situation)_


----------



## theasxgorilla

Excuse my ignorance, is it possible to get volume info on your copper chart WayneL?


----------



## wayneL

theasxgorilla said:
			
		

> Excuse my ignorance, is it possible to get volume info on your copper chart WayneL?




That chart was a continuous contract, so volume is meaningless.

You can look at volume on an individual contract basis, but volume is affected by traders scaling into and out of the spot month.

It's not the same as looking at share volume.

But for interest sake here is the current (March) chart with volume and open interest. http://new.quote.com/futures/adv_ch...0x550&chartUi.bardensity=LOW&chartUi.overlay=

Cheers


----------



## wayneL

Wysiwyg said:
			
		

> Oh .... and by the way....keep tipping the commodities to collapse and one day you will be able to say ...I told you so ....phooooey. :bs:




Somehow I missed reading this unnecessarily antagonistic post.

<amateur psychologist mode> Sounds like you have a lot of capital (both money and emotional) invested up in a perpetual copper bull. The financial capital invested in a view is fine, for it is trading to a view you have of the market. But such an emotional investment, where one feels they must insult anyone with an alternative view is unhealthy and *may* ultimately result in a financially deleterious outcome.

The use of the non-sequiter denotes a suspension of logical arguement. It is OK to hold an alternative view, but one should avoid becoming emotional about it.</amateur psychologist mode>

<zen-goodwill to mankind mode> Merry Christmas to you.  </zen-goodwill to mankind mode>


----------



## Wysiwyg

wayneL said:
			
		

> Somehow I missed reading this unnecessarily antagonistic post.
> 
> <amateur psychologist mode> Sounds like you have a lot of capital (both money and emotional) invested up in a perpetual copper bull. The financial capital invested in a view is fine, for it is trading to a view you have of the market. But such an emotional investment, where one feels they must insult anyone with an alternative view is unhealthy and *may* ultimately result in a financially deleterious outcome.
> 
> The use of the non-sequiter denotes a suspension of logical arguement. It is OK to hold an alternative view, but one should avoid becoming emotional about it.</amateur psychologist mode>
> 
> <zen-goodwill to mankind mode> Merry Christmas to you.  </zen-goodwill to mankind mode>




Hello WayneL.....money invested in a perpetual copper bull..no.The purely analytical assessment of topics are helpful and informative.Thanks.I agree with you.

Merry Christmas to you also.


----------



## Julia

From today's SMH.

http://www.smh.com.au/articles/2007/01/02/1167500110164.html

Julia


----------



## wayneL

Copper just dipped below $2.70 in the electro market.

Technical support still a long way away too.


----------



## noirua

wayneL said:
			
		

> Copper just dipped below $2.70 in the electro market.
> 
> Technical support still a long way away too.





Major miners are down about 4% to 7% in London. Copper is now a peasant not King.


----------



## wayneL

noirua said:
			
		

> Major miners are down about 4% to 7% in London. Copper is now a peasant not King.




Carnage in the states

Freeport down ~10% Teck-Cominco down 8%

Most of the other majors down about 4% on average.

Wide rage day on the SP too!!!

Oh Man!   Action at last!!!!!


----------



## wavepicker

I dare say there will a few surprises and fireworks lined up for the fist half of this year


----------



## wayneL

Forgot to mention feb crude closed at $58 and change, dipping to 57.72 at one stage... thats about 5% down   

Exciting day in the US


----------



## Dr Doom

Demand side negatives (again!) - 

<> GM sales fell 13 percent in the month, although the automaker reported sales on per-selling-day basis that showed only a 9.7 percent decline. The fall left GM with sales 8.7 percent lower in 2006 than the year before.

The slide at GM in December was much worse than had been forecast. Auto sales tracker Edmunds.com had forecast only a 5.2 percent drop for the largest U.S. automaker in raw terms, and sales down only narrowly on a per-sales day. Shares of Dow component GM plunged about 5 percent following the report.

<> Ford Motor (Charts) reported that U.S. sales fell 12.8 percent from December a year earlier.


----------



## Sean K

With copper and oil getting whacked, funny I have BHP opening up at the moment.   

I suppose that will change in the next hour..........

My goldies all look like they'll be swiiming red........  

Nickel, Zinc & Lead up 1-2% so maybe the pain won't be that great. Uranium of course maintaining all time high at $72. Iron Ore recent contract price increase in place. 

Might be just a pause today, although it is hard to see when copper is going to turn back up. Any guestimates?


----------



## dj_420

im only holding zinc, uranium and iron ore at the moment. im hoping i chose the right path. 

im only trying to hold stocks where the fundamentals still look positive.


----------



## Fab

dj_420 said:
			
		

> im only holding zinc, uranium and iron ore at the moment. im hoping i chose the right path.
> 
> im only trying to hold stocks where the fundamentals still look positive.



Out of interest which stocks do you hold and think the fundamental are right


----------



## dj_420

from all the research ive done i believe the fundamentals are still there for zinc, nickel, uranium, iron ore. we have seen demand outstrip supply for all these commodities, and there is to be expected tightness to continue until supply finally catches up with demand.

obviously there will be huge continued demand for uranium. i actually expected zinc supplies to be more depleted than they currently are, so im re-evaulating my zinc stocks.

ive sold down some of my portfolio but am still holding SMM, MTN, CBH, JML, JMS, UMC.

only had limited capital last year so i only hold a few stocks.


----------



## Fab

Here we go from the overnight LME results it looks like a bit of a collapse. DJ down as well almost 1% , not good at all for ASX opening on monday


----------



## chops_a_must

It will be interesting to see what effect the actions of Hugo Chavez have on the oil price over night. Hugo, I could kiss you. *mwah*


----------



## YOUNG_TRADER

Chops I'd prefer a LT Oil price of $55-$60 as it will help tame inflation and hence assist equity markets in rallying as Fed can ease up allowing US Economy to limp along (although its not that weak)

If we get an Oil price above $65 soon we will see heavy talking by US Feds and inflation fears which will make the mkts shakey!


I forgot to add, a $55-$60 US/bl price is not too shabby for the Oil companies either, 

So be careful what you wish for Chops!


----------



## chops_a_must

VALUE CHANGE % CHANGE 
Oil 53.99 -2.10 -3.74 
Gold 609.30 -0.10 -0.02 
Natural Gas 6.39 0.01 0.20 

Not many people would have picked this.


----------



## noirua

chops_a_must said:
			
		

> VALUE CHANGE % CHANGE
> Oil 53.99 -2.10 -3.74
> Gold 609.30 -0.10 -0.02
> Natural Gas 6.39 0.01 0.20
> 
> Not many people would have picked this.





Strong forecasts for oil to hit US$45 a barrel, as futures slide. Low price of oil seen as good for many stocks that are high users of the commodity as most commodity futures hit red. US Dollar rise foreseen and may be negative for gold in the short term.

Commodities to remain strong, seen as Iron Ore and Uranium. Coking coal to weaken in particular with resistance in good quality thermal and PCI coals. Copper to stay at present  low levels, and most other metals to soften.


----------



## noirua

Coal prices in Australia:  http://www.abc.net.au/news/items/200701/1820706.htm?newcastle


----------



## noirua

Most smaller mining stocks are being hit after the negative news coming out of the States on commodity prices. Once the dust has settled, most will have been seen to have fallen, deserved or not.

Stocks, particularly in iron ore, Uranium and those principally in good quality PCI, semi-soft coking and thermal coals should recover. Depending, of course, how much the stock has reversed. 

Cash is going to be a big factor as mining turns negative, as raising it will become tougher. Look closely at whether the stocks your in have plenty of cash in the Bank for development.

Is the company making strong profits at the moment. If it's making none, or struggling, the fight gets harder. 

Much of the above is obvious of course, but how often we miss it.


----------



## Dr Doom

If you need a forward looking indicator to give you advanced warning for the future of commodity prices then keep looking at US housing. It still hasn't bottomed yet & the effects are usually felt by the general economy some several months later. Only this time it is showing up sooner eg slump in transport, slump in oil price, slump in copper, steel looking fully priced, car makers selling fewer cars. Big red warning light flashing now.


----------



## BREND

I have heard too many bearish view on US housing without any data to support. If you look into my blog, mortgage rate has an inversed relationship with housing sector. Mortgage rate has remained low, this should support housing sector in 2007.

http://basemetal-trading.blogspot.com/2006/12/us-will-not-have-recession.html


----------



## kransky

BREND said:
			
		

> I have heard too many bearish view on US housing without any data to support. If you look into my blog, mortgage rate has an inversed relationship with housing sector. Mortgage rate has remained low, this should support housing sector in 2007.
> 
> http://basemetal-trading.blogspot.com/2006/12/us-will-not-have-recession.html




could you read this and post your comments please?
http://www.contraryinvestor.com/mo.htm


----------



## Sean K

Russia is talking about reducing oil output because of a spat with Belarus...
Hugo C is turning Venezuela into a socialist state taking over all the foreign oil companies. 
The US is attacking some poor Muslims in Somalia who they say are terrorists with precision guided 'area weapons'. 
Israel is drawing up plans to Nuke Iran because they want clean power.
Kim Il is just a moment away from going extra crazy with his own Nukes. 
The US can not get out of Iraq because a civil war has started that could engulf more than just Baghdad. 
Millions (millions) of Chindians are buying cars to get to work in massive cities.
The electric car is being held back by big oil.
There are no more elephant fields.
OPEC has stated they want the POI around $60.00.

And yet POI has been going down?? 

Because it's been a warm winter in the US???
Are inventories up that much?
Is demand down that much?

Hmmmm perhaps so.


----------



## wayneL

BREND said:
			
		

> I have heard too many bearish view on US housing without any data to support. If you look into my blog, mortgage rate has an inversed relationship with housing sector. Mortgage rate has remained low, this should support housing sector in 2007.
> 
> http://basemetal-trading.blogspot.com/2006/12/us-will-not-have-recession.html




This is way too simplistic a view and ignores affordability issues, employment etc etc etc.

The FTB (first time buyer) is effectively AWOL in the english speaking world and it is this along with investment which underpins the market.

As investors realise that any new investment in res. RE is in fact now a poor investment, they will go AWOL as well.

It's a house of cards and any breath of wind will blow the whole lot over. I mean people are crapping themselves over quarter percent rises FFS... not healthy!

Base metal prices are a leading indicator, they're telling us something as well.

Economic Armageddon approacheth. Build a war chest for the buying opportunities to come.


----------



## wayneL

kennas said:
			
		

> And yet POI has been going down??




Could go to the 40's based on sentiment I reckon and could linger there as economies go over the cliff in the next 1 -3 years.

However, I suspect geopolitical forces (as detailed in your post) will force oil higher sooner, rather than later.


----------



## Wysiwyg

While on the subject of oil and for those who have not seen this comment by Clive Maund a few days ago. 


Oil broke down from its 5-year uptrend last week, although, as we can see on the chart, it has yet to break down below an important support level at and extending below the late 2005 low, once it does, which will be signified by Light Crude breaking below $54, it will be a bear market. Whilst this support holds there is still an outside chance that oil will rally to the $70 area to complete a Head-and-Shoulders top area, although developments across the commodities sector last week are making that increasingly unlikely. It is considered hazardous to short oil while it remains above $54.


----------



## Sean K

wayneL said:
			
		

> Could go to the 40's based on sentiment I reckon and could linger there as economies go over the cliff in the next 1 -3 years.
> 
> However, I suspect geopolitical forces (as detailed in your post) will force oil higher sooner, rather than later.



Wayne, do you think a major recession could keep oil at, or below your $40 ish sentiment target even with those geopolitical forces? 

Must be extremely hard to make a judgement on this of course with a lot of unknowns down the track. eg, severity of recession, level of geoplitical instability, etc.


----------



## BSD

The copper market is full of hedgefund noise at the moment. 

The speculative shorts have piled up enough to send the market into freefall. The self-fulfilling prophecy is amazing to watch.

The fundamentals are fine and investment decisions should be guided by timeframe of investment. 

The US property market did not drive copper up and it is not the reason behind the fall. 

US property demand is 5% of world copper demand. Chindia is 30%. 

Chindia is growing at 10% per annum still - does anyone really believe that copper consumption fell during this growth?

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1lRHtUL6_uY

*Copper processors in China used more than 250,000 tons of the metal that was stockpiled at their plants or warehouses last year*, according to Yang Changhua, an analyst at Beijing Antaike Information Development Co., which advises the government on industry policies. 

``Our inventories are close to zero, and most other processing plants are in a similar condition,'' said Zhang Xuefeng, head of futures trading at Chinalco Luoyang Copper Co

Where will they get the 250,000 tons from this year?

Short termists can short it all they want - when the Chinese start buying the equivalent of the total LME stockpile again, the game will be up. 
_______________________________________

The Dow Jones index reweighting is also having an effect - particularly in nickel and zinc. Their weights have been halved and at the same time their prices have doubled. 

The index has seen industrial metals downgraded significantly for the increase of energy.  

$30bn USD of commodity index money follows this index and that is a lot of selling for illiquid metals like Zn and Ni to bear


----------



## Smurf1976

BREND said:
			
		

> I have heard too many bearish view on US housing without any data to support. If you look into my blog, mortgage rate has an inversed relationship with housing sector. Mortgage rate has remained low, this should support housing sector in 2007.
> 
> http://basemetal-trading.blogspot.com/2006/12/us-will-not-have-recession.html



None of which changes the reality that housing is incredibly overvalued relative to the earnings of those buying it. That's the problem IMO.


----------



## wayneL

BSD said:
			
		

> The copper market is full of hedgefund noise at the moment.
> 
> The speculative shorts have piled up enough to send the market into freefall. The self-fulfilling prophecy is amazing to watch.



That's actually the wrong way round. The specs are reactive and pile in BECAUSE copper is tanking and may push it along. The specs don't cause the direction though.

The commercial hedgers are getting very long though and on that basis, we could expect some support soon... where? who knows.

One point to note is that the COT report has not been a reliable indicator of direction over the last two years, so a pinch of salt is required with any discussion of commercial hedgers or speculative hedge fund positions.


----------



## BSD

I posted this on the BHP thread:

http://www.kitco.com/ind/Field/jan032007.html

I agree with your comments, you distinguish against the short term and the ultra short term speculators. I have noted for some time on this thread that the non-physical participants (hedge funds) have been short for a long tme and not the reason for higher prices being sustained. 

I don't know where it stops either Wayne, but I am a very happy buyer for investors with a 12-24 month view. 

No leverage, no margin calls, no forced selling etc.


----------



## BREND

BSD said:
			
		

> The copper market is full of hedgefund noise at the moment.
> 
> The speculative shorts have piled up enough to send the market into freefall. The self-fulfilling prophecy is amazing to watch.
> 
> The fundamentals are fine and investment decisions should be guided by timeframe of investment.
> 
> The US property market did not drive copper up and it is not the reason behind the fall.
> US property demand is 5% of world copper demand. Chindia is 30%.
> 
> Chindia is growing at 10% per annum still - does anyone really believe that copper consumption fell during this growth?
> 
> http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1lRHtUL6_uY
> 
> *Copper processors in China used more than 250,000 tons of the metal that was stockpiled at their plants or warehouses last year*, according to Yang Changhua, an analyst at Beijing Antaike Information Development Co., which advises the government on industry policies.
> 
> ``Our inventories are close to zero, and most other processing plants are in a similar condition,'' said Zhang Xuefeng, head of futures trading at Chinalco Luoyang Copper Co
> 
> Where will they get the 250,000 tons from this year?
> 
> Short termists can short it all they want - when the Chinese start buying the equivalent of the total LME stockpile again, the game will be up.
> _______________________________________
> 
> The Dow Jones index reweighting is also having an effect - particularly in nickel and zinc. Their weights have been halved and at the same time their prices have doubled.
> 
> The index has seen industrial metals downgraded significantly for the increase of energy.
> 
> $30bn USD of commodity index money follows this index and that is a lot of selling for illiquid metals like Zn and Ni to bear




Correct, US housing is not the reason behind the fall in copper price. There are rumours spreading around the metal market from China to Spore and to London that State Bureau Reserves of China is only willing to buy copper at $5000. After that price falls gradually, and then sharply.

Is copper price still an indication of housing market in US??


----------



## Wysiwyg

Metals up and the DOW into green.Oh damn off to work I go.Good day for all maybe.


----------



## dj_420

just wondering if someone could please point me to the website where i can get crude oil prices?

thanks


----------



## ekman

dj_420 said:
			
		

> just wondering if someone could please point me to the website where i can get crude oil prices?
> 
> thanks




dj - try http://www.oilnergy.com/1opost.htm


----------



## Bush Trader

This is a dangerous market to call a bottom in.

"WTI Crude has been able to successfully defend its key support at US$55 per barrel thus far, notwithstanding repeated attacks in the first weeks of calendar 2007. However, Barclays maintains the view the larger trend "remains vulnerable to the downside". Crude oil would need to rise above US$60/64 –and hold on to its gains- to reverse that view."

This seems like a rather big call in the current environment – hands in the air all who disagree!


To illustrate their current bearish inclination, Barclays chartists add they would regard any price uptick towards the US$60/64 area to provide a selling opportunity.
If crude succumbs to the pressure and drops below US$55, ideally on a close, this will open up the road to US$50 but the chartists believe it will likely goad the price towards the mid US$40s.

As far as the view for the medium term goes, Barclays holds the view that major damage has been done to the long-term uptrend for crude. While a range trade is envisioned ideally between US$75 and US$55, a price below US$55 would significantly open up the downside towards US$50 and below.


NYMEX WTI Crude Feb Delivery	53.58 	-2.06 	- 3.70%

Source: FN Arena

It's game on for the Hedge funds, for the short term at least


----------



## BREND

Commodities may attract as much asanother $25 billion of investment this year, with most of that going into funds tracking indexes, said Fimat USA LLC, asecurities and commodities brokerage. 

That would add to an estimated $110 billion already investedin commodities including crude oil, metals and agricultural products, the New York-based company said in a Jan. 9 report.Investors will continue to expect gains in commodity prices thisyear and seek to spread the risk in their holdings, Fimat said. 

``Commodities should continue to be looked at by investorsin a positive light and as a way to diversify their portfolios,''Michael McDougall, a senior vice president on the Latin Americadesk in New York, said in the report. ``We still expect at least an injection of $5 billion with a gradual increase during the year of perhaps another $10-20 billion.'' 

Economic expansion in China, the world's most populous country, has spurred a rally in commodity prices that started in 2001. Oil, copper and other raw materials rose to records lastyear on production shortages. The rally has attracted investors looking to increase their returns with asset classes considered riskier than stocks and bonds. 

The Goldman Sachs Commodity Index fell 15 percent last year,ending a four-year run of gains, and the Reuters/Jefferies CRBindex of 19 commodities fell 7.4 percent. That compares with a 14percent gain in the Standard & Poor's 500 Index. 

The surge in investments in commodity-index funds isdistorting prices for raw materials and may lead oil producers,mining companies and farmers to produce more than would be justified by underlying demand, Fimat said.

The situation of too much money chasing too few goods will continue for commodities. I will be more bullish on industrial metals and oil rather than agricultural commodities. Because there is only so much metals and oil under the ground, once it is dug out, it is gone. But for agricultural products, once it is consumed, it still can be grown again.

http://basemetal-trading.blogspot.com/


----------



## Smurf1976

BREND said:
			
		

> The situation of too much money chasing too few goods will continue for commodities. I will be more bullish on industrial metals and oil rather than agricultural commodities. Because there is only so much metals and oil under the ground, once it is dug out, it is gone. But for agricultural products, once it is consumed, it still can be grown again



I think you're forgeting that modern agriculture is itself a form of mining and is not sustainable as such. That and the renewal rate limit which applies to all renewable resources - can't sustainably use it faster than it grows.

To get it to grow quickly enough to meet present demand basically means oil, gas, phosphate rock and a bit of fossil water in = food out. 

I contend that agricultural commodities produced on an industrial scale (which is necessary with 6.4 billion people) are ultimately a finite resource no more abundant relative to demand than any mineral apart from precious metals.

That won't change without either a technological revolution in sustainable agriculture (possible but no real signs of it yet) or an outright crash in demand (and presumably population).


----------



## wayneL

Smurf1976 said:
			
		

> I think you're forgeting that modern agriculture is itself a form of mining and is not sustainable as such. That and the renewal rate limit which applies to all renewable resources - can't sustainably use it faster than it grows.
> 
> To get it to grow quickly enough to meet present demand basically means oil, gas, phosphate rock and a bit of fossil water in = food out.
> 
> I contend that agricultural commodities produced on an industrial scale (which is necessary with 6.4 billion people) are ultimately a finite resource no more abundant relative to demand than any mineral apart from precious metals.
> 
> That won't change without either a technological revolution in sustainable agriculture (possible but no real signs of it yet) or an outright crash in demand (and presumably population).




Great point. Particularly as commodities such as sugar, corn and soybeans are increasingly looked upon as energy sources (as ethanol and boidiesel) 

Get a shortage (short or long term) of these soft commodities and they will run up as hard and as fast as any stinking industrial metal. Check out the charts.


----------



## BREND

Smurf1976 said:
			
		

> I think you're forgeting that modern agriculture is itself a form of mining and is not sustainable as such. That and the renewal rate limit which applies to all renewable resources - can't sustainably use it faster than it grows.
> 
> To get it to grow quickly enough to meet present demand basically means oil, gas, phosphate rock and a bit of fossil water in = food out.
> 
> I contend that agricultural commodities produced on an industrial scale (which is necessary with 6.4 billion people) are ultimately a finite resource no more abundant relative to demand than any mineral apart from precious metals.
> 
> That won't change without either a technological revolution in sustainable agriculture (possible but no real signs of it yet) or an outright crash in demand (and presumably population).




Tks for enlightenment.


----------



## michael_selway

http://www.theglobeandmail.com/servlet/story/LAC.20070109.RFABER09/TPStory/Business

*After right call on crash of '87, Marc Faber says it's time again*



> Money manager warns 'severe correction' imminent in world stock markets
> IAN C. SAYSON AND PIMM FOX
> 
> Bloomberg News
> 
> Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a "severe correction" and it's time to sell.
> 
> "In the next few months, we could get a severe correction in all asset markets," Mr. Faber said in an interview in New York. "In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate."
> 
> Mr. Faber, founder and managing director of Hong Kong-based Marc Faber Ltd., advised investors to buy gold in 2001, which has since more than doubled. His firm manages about $300-million (U.S.) in assets.
> 
> The bullish outlook of traders in everything from bonds, equities and commodities to real estate and art suggests valuations are peaking, Mr. Faber said. Last year, the Morgan Stanley Capital international world index of developed stock markets jumped 18 per cent, while a survey of Wall Street's biggest bond-trading firms predicted U.S. Treasuries will post the best gains in five years during 2007.
> 
> Print Edition - Section Front
> Enlarge Image
> 
> More Business Stories
> Ottawa aims to speed cargo crossings
> Hand set to leave CVRD Inco post
> Two days in climate warrior boot camp
> CoolBrands under fire from former U.S. partner
> Alliance deal could produce TV spinoff
> DIVIDENDS
> Go to the Business section
> "I am not a great buyer of assets now," Mr. Faber said. "We may be in a situation where consumer-price inflation comes back and will have a negative impact on the valuation of assets."
> 
> Mr. Faber, publisher of the Gloom Boom & Doom Report, does have some favourites. Singapore and Vietnam are his top picks in Asia because stocks in Singapore aren't "terribly expensive compared with interest rates" in the city-state, while Vietnam's equities have "incredible potential in the long run."
> 
> Vietnam's Ho Chi Minh stock index more than doubled last year and was Asia's best-performing benchmark. Singapore's Straits Times index climbed 27 per cent, beating a 15-per-cent increase in the Morgan Stanley Capital International Asia-Pacific index. So far in 2007, Vietnam's index has surged 10 per cent, again leading gains in the region, and Singapore's is up 0.6 per cent. The MSCI is down 1 per cent.
> 
> Mr. Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.
> 
> "Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares," Mr. Faber said. "I'd also be careful of buying China and India shares now."
> 
> Russia's dollar-denominated RTS index surged 75 per cent last year, while the Hang Seng enterprise index, which tracks Hong Kong-listed shares of Chinese companies, jumped 94 per cent. India's Sensex index, which more than quadrupled in the past five years, is valued at 25 times estimated earnings.
> 
> Mr. Faber also advises investors stay away from shares in Thailand. Its SET index has been the world's worst-performing benchmark in the past month, sliding 15 per cent as currency controls and bombs in Bangkok spooked investors.
> 
> On a more positive note, Japanese stocks may prove good bets this year, Mr. Faber said. The Nikkei 225-stock average climbed 6.9 per cent in 2006 and the broader Topix index added 1.9 per cent, the smallest gains among benchmarks for the world's 10 biggest markets.
> 
> The U.S. market outpaced Japan last year, with the Standard & Poor's 500-stock index climbing 14 per cent and the Dow Jones industrial average surging 16 per cent.
> 
> Strategists at 14 of the biggest Wall Street firms all estimate that U.S. stocks will advance this year. The last time they were in agreement was for 2001, when the S&P 500 dropped 13 per cent.
> 
> "It's going to have to be something unexpected and somewhat dramatic" to spur the type of pullback that Mr. Faber predicts, according to Wayne Wicker, chief investment officer at Vantagepoint Funds in Washington, which has about $28-billion in assets. "Given the current environment we see today, I don't see anything imminent, other than a huge amount of money chasing deals, as a real negative."
> 
> Mr. Faber said gold should rally further on expectations that supply of the precious metal will decline and demand for it will increase to hedge against inflation. Gold climbed 23 per cent last year, its sixth year of gains.
> 
> "The price of gold will continue to go up and probably very substantially," Mr. Faber said. "In the long run, it's very clear that central banks are basically increasing the supply of money and the supply of gold is obviously very limited."
> 
> Oil prices are also tipped to rise as political instability in the Middle East and other producing areas threaten supply and global demand increases. Crude oil in New York added less than 0.1 per cent to $61.05 (U.S.) a barrel in 2006, after tripling in the previous four years.
> 
> "Everyday the world is burning more oil than new reserves are added," Mr. Faber said.



thx

MS


----------



## Wysiwyg

michael_selway said:
			
		

> http://www.theglobeandmail.com/servlet/story/LAC.20070109.RFABER09/TPStory/Business
> 
> *After right call on crash of '87, Marc Faber says it's time again*
> 
> 
> thx
> 
> MS




Is this the same Marc Faber......

Magic mushrooms for breakfast

A 1998 South China Morning Post polled public figures in Hong Kong with the question, 'Have you ever taken Cannabis?' Cannabis is illegual but not uncommon in Hong Kong, and freely available in many countries around South-East Asia. Most people said no, or refused to be quoted. Faber was as usual more straightforward and more confident: 'Naturally, I have smoked a lot of marijuana, but for breakfast I prefer omelette of Balinese mushrooms.


----------



## panem

Sorry, but what Mr. Faber says  is nonsense:

Uranium shortage, energy shortage, silver shortage.

At LEAST those comms won't fall at all.


----------



## Wysiwyg

panem said:
			
		

> Sorry, but what Mr. Faber says  is nonsense:
> 
> Uranium shortage, energy shortage, silver shortage.
> 
> At LEAST those comms won't fall at all.





Ahhh....but see as the prediction is made now, then in the unknown future it can be reefered to as "Marc Faber does it again".

Sheeesh...he should be retired and living in Barbados by now.

P.S.   He might be right though.  :kiffer:


----------



## wayneL

panem said:
			
		

> Sorry, but what Mr. Faber says  is nonsense:
> 
> Uranium shortage, energy shortage, silver shortage.
> 
> At LEAST those comms won't fall at all.




Sorry, but what Mt Faber says makes all the sense in the world.


----------



## panem

wayneL said:
			
		

> Sorry, but what Mt Faber says makes all the sense in the world.





Well, sorry:

I got Mr. Faber wrong ! 

By saying: "The stocks will fall"  he is right.

But Uranium, Gold, Silver, Oil will raise - so he is right.

Those shares connected to that will multiple, I guess.

Different views on that?


----------



## wayneL

panem said:
			
		

> Different views on that?




Nope!

Hamburg eh? Home of Bronsky & Bernstein.  I watch it as part of my futile attempts at learning German.  

So far I can say "Ein bier bitte"


----------



## Sean K

panem said:
			
		

> Well, sorry:
> 
> I got Mr. Faber wrong !
> 
> By saying: "The stocks will fall"  he is right.
> 
> But Uranium, Gold, Silver, Oil will raise - so he is right.
> 
> Those shares connected to that will multiple, I guess.
> 
> Different views on that?



I think he actually said that nothing in the short term would survive, but the best  places for money would be gold or cash. In the short term, everything would be effected but then PMs and oil would be the place to have any spare $$.....I thought he said that?


----------



## panem

wayneL said:
			
		

> Nope!
> 
> Hamburg eh? Home of Bronsky & Bernstein.  I watch it as part of my futile attempts at learning German.
> 
> So far I can say "Ein bier bitte"




Great!


"Ein Bier, bitte" is the most important sentence in Germany!

Since we have over 3.000 different beers brewt here.

Well, Hamburg is the "Reeperbahn", where you will find the girls standing around and doing some nice talking - and more...http://latesturanium.com/

It is also the city with the most millionairs in Europe.

But that goes hand in hand, I think...

Where I come from (Blankenese - Hamburg):

http://www.hotel-behrmann.de/bilder/bild_um3.jpg

http://www.pro-wohnen.de/Blankenese4.jpg

http://www.welt-atlas.de/datenbank/fotos/0-9001/big/0-9001-19.jpg


----------



## wayneL

panem said:
			
		

> Great!
> 
> 
> "Ein Bier, bitte" is the most important sentence in Germany!
> 
> Since we have over 3.000 different beers brewt here.
> 
> Well, Hamburg is the "Reeperbahn", where you will find the girls standing around and doing some nice talking - and more...http://latesturanium.com/




Reeperbahn = die sÃ¼ndige meile, ja? (I looked it up   )



			
				panem said:
			
		

> It is also the city with the most millionairs in Europe.
> 
> But that goes hand in hand, I think...
> 
> Where I come from (Blankenese - Hamburg):
> 
> http://www.hotel-behrmann.de/bilder/bild_um3.jpg
> 
> http://www.pro-wohnen.de/Blankenese4.jpg
> 
> http://www.welt-atlas.de/datenbank/fotos/0-9001/big/0-9001-19.jpg




Looks exceptionally nice, In fact I will be there sometime in the next year. 

Mission: To sample as many of those 3,000 beers as possible. There also used to be a metzgerei where I lived in Perth. I want to get into some of those things again. My favourites: Kasseler Kotelett, Lachsschinken, ThÃ¼ringer Rostbratwurst amongst many others ...YUM

....and just to feign being on topic, I predict the price of these commodities to crash


----------



## panem

Uranium to crash?
Very funny!
Silver at 8 $?
Never!
Na, dann Prost!
Hier ein Bier und ein feines Schnitzel!
No way, Sir!
It is against all researches, articles and fundamentals I read in the last 12 month.
And that was quite a lot...
You ARE from Germany, right?
It sounds like you are a Bayer?

Mahlzeit, der Herr!


----------



## wayneL

panem said:
			
		

> Uranium to crash?
> Very funny!
> Silver at 8 $?
> Never!
> Na, dann Prost!
> Hier ein Bier und ein feines Schnitzel!
> No way, Sir!
> It is against all researches, articles and fundamentals I read in the last 12 month.
> And that was quite a lot...
> You ARE from Germany, right?
> It sounds like you are a Bayer?
> 
> Mahlzeit, der Herr!




No No lol, not uranium et al to crash! I meant the price of Kasseler to crash HAHA.

Not not from Germany, but have a lot to do with Germans because of _das Deutche pferde und dressurreiten_ But did have a previous attempt at those 3000 beers in Bayern. Loved it.

Long silver atm..... and copper ferchrissake lol.


----------



## panem

See ya at the Reeperbahn, I hope!

Would be very nice!

One link to remember:

http://www-pub.iaea.org/MTCD/publications/PDF/Pub_1259CD_web.pdf/PDF/Pub_1259.pdf 

Cheers!


----------



## champ2003

panem said:
			
		

> See ya at the Reeperbahn, I hope!
> 
> Would be very nice!
> 
> One link to remember:
> 
> http://www-pub.iaea.org/MTCD/publications/PDF/Pub_1259CD_web.pdf/PDF/Pub_1259.pdf
> 
> Cheers!




That article is 1.5 years old.

All the best 

Champ2003


----------



## Dr Doom

So does this qualify as a 'collapse' yet?. 

Zinc, Copper Plunge After WSJ Report of Losses at Red Kite Fund 

By Millie Munshi and Pham-Duy Nguyen

Feb. 2 (Bloomberg) -- Zinc plunged the most in nine years and copper dropped to a 10-month low, fueled by a report of losses by metals-trading hedge fund Red Kite Management Ltd. 

Red Kite's $1 billion fund lost 20 percent in the year to Jan. 24, the Wall Street Journal reported, citing an ``unofficial estimate'' the fund gave to one investor. Base metals have lost as much as 27 percent this year on rising global inventories and slowing global growth. 

``The fear is that it's an Amaranth'' Advisers LLP, the hedge fund that lost $6.6 billion last year on natural-gas trades, said Michael Guido, director of hedge-fund marketing at Societe Genearle SA in New York. ``The problem is that we don't know how serious it is, and uncertainty breeds liquidation.'' 

Zinc for delivery in three months fell $310, or 9.1 percent, to $3,080 a metric on the London Metal Exchange, the biggest drop since July 1997. Copper for delivery in the three months fell $255, or 4.6 percent, to $5,345 a ton, after earlier reaching $5,250, the lowest since March 27. Aluminum, lead and tin also fell on the LME. 

Signs of losses by hedge funds that had poured money into metals during last year's rally may prompt some speculators to reduce their holdings, accelerating the decline in prices, said Mo Ahmadzadeh, president of metals trading at Mitsui Bussan Commodities Ltd. in New York. 

Hedge funds ``may be one sector that is feeling they've gotten more ahead of themselves in this market,'' Ahmadzadeh said. ``There's been a lot of willingness from the funds and the investment community to sell.'' 

190 Percent Gain 

Red Kite's performance in January was the worst for any month in at least a year, the Wall Street Journal said today, citing an investor who saw the fund's results. One of Red Kite's funds last year gained more than 190 percent betting on metals, the newspaper reported. 

David Lilley, who co-founded Red Kite with Michael Farmer and Oskar Lewnowski III, declined to comment when contacted by Bloomberg. Farmer wasn't available to comment on the Wall Street Journal report. 

Not everyone is convinced the losses of one hedge fund signal metals are a bad investment. 

``There's absolutely no reason for metals to fall this way,'' said Michael Metz, chief investment strategist at Oppenheimer Holdings Inc. in New York. ``The decline reflects the stress on one or more leveraged players. When the locals smell a catastrophe, they liquidate. In my opinion, it's a good time to buy.'' 

Zinc Slump 

Zinc dropped as much as 12 percent to $2,990 a ton, and prices are down 27 percent this year. The metal, last year's second-biggest gainer behind nickel after jumping 126 percent, has posted five straight weeks of declines. 

This year's slump has been spurred partly by rising inventories. Stockpiles monitored by the LME, the world's biggest metals bourse, have increased 8 percent since the end of December. LME-monitored stockpiles dropped 175 tons to 98,350 tons, the exchange said in a daily report today. 

*Supplies of zinc and other metals have risen following record prices last year. Zinifex Ltd., the world's second- largest zinc producer, said on Jan. 30 that the raw material used in producing the metal is more available than a year ago. China, the biggest producer and user of zinc, was a net exporter of refined metal in 2006 for the first time in three years, Beijing Antaike Information Development Co. said Jan. 26* 

Increased Production 

Miners such as Canada's Lundin Mining Corp. have increased production of zinc concentrate, the raw material shipped to smelters, in a bid to capitalize on last year's prices. Zinc traded at a record $4,580 on Nov. 10. 

*Supply will surpass demand by 85,000 tons this year * compared with a shortfall of 272,000 tons in 2006, Goldman Sachs Group Inc. said in a December report. 

``The $3,400 level has been a crucial point and that being broken poses further downside risk for the metal,'' Peter Fertig, a commodity analyst with Dresdner Kleinwort in Frankfurt, said today by telephone. 

Barclays Capital, the investment bank of Britain's third- largest lender, cut its average 2007 price forecast for the metal to $3,700 a ton, from $4,200, on Jan. 29. 

Copper futures fell 10.75 cents, or 4.3 percent, to $2.423 a pound on the New York Mercantile Exchange, the lowest closing price since March 24. Prices have fallen 16 percent this year. 

Swelling Inventories 

*Global stockpiles of the metal are now at the highest level since June 2004, according Bloomberg data*. Inventories monitored by the LME rose 16 percent in January, after gaining 18 percent in December. Stockpiles in London are now at the highest level since March 2004. 

``The huge tonnage that has entered LME warehouses over the last two months suggests that the market is now running in a substantial physical surplus,'' said John Kemp, a London-based analyst at Sempra Metals, said in an e-mailed note. 

Prices have also fallen because *slower growth in the U.S*., the world's second-biggest consumer behind China, means shrinking demand for the metal used in electronics, cars and air conditioners. 

Businesses in the U.S. employed fewer people than forecast, the Labor Department reported in Washington today and manufacturing in the U.S. unexpectedly contracted in January. 

The Institute for Supply Management's manufacturing index fell to 49.3, the lowest since April 2003, the private industry group said. Readings less than 50 signal a contraction in production at U.S. factories. 

Nickel Rises 

Eight of 17 people surveyed yesterday and Jan. 31 forecast copper will fall next week. Five expected a gain and four said little change. 

Among other LME-traded metals, nickel was today's only gainer, rising $550, or 1.5 percent, to $37,400 a ton as stockpiles continued to drop, exacerbating supply tightness. 

Inventories monitored by the LME shed 144 tons, or 4.3 percent, to 3,222 tons, the lowest since July 1991 and equal to less than one day of global consumption. 

Low stockpiles forced buyers to pay $2,775 a ton more for metal for immediate delivery as of yesterday than for metal for delivery in three months. Such premiums are likely to attract sellers of nickel, David Thurtell, an analyst at BNP Paribas in London, said today by phone. 

Nickel stockpiles jumped 14 percent in two days from Aug. 22, when the price differential, known as backwardation, peaked at $5,250 a ton. 

Aluminum, the most traded metal on the LME, slipped $33 or 1.2 percent, to $2,720 a ton, tin fell $200 to $11,700 a ton, and lead dropped $35 to $1,630 a ton.


----------



## theasxgorilla

Great article Doc.

I wonder what BREND can tell us about this Red Kite situation?


----------



## reece55

Cheers for posting the article Doc......

Those holding ZFX will most likely have a nasty shock on Monday then I suspect, I wonder if the $16 barrier will be broken ........ I noticed that AXA topped up of late too, so it's interesting times ahead.......... I, like ASX Gorilla, would be interested in anyone who could reveal more about Red Kite........ very interesting, the cracks are certainly appearing, first copper now it looks like zinc is in a bit of strife TA wise....... More ahead, only time will tell.....

Cheers


----------



## CanOz

One thing is absolutely certain.....Monday will be a very interesting day.

Cheers,


----------



## BREND

theasxgorilla said:
			
		

> Great article Doc.
> 
> I wonder what BREND can tell us about this Red Kite situation?




Already talked about it in the "Zinc" thread.

I have long heard of Red Kite's involvement in copper. They used to buy up 50% of copper inventory at LME warehouse, trying to corner the copper market. Many people suspect they are the ones who have push copper price up from $3000 to $7000 level.


----------



## Dr Doom

Sounds like Red Kite have been left holding the baby, so to speak. Looks like they have been holding a sizable inventory but now as prices have corrected they find themselves having toget rid of their long positions, putting further pressure on the price??.


----------



## Kauri

Dr Doom said:
			
		

> Sounds like Red Kite have been left holding the baby, so to speak. Looks like they have been holding a sizable inventory but now as prices have corrected they find themselves having toget rid of their long positions, putting further pressure on the price??.




   With the commodity prices coming off and the stellar bottom line of their fund weakening some of the investors in Red Kite have decided it's a good time to cash in their dwindling profits. Unfortunately Red Kite is fully invested, and need to sell into what is already a falling market to pay them out. They have tried to extend the time they have to repay investors so as to try not to spook the market, as they have no more money to pour into the market to prop it up. Their actions show up in the unusual vol and price action on the LME zinc forward contracts over the last week. Now word is out and it's a mad scramble for the exits. 
       Will it be business as usual after one panick attack day?
       Will other investors in commodity hedge funds see which way the wind is blowing and want to cash out as well, domino type affecting the entire metals complex?
       If you had money in a hedge fund leveraged heavily into metals would you be calling the fund manager at open of business Monday?
       Which other metals, if any, will come under pressure if panicky herd mentality prevails?  At least there is a minimum 1 month notice period for withdrawl from the funds, so if herd mentality rules we may get warning of it.
        There again, it may all be a storm in a (china) teacup.     One thing is for certain, fund managers and large institutions heavily committed in the affected markets will be out in force in the media selling the line... _Don't worry, it's only one small rogue fund that has recklessly over extended itself, the metals markets are still sound, in fact this presents a perfect time to buy... (falling knives have never been cheaper!!!)_

         The above is purely speculumation on my part, said with tongue firmly pressed in cheek.


----------



## BSD

Jim Rogers speaking to UBS dealers in Sydney recently

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vTHXty9QsX7M.asf

Good to hear a 5-10 year rather than 5-10 minute thinker


----------



## wayneL

BSD said:
			
		

> Jim Rogers speaking to UBS dealers in Sydney recently
> 
> http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vTHXty9QsX7M.asf
> 
> Good to hear a 5-10 year rather than 5-10 minute thinker




Jim's a shill


----------



## BentRod

I can barely hear the interview, sounds all muffled.

Is it the same for you guys also?

Cheers


----------



## Wysiwyg

This meeting points to a continuity of demand for rocks.Ian McFarlane seems to be encouraging on trade for such.Open the ports he says......

 Mining heavyweights say inconsistencies on uranium transport are obstacles to growth. 

The Federal Resources Minister, Ian Macfarlane, has called on state governments to remove restrictions on the shipment of uranium from their ports. 

Mining heavyweights met government officials in Canberra today to discuss the transport and regulatory problems facing the industry. 

They have named inconsistent regulation by the states and territories and uranium transport bans as obstacles to growth. 

Darwin is currently the only Australian port shipping uranium and Mr Macfarlane says that needs to change before more uranium mines open. 


And this......

Perth will host minerals industry leaders from 21 Asia-Pacific Economic Co-operation nations for the Ministers Responsible for Mining meeting from today until Friday. 

The meeting, chaired by Industry Tourism and Resources Minister Ian MacFarlane, aims to provide Ministers with the opportunity to discuss the challenges caused by increasing demand for both producer and consumer economies, and the development of new technologies and applications which require new material.

Running alongside will be the inaugural Mining Industry Forum, co-ordinated by the Minerals Council of Australia, and providing a platform for comprehensive assessment of factors affecting the growth and prosperity of the minerals sector and its contribution to global economic growth as well as sustainable development.


----------



## Kauri

On the other hand, Xinhua has reported on its website that China has discovered billions of tons of iron ore deposits on Qinghai-Tibet plateau. 



> Chinese geologists have discovered more than 600 new sites of copper, iron, lead and zinc ore deposits on the Qinghai-Tibet plateau since 1999, according to the results of the latest geological survey.
> 
> Preliminary estimates show the plateau has reserves of 30 million to 40 million tons of copper, 40 million tons of lead and zinc and billions of tons of iron, said Zhang Hongtao, vice director of the China Geological Survey Bureau.
> 
> Zhang said geologists have also compiled the country's first Qinghai-Tibet plateau geological map on the scale of 1:250,000 and the plateau's first map of metal and nonmetal deposits on the scale of 1:1.5 million.
> 
> Currently 90 percent of China's iron ore deposits are of low grade but geologists have discovered three large high-grade iron ore deposits on the plateau, including the one in Nyixung with reserves of 300 million to 500 million tons.
> 
> Large quantities of oil shale resources, which could be turned into oil, were also found on the plateau.
> 
> The plateau may have "large or super-large" deposits of hydrocarbon resources, said Zhang, adding that geologists had detected promising reserves of oil and gas in northern Tibet.
> 
> "These deposits will fundamentally ease China's shortages of mineral resources", said Zhang.
> 
> China will increase its copper concentrate output by 30 percent because the country has started to exploit three of the plateau's copper mines in Qulong, Pulang and Yangla regions, which are predicted to produce 250,000 tons of copper concentrates every year.


----------



## rederob

The thread title remains interesting.
Are commodities still tipped to "collapse"?
We have had corrections, but not even copper has "collapsed" some 20 months after inventories bottomed.
Meanwhile nickel is likely (in my view) to reach $45k/tonne on a short term squeeze, tin prices are staying high, and lead prices are heading north quite firmly.
This remains a tight commodity market by any conventional standard, and will require a market economy of significance to "fall over" in order to precipitate a collapse.


----------



## greggy

rederob said:
			
		

> The thread title remains interesting.
> Are commodities still tipped to "collapse"?
> We have had corrections, but not even copper has "collapsed" some 20 months after inventories bottomed.
> Meanwhile nickel is likely (in my view) to reach $45k/tonne on a short term squeeze, tin prices are staying high, and lead prices are heading north quite firmly.
> This remains a tight commodity market by any conventional standard, and will require a market economy of significance to "fall over" in order to precipitate a collapse.



When the so called experts predict something they often get it wrong.  That's why I got rid of my full service broker years ago.
DYOR


----------



## BREND

greggy said:
			
		

> When the so called experts predict something they often get it wrong.  That's why I got rid of my full service broker years ago.
> DYOR




Then why dont u open account with me? 
I'm not famous, but my views have a higher possibility of being correct, in metal trading and Singapore stocks investing  .

Some of my recent trades:
http://basemetal-trading.blogspot.com/2007/02/review-on-aluminum-trade.html

http://basemetal-trading.blogspot.com/2007/02/review-on-lead-trade_18.html

http://basemetal-trading.blogspot.com/2007/01/40-profit-on-lead-trade.html

http://basemetal-trading.blogspot.com/2007/01/83-profit-on-tin-trade.html

My Singapore stocks recommendations:
http://basemetal-trading.blogspot.com/2007/02/review-on-my-3-top-picks-listed-in.html


----------



## BREND

*Credit Suisse said supper-cycle isn't over, upward bias*

The commodities “super-cycle'' isn't over and prices may increase in the second half, led by gains in precious metals and agriculture, as the pace of global economic growth quickens, according to Credit Suisse Group.

Gold prices may match last year's 26-year high of $730 an ounce by the end of 2007, Philipp Vorndran, investment strategist at the Zurich-based bank's asset management unit, said by phone today. Corn, wheat and sugar may rise 50 percent in the next
three years after falling by as much as 15 percent in the next three months, he forecast.

“Investors have been very pessimistic about commodities recently, but the fundamentals are in place for higher prices starting later this year,'' Vorndran said.  “The commodities super-cycle isn't over.”

Commodity prices, as measured by the Reuters/Jefferies CRB Index, have gained 6 percent in the past month after falling to its lowest in almost two years. The index declined 7.4 percent last year, ending a market rally that started in 2001, as a rise
in global inventories pushed prices for oil, copper and other raw materials down from records.

“Commodities will come under the spotlight again for positive reasons in the second half of 2007, if not sooner,” the bank said in a statement today.
Returns from commodities may average between 7.5 percent and 8 percent annually over the next three years, compared with forecasts from rival banks of returns of up to 6 percent.


----------



## Jadefox

BREND,

I'll be looking to open a futures account sometime this year.

Regarding opening an account with you:

Which bank do you work for?

How many years experience do you have in commodities trading?

What is your commission?

What is the minimum deposit required to open an account?

How to go about opening an account -  you work in Singapore right?

PM me if you'd prefer.


----------



## BREND

Jadefox said:
			
		

> BREND,
> 
> I'll be looking to open a futures account sometime this year.
> 
> Regarding opening an account with you:
> 
> Which bank do you work for?
> 
> How many years experience do you have in commodities trading?
> 
> What is your commission?
> 
> What is the minimum deposit required to open an account?
> 
> How to go about opening an account -  you work in Singapore right?
> 
> PM me if you'd prefer.




I'm working at United Overseas Bank, one of the largest bank in Singapore.
My experience in commodity trading as a broker is not long, but I was previously working in funds management for couple of years.

And rest of our team member has more than 3 years experience as base metal brokers.

You need to deposit USD30,000 to open an account with us.

Yes, I work in Singapore. We can refer you to the nearest United Overseas Bank in Australia to sign the forms.

We have close contract with our London couterparts, so we have all the juicy information. We update our clients on funds' trading activities, ie whether the hedge funds/ CTAs/ commodity funds are selling or buying a particular metals, whether funds are buying or selling options, whether funds are buying up huge amount of particular metal inventory. And what is happen to the demand level in China, I personally think this is very important. 

Standard commission rate is contract value / 1600. But if your volume is higher, our management will reduce the rate.

*Futures is a leveraged product, it can work for you and also work against you. My suggestion is that make sure you know the risk that you will be undertake before you trade. 

What is your email address? I can add you into our daily commentary first, you will be amazed how much information that we have, which the rest of the retails investors do not have. 

Once you are comfortable, then you start trading. No obligations.


----------



## Smurf1976

BREND said:
			
		

> *Credit Suisse said supper-cycle isn't over, upward bias*
> 
> The commodities “super-cycle'' isn't over and prices may increase in the second half, led by gains in precious metals and agriculture, as the pace of global economic growth quickens, according to Credit Suisse Group.



Agreed except for the bit about economic growth. I'd replace those words with "...as the pace of global monetary inflation quickens..." since I'm expecting more of the same from central banks later this year. They've been doing it for decades and I don't see them stopping now. Not with the massive debts, overvalued housing etc that all has to be returned to a reasonable balance somehow. The printing press being the "easy" way out.

That said, they'll need an excuse for more rapid inflation so I don't think it will happen until after some event gives that justification. Event as in significnat decline in a major market (housing, stocks), falling CPI data or some external shock such as terrorism.


----------



## Dr Doom

Steven Roach comments on China & commodities, and a warning for Australia

"Halfway around the world, a comparable issue is evident with respect to the Chinese investment slowdown.  Like America’s housing shakeout, there can be little disputing the facts of a major slowing of Chinese investment activity -- a year-over-year growth rate that was running at close to 30% at the start of 2006 but that ended the year at 14%.  Despite this dramatic slowing, most still believe nothing can stop China’s growth juggernaut.  However, with investment easily the largest sector of the Chinese economy -- close to 45% of total GDP in 2006 -- it is almost mathematically impossible for sharply slower investment growth not to have impacts on the broader economy.  The recent industrial output trajectory underscores this conclusion -- a slowing from peak rates of growth of 19.5% last June to less than 15% in the final months of 2006.  While 15% growth in industrial output is still quite vigorous, it does represent a meaningful cooling off from earlier overheated gains. 

At the same time, I take the recent softening of commodity markets as further validation of the spillover effects of China’s investment slowdown.  With China accounting for about 50% of the cumulative increase in global consumption of base metals and oil since 2002 -- fully 10 times its 5% share of world GDP -- a China slowdown represents a very important development on the demand side of economically sensitive commodity markets.  The same can be said for the transmission of spillover effects into China’s supply chain.  As Chinese investment slows, cross-border impacts are likely in the other big economies of Asia -- especially Japan, Korea, and Taiwan.  *Similar ripple effects should be felt by China’s natural resource providers -- especially Australia, Brazil, Canada, and parts of Africa*.  In recent years, China has become such an important engine on the supply side of the global economy that it is difficult to see how a meaningful deceleration in its major source of economic growth won’t produce significant collateral damage elsewhere in the world."


----------



## Jadefox

Brend,

Please see private message.


----------



## trendsta

2008 Olympics are China's opportunity to show the world what its all about... I have a feeling there wont be a substantial slowdown until then... The govt will keep trying to prop up things. With international media all over the place they will be trying desperately to show that communism can work and does work (ahem).. 

Even if supercycle and China's economic boom continue there are bound to be hicups along the way, like the asian currency crisis, or property bust or something (an X factor?)..


----------



## BREND

Jadefox said:
			
		

> Brend,
> 
> Please see private message.




Received! Will add your email into our base metal commentary tonight.
Anyone else interested?

Cheers!


----------



## BREND

trendsta said:
			
		

> 2008 Olympics are China's opportunity to show the world what its all about... I have a feeling there wont be a substantial slowdown until then... The govt will keep trying to prop up things. With international media all over the place they will be trying desperately to show that communism can work and does work (ahem)..
> 
> Even if supercycle and China's economic boom continue there are bound to be hicups along the way, like the asian currency crisis, or property bust or something (an X factor?)..




Many economists like to use supercycle, and treat the whole commodity group as one. I think that is a wrong way to look at commodities. Different commodities, ie base metals, have different supply and demand situations.

*Aluminum* inventory is in abundance, China is producing huge amount of aluminum every year, there will not be any shortage of aluminum in the near term.

Whereas *lead* and *tin* supply are so little, any supply disruption (which is happening to tin and lead now) will push their prices to a much higher level.

As for copper, it has become a gambling pawn for hedge funds, rather than an investment class. There is hardly any explanation for their price movement except for hedge funds' and banks' trading activities.

Nickel price has overshot its fundamental value, now the price level is only at the mercy of the hedge funds who are controlling the remaining inventory level at LME warehouses. There is little demand for nickel now, a lot of stainless steel companies had closed down, because cost of nickel is way too high. All the news of high demand for nickel is just bull****.


----------



## wayneL

Interesting insights BREND.

Thanks


----------



## rederob

BREND said:
			
		

> There is little demand for nickel now, a lot of stainless steel companies had closed down, because cost of nickel is way too high. All the news of high demand for nickel is just bull****.



Grateful to learn about the stainless companies that have closed down: Most have barely been able to keep up with orders until recent weeks.


----------



## BREND

rederob said:
			
		

> Grateful to learn about the stainless companies that have closed down: Most have barely been able to keep up with orders until recent weeks.




Are u in the stainless steel industry?


----------



## rederob

BREND said:
			
		

> Are u in the stainless steel industry?



No, but I am interested to know which stainless producers have recently closed shop.


----------



## noirua

Should there be a collapse, it may well from far higher levels than today. Mining stocks are up overnight in Europe and the States, many reaching all-time highs.


----------



## BREND

rederob said:
			
		

> No, but I am interested to know which stainless producers have recently closed shop.




I heard that many from China, not sure about other parts of the world.


----------



## BREND

noirua said:
			
		

> Should there be a collapse, it may well from far higher levels than today. Mining stocks are up overnight in Europe and the States, many reaching all-time highs.




Some mining stocks have been up for weeks already, look at BHP Billiton, Southern Copper and CVRD.


----------



## CanOz

noirua said:
			
		

> Should there be a collapse, it may well from far higher levels than today. Mining stocks are up overnight in Europe and the States, many reaching all-time highs.




US Markets open tonite. You mean they were up Friday nite?


----------



## rederob

BREND said:
			
		

> I heard that many from China, not sure about other parts of the world.



Chinese stainless steel production up 68% year on year - not many would have closed shop!


----------



## BREND

rederob said:
			
		

> Chinese stainless steel production up 68% year on year - not many would have closed shop!




I'm just telling you what I had heard from my nickel clients.
They said many of their stainless steel clients had closed down factories.

What's your view on base metal/ gold/ silver/ oil now? Or market in general?


----------



## trendsta

BREND said:
			
		

> Many economists like to use supercycle, and treat the whole commodity group as one. I think that is a wrong way to look at commodities. Different commodities, ie base metals, have different supply and demand situations.
> 
> *Aluminum* inventory is in abundance, China is producing huge amount of aluminum every year, there will not be any shortage of aluminum in the near term.
> 
> Whereas *lead* and *tin* supply are so little, any supply disruption (which is happening to tin and lead now) will push their prices to a much higher level.
> 
> As for copper, it has become a gambling pawn for hedge funds, rather than an investment class. There is hardly any explanation for their price movement except for hedge funds' and banks' trading activities.
> 
> Nickel price has overshot its fundamental value, now the price level is only at the mercy of the hedge funds who are controlling the remaining inventory level at LME warehouses. There is little demand for nickel now, a lot of stainless steel companies had closed down, because cost of nickel is way too high. All the news of high demand for nickel is just bull****.




I think you missed my point there Brent.

The general complex IS driven by economic growth. What I was saying is that I dont think Chinese economy will slow enough to warrant a collapse in commodity prices. Thus demand for base metals as well as iron ore will remain high. If a collapse or correction is to occur it will happen after 08 due to above mentioned reasons.  

Yes, agreed each metal has different supply and demand conditions. But remember at times those fundamentals dont matter. Look back to May 06 when the whole complex started collapsing. Zinc went down from 3900 to 3100 even though each day LME stocks for zinc were going down. The market PERCIEVES the whole metals complex as one market. So if a collapse were to occur, again, those fundamentals would go out the window...


----------



## rederob

BREND said:
			
		

> I'm just telling you what I had heard from my nickel clients.
> They said many of their stainless steel clients had closed down factories.
> 
> What's your view on base metal/ gold/ silver/ oil now? Or market in general?



Base metals: Firm to strong for remainder of year - with some doing better than others
Gold/silver: Bullish 
Oil: neutral until second half


----------



## BREND

rederob said:
			
		

> Base metals: Firm to strong for remainder of year - with some doing better than others
> Gold/silver: Bullish
> Oil: neutral until second half




Yeh! I like gold too, bought gold when it was trading at USD590. Now taking profit slowly.


----------



## Freeballinginawetsuit

trendsta said:
			
		

> I
> Yes, agreed each metal has different supply and demand conditions. But remember at times those fundamentals dont matter. Look back to May 06 when the whole complex started collapsing. Zinc went down from 3900 to 3100 even though each day LME stocks for zinc were going down. The market PERCIEVES the whole metals complex as one market. So if a collapse were to occur, again, those fundamentals would go out the window...





Although a correction would seems probable ATM, recent weeks have seen a willing capacity for liquidity (on large volume) to enter the market on value stocks and reject not only the lows but provide higher support in the pullbacks.

The aforementioned is in stark contrast to the willingness of liquidity to enter the market after May 06 pullback. Although punters did provide support at this time, volume's were low and the smart money was on the sidelines until fundamentals drove the market out of months of sideways movement. A direction was found.....slowly. Many a punter would have sold out too soon back then, out of sheer frustration with the lack of market direction.

Already we are hearing rumblings from the experts and their changing flip/flopping on commodities.......drawn from the bleeding obvious liquidity that has enterd the market in recent weeks rejecting old lows and providing new support for fundamentally sound commodity companies.

IMO a lot can be learned from the current new highs of many a Nickler, bounce of the Zincors and how willing the market is to extend the caps of the 'U' stocks. IMO I dont think the market will go sideways like May 06, odds are in favor of modest gains till June or a seriously nasty pullback to take some of 06's profitts. I am punting on the former and volumes over recent weeks have on further confirmed this in my mind.

As with most punters, I am well aware of how far extended the market is at the moment.....but I thought that throughout 06 and look at the gains made. Realistically and I am sure many would agree, that anyone who has been in the market the last few years can afford the early punt this time around ....especially with only a few months before tax time.


----------



## CanOz

Freeballinginawetsuit said:
			
		

> Although a correction would seems probable ATM, recent weeks have seen a willing capacity for liquidity (on large volume) to enter the market on value stocks and reject not only the lows but provide higher support in the pullbacks.
> 
> The aforementioned is in stark contrast to the willingness of liquidity to enter the market after May 06 pullback. Although punters did provide support at this time, volume's were low and the smart money was on the sidelines until fundamentals drove the market out of months of sideways movement. A direction was found.....slowly. Many a punter would have sold out too soon back then, out of sheer frustration with the lack of market direction.
> 
> Already we are hearing rumblings from the experts and their changing flip/flopping on commodities.......drawn from the bleeding obvious liquidity that has enterd the market in recent weeks rejecting old lows and providing new support for fundamentally sound commodity companies.
> 
> IMO a lot can be learned from the current new highs of many a Nickler, bounce of the Zincors and how willing the market is to extend the caps of the 'U' stocks. IMO I dont think the market will go sideways like May 06, odds are in favor of modest gains till June or a seriously nasty pullback to take some of 06's profitts. I am punting on the former and volumes over recent weeks have on further confirmed this in my mind.
> 
> As with most punters, I am well aware of how far extended the market is at the moment.....but I thought that throughout 06 and look at the gains made. Realistically and I am sure many would agree, that anyone who has been in the market the last few years can afford the early punt this time around ....especially with only a few months before tax time.




Tonite is the nite, i think the US markets will tell us how the mob reacts to the sell off in China.....lets see if the money is still keen to enter the market in Australia if the US takes a pounding tonite.

I agree there is so much money looking for a home, but value is getting scarce now. The ones finding a home for the all that super money have to be careful too.

Cheers,


----------



## Freeballinginawetsuit

CanOz said:
			
		

> Tonite is the nite, i think the US markets will tell us how the mob reacts to the sell off in China.....lets see if the money is still keen to enter the market in Australia if the US takes a pounding tonite.
> 
> I agree there is so much money looking for a home, but value is getting scarce now. The ones finding a home for the all that super money have to be careful too.
> 
> Cheers,





I'd say a lot of money has been in and out in recent weeks, certainly a lot of the insto's are only recent ins .

Incidently wasn't it only a few days back when most of the Chinese stocks got locked out for posting 10 percent gains in a day. How far the market pullsback is the ?>their is plenty of room/abundance of punters who could bail long term holdings and still maintain substantial gains.

The question will be the 'greed factor' of the liquidity on the sidelines.....and the ever present doomsdayers who are well over due for a correct call


----------



## Dr Doom

CanOz said:
			
		

> Tonite is the nite, i think the US markets will tell us how the mob reacts to the sell off in China.....lets see if the money is still keen to enter the market in Australia if the US takes a pounding tonite.
> 
> I agree there is so much money looking for a home, but value is getting scarce now. The ones finding a home for the all that super money have to be careful too.
> 
> Cheers,




I agree C. Some interesting data out in the US tonight - the alignment of the planets so to speak - syncronised corrections?. Are you actually located in China?. 

~~~~~~~~~~~~~~~~~~~~~~~
Chinese shares listed in Shanghai tumbled nearly 5% after ending at a record Monday, with energy, steel makers and financial issues leading declines, and Hong Kong's Hang Seng Index ended its morning session lower. 
Chinese traders said profit-taking was sparked by concerns additional macro-tightening policies could be introduced following the annual session of the China's National People's Congress that gets underway March 5. 

~~~~~~~~~~~~~~~~~~~~~~~
London down tonight substantially already  

Freeby, the Chinese market is also 'protected' by 10% in a sell-off also isn't it, somewhat limiting a full blown crash? I'm sure a similar scheme would arbitrarily kick in in the US markets also?


----------



## CanOz

Dr Doom said:
			
		

> I agree C. Some interesting data out in the US tonight - the alignment of the planets so to speak - syncronised corrections?. Are you actually located in China?.
> 
> ~~~~~~~~~~~~~~~~~~~~~~~
> Chinese shares listed in Shanghai tumbled nearly 5% after ending at a record Monday, with energy, steel makers and financial issues leading declines, and Hong Kong's Hang Seng Index ended its morning session lower.
> Chinese traders said profit-taking was sparked by concerns additional macro-tightening policies could be introduced following the annual session of the China's National People's Congress that gets underway March 5.
> 
> ~~~~~~~~~~~~~~~~~~~~~~~
> London down tonight substantially already
> 
> Freeby, the Chinese market is also 'protected' by 10% in a sell-off also isn't it, somewhat limiting a full blown crash? I'm sure a similar scheme would arbitrarily kick in in the US markets also?




Yes, located in China. Wish i still had Bloomberg! Imagine the carnage tonite!


----------



## Freeballinginawetsuit

Dr Doom said:
			
		

> Freeby, the Chinese market is also 'protected' by 10% in a sell-off also isn't it, somewhat limiting a full blown crash?.




Any potential market reaction in the post was specific to OZ, perhaps I should have put the 'Chinese 10% +-' on a separate line, wasn't really relevant in any context just the reversal fact.

Although not sure...I don't think Ours or the US markets have any margin rules in place, certainly not on individual stocks and as for indices....I have never seen a '10 percent down day' on an entire indice, since Ive been investing.


----------



## BSD

Chinese market falls 10%  - who cares?

Will have no effect on real metals demand

I seriously hope BHP etc get sold off heavily so I can top up on the way back to $32


----------



## purple

BSD said:
			
		

> Chinese market falls 10%  - who cares?
> 
> Will have no effect on real metals demand




The Australian mining industry is heavily tied to the chinese market. In fact the Chinese boom was one of the factors that galvanized the Aussie mining rush - the Aus gov even lowered taxes in 06 because they made so much money from trade with China.

Chinese market falls 10% - Aussies care! (unless you make a living blowing didgeridoos in the outback, where I was a couple of years back, no one had the faintest idea about China there)


----------



## BSD

The day-to-day performance of the Chinese A-Class stockmarket has limited relevance to the vibrance of the Chinese economy. 

BHP will be fine

Demand for commods will be fine

Chinese GDP and Industrial Production will be fine.

Neither will be effected by this bubble being pricked

Opportunity presents


----------



## BREND

China stock market is in a bubble stage, so crash in share prices is just expected. 

Will this affect commodity demand? I think this is 2 different issues.


----------



## wayneL

Freeballinginawetsuit said:
			
		

> Any potential market reaction in the post was specific to OZ, perhaps I should have put the 'Chinese 10% +-' on a separate line, wasn't really relevant in any context just the reversal fact.
> 
> Although not sure...I don't think Ours or the US markets have any margin rules in place, certainly not on individual stocks and as for indices....*I have never seen a '10 percent down day' on an entire indice, since Ive been investing.*



You will.  

FYI, the price limits on US indicies:

LINK 

RULES for S&P 500, E-mini S&P 500, S&P MidCap 400, E-mini S&P MidCap 400, E-mini Russell 1000, Russell 2000, E-mini Russell 2000, S&P 500/Citigroup Growth & Value, S&P SmallCap 600 and SPCTR futures
5% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit for 102 minutes or until 2:30 p.m. CT.3 Trading will halt for two minutes if the primary futures contract is limit offer at the end of the 102 minutes or at 2:30 p.m. CT3. Trading will resume with the 10% limit in effect.
10% 	1 	Down only. Prior to 1:30 p.m. CT, trading can occur at or above this limit. If the primary futures is limit offer and the NYSE has declared a trading halt (due to a 10% decline in the DJIA), trading will halt (see below for more details). Trading will resume with the 15% limit in effect when 50% (capitalization weights) of the underlying S&P 500 stocks reopen. After 1:30 p.m. CT, trading can occur at or above this limit for 102 minutes. Trading will halt for two minutes if the primary futures is limit offer at the end of 102 minutes. Trading will resume with the 15%-point limit in effect.
15% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit for 102 minutes. Trading will halt for two minutes if the primary futures is limit offer at the end of 102 minutes. Trading will resume with the 20%-point limit in effect.
20% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit. If the primary futures contract is limit offer and the NYSE has declared a trading halt (due to a 20%-point decline in the DJIA), trading will halt (see below for more details). Trading will resume with the 20%-point limit in effect when 50% (capitalization weights) of the underlying S&P 500 stocks reopen. (See below for second day limits.)
5% 	1 	Up or down. CME Globex price limit. The 5% upside price limit will be removed at 8:28 a.m. CT. This only applies to the upside price limit and does not have an effect on the downside price limit. CME Globex trading will be delayed until 6:00 p.m. CT, if an NYSE trading halt is in effect at 3:00 p.m. CT or the primary big S&P 500 futures is locked at a limit at 3:15 p.m. CT.
1 	These limits are set quarterly.

2


This window can be longer or shorter than 10 minutes for the E-mini S&P 500, E-mini S&P MidCap 400 and E-mini Russell 2000 contracts depending on when the primary big futures reach their corresponding limit.

3
	Forty-five minutes before the close of an abbreviated trading session.

Please note: E-mini S&P 500, E-mini S&P MidCap 400 and E-mini Russell 2000 contracts will halt whenever a halt is declared in the primary futures contract -- except at the 10%-point limit before 1:30 p.m. CT and the 20% limit.

RULES for NASDAQ-100, E-mini NASDAQ-100, E-mini NASDAQ Composite, and E-mini NASDAQ Biotech futures
5% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit for 10 2 minutes or until 2:30 p.m. CT.3. Trading will halt for two minutes if the primary futures contract is limit offer at the end of the 102 minutes or at 2:30 p.m. CT3. Trading will resume with the 10% limit in effect.
10% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit for 10 2 minutes. Trading will halt for two minutes if the primary futures is limit offer at the end of the 102 minutes. Trading will resume with the 15% limit in effect.
15% 	1 	Down only. Once a limit offer has been established, trading can occur at or above this limit for 10 2 minutes. Trading will halt for two minutes if the primary futures is limit offer at the end of 102 minutes. Trading will resume with the 20%-point limit in effect.
20% 	1 	Down only. Trading can occur at or above this limit.

Trading
Halts:
	If there is a trading halt declared in the primary securities market, trading will halt for the NASDAQ-100, E-mini NASDAQ-100, E-mini NASDAQ Composite, and E-mini NASDAQ Biotech contracts. Once trading in the primary securities market resumes after a trading halt, trading in the NASDAQ-100, E-mini NASDAQ-100, E-mini NASDAQ Composite, and E-mini NASDAQ Biotech will resume.
5% 	1 	Up or down. CME Globex price limit. The 5% upside price limit will be removed at 8:28 a.m. CT. This only applies to the upside price limit and does not have an effect on the downside price limit. CME Globex trading will be delayed until 6:00 p.m. CT, if an NYSE trading halt is in effect at 3:00 p.m. CT or the primary big S&P 500 futures is locked at a limit at 3:15 p.m. CT.
1 	These limits are set quarterly.

2


This window can be longer or shorter than 10 minutes for the E-Mini NASDAQ-100 contracts depending on when the primary big futures reach their corresponding limit.

3
	Forty-five minutes before the close of an abbreviated trading session.

Please note: E-Mini NASDAQ-100 contracts will halt whenever a halt is declared in the primary futures contract.

DJIA % Declines *
10% 	If the DJIA declines 10% prior to 1:00 p.m. CT, the NYSE will declare a one-hour trading halt. If the DJIA declines 10% between 1:00 p.m. and 1:30 p.m. CT, the NYSE will declare a half-hour trading halt. After 1:30 p.m. CT, the 10% limit is not in effect.
20% 	If the DJIA declines 20% prior to 12:00 p.m. CT, the NYSE will declare a two-hour trading halt. If the DJIA declines 20% after 1:00 p.m. CT, the NYSE will declare a trading halt and will not reopen.
30% 	If the DJIA declines 30%, the NYSE will declare a trading halt and will not reopen.

2nd Day Limits


If the primary futures contract is limit offered at the 20% limit at the close of Regular Trading Hours (RTH) and the cash equity markets fall more than 20%, the following RTH trading session will have modified price limits. These provisions reduce the restraining impact of the 10% limit. The 10% limit would be in effect for 102 minutes or until 2:30 p.m. CT3. Trading will halt for two minutes if the primary futures is limit offer at the end of the 102 minutes or at 2:30 p.m. CT3. Trading will resume with the 15% limit in effect before 2:30 p.m. CT3 and 20% after 2:30 p.m. CT 3. The 15% limit would be in effect for 102 minutes or until 2:30 p.m. CT3. Trading will halt for two minutes if the primary futures contract is limit offer at the end of the 102 minutes or at 2:30 p.m. CT3. Trading will resume with the 20% limit in effect.

To maintain coordinated trading halts under Second Day procedures, trading will halt whenever the NYSE declares a trading halt, regardless of the futures price level. Futures trading will resume only after 50% (capitalization weights) of the underlying S&P 500 stocks reopen.+

+After a trading halt in the primary securities market, NASDAQ-100, E-mini NASDAQ-100, E-mini NASDAQ Composite, and E-mini NASDAQ Biotech contracts will resume trading once the primary securities market reopens.

etc etc etc


----------



## wayneL

BSD said:
			
		

> The day-to-day performance of the Chinese A-Class stockmarket has limited relevance to the vibrance of the Chinese economy.
> 
> BHP will be fine
> 
> Demand for commods will be fine
> 
> Chinese GDP and Industrial Production will be fine.
> 
> Neither will be effected by this bubble being pricked
> 
> Opportunity presents



Depend whether this is the chicken or the egg... whether this is symptom or cause.

Chinese GDP etc may be fine, but then again it may not.

We may be seeing a domino effect


----------



## Freeballinginawetsuit

Is that the same for the OZ market as well Wayne?.


Considering that I only trade X (fixed amount) yet systematically Milk Y into value holds, regularily for quite a significant timespan......I would really like to know what effect any pullback in the market will have on me. Much the same as the property market crashing. Quite honestly I couldn't give a rats!

I mean come on......if you compare both markets and the time in them in recent years, all this Bearish talk is of no relevance to the people that have grasped the opportunities.

I say this in no codescending manner at all....just stating the reality that their would be many in the same boat......and of course, more cash than ever seeded the initial investment, is out to pasture 'safe and sound'.

By continuing the bearish arguement you run the risk of the Bullish market continuing on with the same info being offered by yourself in 08


LOL, that doc looks too long and Ive got some pasta to eat at the Cot


----------



## BSD

Yeah - well I am very happy to bet an unwinding of a Chinese sharemarket bubble is NOT going to limit the ongoing domestic GDP expansion of 10% per annum. 

This is not the Dow or Nasdaq that created a consumption boom in the US in 1999. 

What is the wealth-effect like in China? 

Laughably small I would assume.


----------



## wayneL

Freeballinginawetsuit said:
			
		

> Is that the same for the OZ market as well Wayne?.



Doesn't look like there is;

http://www.sfe.com.au/content/sfe/trading/con_specs.pdf


----------



## wayneL

BSD said:
			
		

> Yeah - well I am very happy to bet an unwinding of a Chinese sharemarket bubble is NOT going to limit the ongoing domestic GDP expansion of 10% per annum.
> 
> This is not the Dow or Nasdaq that created a consumption boom in the US in 1999.
> 
> What is the wealth-effect like in China?
> 
> Laughably small I would assume.



Of itself yes, but there are other cracks in the edifice... and in all the wrong places


----------



## BREND

Bank selling Copper, Aluminum and Zinc now.


----------



## rederob

wayneL said:
			
		

> Of itself yes, but there are other cracks in the edifice... and in all the wrong places



Lots of cracks in the Great Wall.
But the economy of the great bastion of western democracy is now riddled with more holes than an Albanian highway, and that inevitable "crash" seems as far away as ever.
BTW, are commodities still tipped to collapse?
Or did they collapse and recover again?
Or, what do we really mean by "collapse" in the context of historically high prices?


----------



## wayneL

rederob said:
			
		

> Lots of cracks in the Great Wall.
> But the economy of the great bastion of western democracy is now riddled with more holes than an Albanian highway, and that inevitable "crash" seems as far away as ever.
> BTW, are commodities still tipped to collapse?
> Or did they collapse and recover again?
> Or, what do we really mean by "collapse" in the context of historically high prices?




Red,

I draw you to the first post:



> Don't shoot the messenger! :whip
> 
> http://finance.news.com.au/story/0,10166,18993553-462,00.html
> 
> 
> 
> 
> 
> Commodity collapse tipped
> From:
> By Andrew Trounson
> 
> May 02, 2006
> 
> 
> COMMODITY prices were likely to peak this year and were primed for a fall of up to 50 per cent, analysts warned yesterday as resource stocks again jumped sharply higher.
> The gold price hit a 25-year high at $US661.10 an ounce, sparking fresh buying of mining stocks, despite a warning from Canberra-based Access Economics that metal prices are poised to start dropping steeply from the end of the year.
> 
> Gold shot up on the back of growing fears over the nuclear standoff between the US and Iran, and expectations that US rates are on hold.
> 
> This year will be as good as it gets in metal markets, according to Access's latest quarterly survey of 10 forecasters. Booming copper prices are forecast to fall about 50 per cent *over the next two years*, with other base metals to fall 30-40 per cent. Gold is forecast to be averaging $US564 an ounce a year from now.
Click to expand...


They got copper pretty right, other metals, no. But there is still time for this to play out.

For mine, the route is still to come... but note I am long metals and mining stocks at the moment. Bears may look to a correction, but we ain't dumb


----------



## wayneL

US Durable Goods Orders:

Actual -7.8%
Survey Prediction : -2.5%
Prior : 2.9%

building down
re values down - MEW down
motor vehicles down

all commodity consumers and customers of China.

= MegaDump


----------



## rederob

wayneL said:
			
		

> Red,
> 
> I draw you to the first post:
> 
> 
> They got copper pretty right, other metals, no. But there is still time for this to play out.
> 
> For mine, the route is still to come... but note I am long metals and mining stocks at the moment. Bears may look to a correction, but we ain't dumb



Wayne
Before that post of mine, I actually did go back to the first post of yours.
Copper is up so far this year.
Zinc has also clawed some cents back from an early year bath it took, and fundamentally remains as strong as it was at almost any time last year.
Nickel has gone absolutely ballistic, breaking new records with monotony.
Tin is at cyclical highs.
Lead is at cyclical highs.
And even aluminium, which I consider the weakest metal on fundamental grounds, refuses to buckle and collapse.
So the quoted forecaster got it badly wrong on most counts.

I am personally very wary about 2007's second half, but think that global markets can tough out present jitters for a while longer.
As for the "correction" we had to have, I will keep doing what I have for a long time; buy more of the equities that I have had on my watch list yet at the time were not quite the "value" proposition I preferred.

Looking simply at LME warehouse stock levels and movements, despite many metals being at cycle high prices, demand remains generally robust: Chinese New Year had no material impact on overall market tightness.  Given the indicators you quote, we should have seen a greater impact on the demand side of the equation, especially as most metals (except tin) continue to be responsive on the supply side.


----------



## nizar

http://www.marketwatch.com/news/sto...x?guid={BC9B7A77-BF24-4586-978C-CA7A11757779}


----------



## Kimosabi

What impact would it have on commodities if the US Housing/Subprime Mortgage continues self-destructing, thus impacting US Consumer Spending/Consumption etc?


----------



## rederob

Kimosabi said:
			
		

> What impact would it have on commodities if the US Housing/Subprime Mortgage continues self-destructing, thus impacting US Consumer Spending/Consumption etc?



The US housing market has been in decline for many months.
The impact has been noticed on metal inflows to Comex and LME warehouses.
There are many US market sectors off the boil - eg vehicle manufacturing - and again the impact has been noticed, but remains subdued.
The stark reality is that for the time being, any slack on the US front is being compensated for elsewhere.
Unfortunately too many " market commentators" and too much "market media" emanates from the US, and they seem not yet to have come to grips with the fact the world is longer dependent on their economy alone.

On the metals front - a stellar recovery overnight, eg lead up 5%, and nickel another record close.


----------



## rederob

wayneL said:
			
		

> Red,
> 
> I draw you to the first post:
> 
> 
> They got copper pretty right, other metals, no. But there is still time for this to play out.
> 
> For mine, the route is still to come... but note I am long metals and mining stocks at the moment. Bears may look to a correction, but we ain't dumb



Wayne
Seems they got copper right for a little while only.
Copper up over 20% from its lows this year.
Most metals tighter now than last year, especially as "destocking" has left them more vulnerable to upside surprises as inventories continue to decline or show weakness.
This "collapse" could be another 20 years away!


----------



## wayneL

rederob said:
			
		

> Wayne
> Seems they got copper right for a little while only.
> Copper up over 20% from its lows this year.
> Most metals tighter now than last year, especially as "destocking" has left them more vulnerable to upside surprises as inventories continue to decline or show weakness.
> This "collapse" could be another 20 years away!



That was enough collapse for me. I am now long... for now



			
				wayneL next door at RC in response to possible copper long said:
			
		

> posted 15-01-2007 02:41 PM      Profile for enzo     Send New Private Message       Edit/Delete Post
> 
> ZZ,
> 
> Been looking at that trade too. Started scaling last week.
> 
> --------------------


----------



## rederob

Almost a year since this thread began, and the base metals are running a repeat performance; ie running to new record highs in many cases.
At present, commodity market tightness is the rule and not the exception.
It is clear that supply side responses are inadequate, despite a 5-year ramp-up phase for most metal miners/producers.
Unless metals demand wanes, then prices in 2007 will be higher on average than 2006.
And we might also be setting-up 2008 for an even stronger year again!
That's certainly where I reckon we are heading right now.  However, as always I review this longer term trend more deeply in the 3rd quarter.
Between now and then I'm not likely to move too much unless a clear meltdown comes into view.


----------



## BREND

rederob said:


> Almost a year since this thread began, and the base metals are running a repeat performance; ie running to new record highs in many cases.
> At present, commodity market tightness is the rule and not the exception.
> It is clear that supply side responses are inadequate, despite a 5-year ramp-up phase for most metal miners/producers.
> Unless metals demand wanes, then prices in 2007 will be higher on average than 2006.
> And we might also be setting-up 2008 for an even stronger year again!
> That's certainly where I reckon we are heading right now.  However, as always I review this longer term trend more deeply in the 3rd quarter.
> Between now and then I'm not likely to move too much unless a clear meltdown comes into view.




Ya man! This is why I would always be an investor of mining giants like BHP and Rio whenever their share price are bashed down.


----------



## Wysiwyg

rederob said:


> Almost a year since this thread began, and the base metals are running a repeat performance; ie running to new record highs in many cases.
> At present, commodity market tightness is the rule and not the exception.
> It is clear that supply side responses are inadequate, despite a 5-year ramp-up phase for most metal miners/producers.
> Unless metals demand wanes, then prices in 2007 will be higher on average than 2006.
> And we might also be setting-up 2008 for an even stronger year again!
> That's certainly where I reckon we are heading right now.  However, as always I review this longer term trend more deeply in the 3rd quarter.
> Between now and then I'm not likely to move too much unless a clear meltdown comes into view.




The costs involved to get the commodities from earth to market are much higher nowadays so that is factored into the present day pricing situation.Bottom lines are higher along with higher demand than we are used to.I think monetary inflation would cover it broadly.


----------



## BSD

See the following link for an excellent (and very simple) refutation of the guy predicting "a Nuclear Winter for Commods" a number of months ago 

http://www.kitco.com/ind/resopp/mar292007.html

All basic and very boring fundamental research that covers the underlying trend for the majority of commodities. 

Here are the bear's comments

http://www.kitco.com/ind/veneroso/nov062006.pdf

In the 6 months since Veneroso penned this piece, how many of the following have been discovered or had a completed BFS:

1. A major copper deposit offering more than 150,000 kt Cu production
2. A decent Nickel Sulphide deposit
3. A major Oil/gas reserve

Six months has not produced a lot of new supply (that would come on line in about five to ten years) despite the apparently massive flow of exploration money.

The commodities bull is well intact.


----------



## Uncle Festivus

Is it possible to ascertain how much of the recent momentum of commodity prices is due to hedge fund trading? That is, to remove the speculative portion of trades & leave a truer measure of the supply/demand fundamentals to give a better view as to whether we are heading for another even more spectacular blow-off top or if it is more of a sustainable occurance. 
Whatever the truth, I have my doubts about the short term prospects for China because it's based on such rickety financial foundations; the Shanghai market is up 25% since the correction of 5 weeks ago - pure gambling with loose money provided by looser financial institutions. Certainly no lack of liquidity.
Watching the yen carry trade & Japanese interest rates closely


----------



## BREND

Wysiwyg said:


> The costs involved to get the commodities from earth to market are much higher nowadays so that is factored into the present day pricing situation.Bottom lines are higher along with higher demand than we are used to.I think monetary inflation would cover it broadly.




The cost to product 1 ton of nickel is USD10,000. Nickel price is near to USD50,000 for 3 month futures. Margin is still very high.


----------



## chops_a_must

BREND said:


> The cost to product 1 ton of nickel is USD10,000. Nickel price is near to USD50,000 for 3 month futures. Margin is still very high.



Although this varies between 5,000 and 15,000USD.

Given the 27 month contract is trading between 35,000 and 40,000USD a ton for nickel, what do you see as the long term prospects? I can't see it dipping below 40,000 in the next year or two.

Nickel to become the new gold perhaps?


----------



## BSD

Uncle Festivus said:


> Whatever the truth, I have my doubts about the short term prospects for China because it's based on such rickety financial foundations; the Shanghai market is up 25% since the correction of 5 weeks ago - pure gambling with loose money provided by looser financial institutions. Certainly no lack of liquidity.
> Watching the yen carry trade & Japanese interest rates closely




Two Points

The Chinese government has over $1 Trillion USD in reserves and is very relevent to Chinese progress, hardly rickety

The Chinese stockmarket is as relevent to the Chinese economy as Melbourne Cup day is to ours. 

Nobody is borrowing in Yen to punt the Shanghai exchange


----------



## dhukka

From Paul Van Eeden's latest column. The last two paragraphs are particularly interesting:



> In the US the question is whether the fallout from the real estate sector is going to materially hurt economic growth or not. Meanwhile, in China, the government is seriously trying to curb speculation and liquidity.
> 
> China will raise its banks’ reserve requirements for the third time this year on April 16th. The latest 0.5% increase brings the reserve requirement to 10.5% and comes on top of repeated increases in interest rates as well as curbs on investments in real estate, auto manufacturing and other industries during the past year. Apparently the Chinese government’s efforts to curtail investment growth and speculation have had very little impact.
> 
> No wonder. Monetary growth in China, as measured by M2, is running at 17.8% and I bet that M3 growth is even higher. Essentially that means the yuan is losing about 20% of its buying power every year so the only rational thing to do is to spend the money as fast as possible. If you hold onto the currency you lose 20%. If you buy something useful you’ll at least have something useful and if you gamble with the money you still come out ahead as long as you don’t lose more than 20% a year. That is why monetary inflation leads to an increase in the velocity of money and a tendency towards ever more speculation.
> 
> Regardless of the rhetoric about prudent monetary policy, management of liquidity and monitoring of debt levels, the bottom line is that the Chinese banking industry is skating on thin ice. Excessive loans for ill-conceived capital projects and an astounding large percentage of non-performing loans simply means extra-ordinary systemic risk for China’s financial system. With its centrally planned government and huge foreign exchange reserves the government could always intervene, and I fully expect it to, but that does not mean the country can withstand an economic downturn and financial meltdown unscathed.


----------



## CanOz

dhukka said:


> From Paul Van Eeden's latest column. The last two paragraphs are particularly interesting:




You have no idea how visiable this is too! I think every time a business gets a loan, they go out and buy a new BMW 735, Porche Cayenne, or Audi Q7! Its very common for developers to borrow money, get a fixed asset started, and then bolt with the money, including the banks.

This is a regular occurance with the Governments funding too, and now its hittingthe rural areas.

Cheers,


----------



## drillinto

Resource boom expected to continue: Reserve Bank of Australia

http://www.rba.gov.au/PublicationsA..._apr07/rec_rise_com_prices_long_run_pers.html


----------



## Sean K

Wayne, you still in the bear cave?  

1013 [Dow Jones] 100-year bear market in commodities is ending says Southern Cross Equities, arguing that massive demand from the industrialization of China is occurring amid capacity constraints due to decades of underinvestment. "Only with significantly and sustained higher metal prices can new investment in production be justified on R.O.I.C. measures," says Southern Cross, adding that base metals inventories dangerously low and shortages of skilled labor, machinery and equipment are critical. "We believe the current conditions will last for another two decades, albeit with the expected shorter-term volatility." (DWR)


----------



## BREND

chops_a_must said:


> Although this varies between 5,000 and 15,000USD.
> 
> Given the 27 month contract is trading between 35,000 and 40,000USD a ton for nickel, what do you see as the long term prospects? I can't see it dipping below 40,000 in the next year or two.
> 
> Nickel to become the new gold perhaps?




There are already signs that nickel price has peaked. Inventory rises more than 1000mt yesterday.

I'm already bearish on copper in the near term, hence pulling down other base metals as well.

But still bullish over the long term.


----------



## wayneL

kennas said:


> Wayne, you still in the bear cave?



Yeah still a bear. But a pragmatic bear. 

I found a bull that had been hit by a train, so I skinned it and made its horns into a helmet. Comes in handy for when I venture out of my cave.

Being a swing trader it's easy to flip the disguise on and off at will. It's getting a bit smelly though, I'm dying to take it off so I can give it a wash...

....and I want some short positions godammit! Fancy that! A bear with no shorts.


----------



## Sean K

wayneL said:


> Yeah still a bear. But a pragmatic bear.
> 
> I found a bull that had been hit by a train, so I skinned it and made its horns into a helmet. Comes in handy for when I venture out of my cave.
> 
> Being a swing trader it's easy to flip the disguise on and off at will. It's getting a bit smelly though, I'm dying to take it off so I can give it a wash...
> 
> ....and I want some short positions godammit! Fancy that! A bear with no shorts.



  

Looks like you should have shorts on at the moment to me. Copper, Zinc, Nickel all look like there's a bit of downside possibility in the short term. Next stops: Zinc to 1.4, Copper to 3.2, Nickel to 20.5. Maybe.  

Medium term, I'm starting to think China is going to keep consuming the raw stuff for some time, then to be followed by India. Maybe. 

You're not playing these though are you. Just corn and coffee??


----------



## chops_a_must

wayneL said:


> ....and I want some short positions godammit! Fancy that! A bear with no shorts.




I believe he begins to look something like this:


----------



## wayneL

kennas said:


> Looks like you should have shorts on at the moment to me. Copper, Zinc, Nickel all look like there's a bit of downside possibility in the short term. Next stops: Zinc to 1.4, Copper to 3.2, Nickel to 20.5. Maybe.
> 
> Medium term, I'm starting to think China is going to keep consuming the raw stuff for some time, then to be followed by India. Maybe.
> 
> You're not playing these though are you. Just corn and coffee??




Yeah I play copper. I'll trade anything on CME, CBOT, NYMEX, NYBOT (and subsidaries) but not the LME metals (nickel, zinc etc except via miners)

First and foremost, I have to like the setup, I like low risk entries**. Copper hasn't given me that yet, though could be setting up now.

**Low risk entry means an entry close to an apparent pivot bar. 

Cheers


----------



## wayneL

chops_a_must said:


> I believe he begins to look something like this:



LOL, Just call me Humphrey *B*. Bear then.

The *B.* stands for *Bull* when necessary.


----------



## BREND

Today I advise my clients to short copper if it fails to break $7380 resistance level and moves down.

Also advise my clients to short zinc if it fails to break $3780 resistance level and moves down.

Few days ago had asked my clients to sell copper call options, strike $8200, Jun07, the sold options look pretty safe now with 2 weeks to go. 
Copper is now $7290/ $7311/mt.

Copper short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-copper_23.html

Zinc short-term chart:
http://basemetal-trading.blogspot.com/2007/05/short-zinc.html


----------



## Pommiegranite

BREND said:


> Today I advise my clients to short copper if it fails to break $7380 resistance level and moves down.
> 
> Also advise my clients to short zinc if it fails to break $3780 resistance level and moves down.
> 
> Few days ago had asked my clients to sell copper call options, strike $8200, Jun07, the sold options look pretty safe now with 2 weeks to go.
> Copper is now $7290/ $7311/mt.
> 
> Copper short-term chart:
> http://basemetal-trading.blogspot.com/2007/05/short-copper_23.html
> 
> Zinc short-term chart:
> http://basemetal-trading.blogspot.com/2007/05/short-zinc.html




You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.


----------



## BREND

Pommiegranite said:


> You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.




Time will tell if I'm right.


----------



## BREND

Pommiegranite said:


> You'll have no clients left at the rate you're going. They'll have all of their cash under their mattresses.




Copper down USD240, Zinc down USD94. I'm right for now.


----------



## TheRage

Forgive my commodity ignorance but could someone explain what Paladium is used for and why it hit such highs a few years ago but has dropped back significantly compared against other commodities which are roaring ahead.


----------



## wayneL

TheRage said:


> Forgive my commodity ignorance but could someone explain what Paladium is used for and why it hit such highs a few years ago but has dropped back significantly compared against other commodities which are roaring ahead.



http://en.wikipedia.org/wiki/Palladium

As far as the price movements noticed :dunno:

It's a pretty thinly traded contract and not one speculators usually dabble in.


----------



## TheRage

Thanks Wayne I enjoyed the read.


----------



## rederob

It looks like a lot of our metals producers are being re-rated.
So the likes of BHP appear destined to hover at or over present prices.
This is supported by base metal inventories, coal, oil, uranium, iron ore, etc,., etc..
I anticipate nickel to be the weakest of the metals near term.
But recent history tells us that restocking occurs as soon as metals go off the boil.
Anyone tipping commodities to "collapse" any time soon?

Wayne, you must be able to find someone!


----------



## wayneL

rederob said:


> Wayne, you must be able to find someone!



It was tough, but you knew I'd find someone...

http://virgoans.wordpress.com/2007/05/07/a-dozen-reasons-to-worry/


> SNIP
> 
> – Commodity prices will nosedive. Commodity prices showed unusual strength in recent years and not just in the energy sector. Industrial metals prices have skyrocketed. So have livestock and grains of late. Even precious metals have reached prices not seen since inflation was raging in the late 1970s.
> 
> In the long run, we don’t see any constraints that will prevent the normal reaction to high commodity prices–increased supply that will depress prices. In energy, Hubbert’s Peak devotees believe the world is running out of crude oil so prices will skyrocket in the years ahead. But we’re convinced that human ingenuity will, as in the past, prevent a Malthusian outcome. The ongoing fall in U.S. home sales and likely collapse in prices will have very negative effects on building materials prices. Lumber and copper prices have already nosedived.


----------



## legs

Copper now up 2.9% today.............................................................


----------



## rederob

wayneL said:


> It was tough, but you knew I'd find someone...
> 
> http://virgoans.wordpress.com/2007/05/07/a-dozen-reasons-to-worry/




Sorry, no cigar.
The article was from December 2006


----------



## Kimosabi

I have a question about commodity prices.

How much has the increase of commodity prices been due to supply/demand, and how much is due to the deflation of the US dollar?


----------



## Sean K

0951 [Dow Jones] Renewed surge in resources likely to get underway today, says Southern Cross Equities director Charlie Aitken. "BHP (BHP.AU) are going to A$40, Rio (RIO.AU) to A$120, Fortescue (FMG.AU) to A$50 and Oxiana (OXR.AU) to A$5.00. If you are short resources you are dead. It starts today." Another trader says recent BHP price action demonstrates that it is very well supported. BHP last A$32.79, RIO last A$92.01, FMG A$34.10, OXR A$3.37. (DWR)


----------



## legs

kennas said:


> 0951 [Dow Jones] Renewed surge in resources likely to get underway today, says Southern Cross Equities director Charlie Aitken. "BHP (BHP.AU) are going to A$40, Rio (RIO.AU) to A$120, Fortescue (FMG.AU) to A$50 and Oxiana (OXR.AU) to A$5.00. If you are short resources you are dead. It starts today." Another trader says recent BHP price action demonstrates that it is very well supported. BHP last A$32.79, RIO last A$92.01, FMG A$34.10, OXR A$3.37. (DWR)




Kennas can you give me a link to that please??


----------



## Sean K

legs said:


> Kennas can you give me a link to that please??



It's on my broker site - through Power E Trade. Can't post the link. Any service that gets dow jones newswires will have got it.


----------



## questionall_42

kennas said:


> It's on my broker site - through Power E Trade. Can't post the link. Any service that gets dow jones newswires will have got it.




Also just on the regular etrade platform in "quotes and research", "australian market update - Intra-day".


----------



## Sean K

Maybe we're underestimating the effect of China's industrialisation?

1455 [Dow Jones] China's apparent copper consumption may rise much more than anticipated in 2007, possibly 18%-26%, says commodity analyst at large Chinese trading house; estimates China may import 1.2 million-1.5 million tons of refined copper and domestic output to increase to 3.3 million tons, projects apparent consumption in 2007 at 4.5-4.8 million tons vs 3.8 million in 2006. Apparent consumption includes consumption plus stock rebuilding while real consumption reflects just consumption. Tips China imports to rebound in 3Q, which, coupled with possible recovery in U.S. demand, could spur LME 3-month copper to retest $8,000/ton in 3Q or 4Q. LME 3-month copper last at $7,400/ton, down $55 vs London PM kerb. (MWL)


----------



## nizar

kennas said:


> 0951 [Dow Jones] Renewed surge in resources likely to get underway today, says Southern Cross Equities director Charlie Aitken. "BHP (BHP.AU) are going to A$40, Rio (RIO.AU) to A$120, Fortescue (FMG.AU) to A$50 and Oxiana (OXR.AU) to A$5.00. If you are short resources you are dead. It starts today." Another trader says recent BHP price action demonstrates that it is very well supported. BHP last A$32.79, RIO last A$92.01, FMG A$34.10, OXR A$3.37. (DWR)




LOL now thats what i call a _*RAMP!!!  *_


----------



## Sean K

nizar said:


> LOL now thats what i call a _*RAMP!!!  *_



I like this one:



> If you are short resources you are dead. It starts today.




That is an immediate banning on ASF!


----------



## legs

kennas said:


> I like this one:
> 
> 
> 
> That is an immediate banning on ASF!





well i am well and truly alive!!


----------



## Uncle Festivus

How to take part in the commodities boom in your spare time?

*Fortune's field guide to the ill-gotten goods driving the black market.*

http://money.cnn.com/galleries/2007/fortune/0707/gallery.metalmadness.fortune/index.html


----------



## Spaghetti

I have concerns upcoming quarterly reports may reflect some bad news due to the appreciating dollar. It has been widely covered in the press that profits may be hit hard in some mining stocks. It may start a correction and many foreign investors may withdraw their funds from our market dropping the Aussie value. I think that would be a good outcome in the long term. However I never even did economics 101 so welcome anyone to prove me wrong. My imagination gets a bit carried away at times.


----------



## Uncle Festivus

Spaghetti said:


> I have concerns upcoming quarterly reports may reflect some bad news due to the appreciating dollar. It has been widely covered in the press that profits may be hit hard in some mining stocks. It may start a correction and many foreign investors may withdraw their funds from our market dropping the Aussie value. I think that would be a good outcome in the long term. However I never even did economics 101 so welcome anyone to prove me wrong. My imagination gets a bit carried away at times.




Yes, it's a subject not much is said about, but as I have posted on the ILU thread, ILU have indicated that their bottom line is affected by $8m per every 1 cent rise in the $A. Their guidance was based on exchange rate of 75c - now 85. A sign of things to come with this qtrs reporting?
CDI shares of US listed co's are taking a battering too eg NEM etc


----------



## Spaghetti

Uncle Festivus

I have read that about Iluka and also others. I can recall some press article suggesting Zinifex will be affected also. I am more familiar with purchasing in FX rather than selling, and know that many importers use forward exchange contracts to soften the immediate effect of currency fluctuations. If similiar practise are used by many miners the affect may be more gradual but should be apparent as the year progresses. From my reading on this though some miners do not hedge so effects, I would imagine, will be severe and soon.

Increase in metal prices may offset, hopefully to some degree. It depends what the market has factored into current s/p. It doesn't appear it has been though with prices rollicking along. 

Events I cannot fully understand always make me nervous but also make me go back to the learning process.

I would imagine /hope also the big end of town has this covered in thier expectations of earnings so perhaps I am being a little ott. We will soon find out I guess.


----------



## Who Dares Wins

Interesting when you look back and read the first post on this thread from May 2006 - when exactly were they tipping commodities to collapse? Obviously not anytime near when it was posted cos it didnt do it. 

2 Years ago the "experts" also tipped the NZ dollar at about 67 cents to fall against the Greenback. What did it do? Go up - now its at 78 cents. 

How much more completely wrong can experts be?


----------



## Uncle Festivus

NEW DELHI: Following a huge rise in production, China’s stainless steel industry is facing a problem of plenty now. 

The glut has caused panic in China’s stainless steel market. A sharp fall in nickel and stainless steel prices, has forced a joint cut in production from this month in China. 

State-owned and private mills are reportedly working in tandem to support falling prices. Some plants have resorted to production cuts, while others have commenced their maintenance work early. 

From the peak of end-May, stainless steel prices had been falling and by mid-July, the market was 25 per cent lower. From around $4,500 a tonne in May, the rates have declined to less than $3,300 a tonne. Steel traders apprehend there could be a further drop in August when seasonal demand stays weak. 

The sharp fall in prices and oversupply of stainless steel together with the rapid expansion of production capacity since the second half of 2006 has led to a substantial build-up in stainless steel inventories in China. 

On the back of a rapid growth in stainless steel capacity, a strong rise in stainless steel production in the second half of 2006 was about 5.3 million tonnes, 68 per cent higher than in 2005. 

For 2007, the forecast output is about 7.3 million tonne, up 38 per cent year-on-year.


----------



## Bush Trader

Not collapse so much as NAB believes the Cycle may have peaked.  Remember many analysts are still using commodity valuations well below spot price numbers.

Cheers

BT

National Australia Bank Says Commodity Prices Have Peaked 
Source: FN Arena News - August 09 2007 
By Chris Shaw
According to the National Australia Bank Base Metal Index (BMI) prices among the base metals sector fell 5.2% in July, this after a 10.8% fall in June. Much of the fall can be attributed to the nickel price, as the metal has had consecutive months of 20% declines at the same time as most other metals have tracked sideways.
While a summer slowdown is nothing unusual, the bank suggests the recent peak in the index may in fact prove to be the top in the current cycle even allowing for continued strong growth from China and low metal stockpiles.
On the bank’s numbers China should record economic growth of around 11% in 2008, which means there will be no change to the recent trend of it being the dominant global consumer of base metals. As the bank’s economist Gerard Burg notes, this has the effect of pulling greater quantities of metals out of the global market, a trend evidenced by China’s growing imports of copper and nickel and lower exports of aluminium and lead.
Despite this, Burg expects increases in output will push all metals in the sector into a surplus in 2008, though the size of the surpluses will vary. Given this will alleviate some of the price pressure resulting from currently low stockpiles it supports the bank’s view prices will come down, while remaining at what are historically high levels. From a forecast average of 406.8 points this year Burg expects a decline of 15% in 2008 and 14% in 2009 in the value of the bank’s BMI.
Looking across the sector, the bank expects lead prices can rise further in the short-term as outages in production at key mines in Australia and the USA will keep the market tight. As this supply side issue returns to normal prices are expected to correct lower, so from an expected average this year of US$2,325 per tonne Burg is forecasting an average price in 2008 of US$1,550 per tonne, falling further to US$1,125 per tonne in 2009.
With the aluminium market expected to move into a surplus in 2008 the bank sees prices as continuing to drift lower, though it has lifted its forecasts to account for a tighter market than previously expected on the back of lower Chinese output. From a forecast of US$2,700 per tonne this year the bank sees prices falling to US$2,425 per tonne in 2008 and US$2,150 per tonne in 2009, its 2008 forecast having been revised up from US$2,125 previously.
International Copper Study Group figures suggest the copper market will be in surplus this year but the bank sees scope for disruptions to supply to produce a balanced market, meaning any surplus will be pushed out to next year. This sees the bank lifting its price forecast for next year to US$6,750 per tonne, up from US$5,900 per tonne previously, but down from its forecast for this year of an average of US$7,250.
Deliveries to LME warehouses through Europe are behind the recent slide in the nickel price, but the bank takes the view the slide has gone too far and prices should settle at around the low to mid US$30,000 per tonne level as this represents approximate break-even for ferronickel costs.
Both demand and supply expectations for the remainder of the year have been revised down slightly and the bank sees prices as averaging US$40,500 per tonne this year before falling to US$32,500 per tonne in 2008 and US$28,500 per tonne in 2009.
The bank suggests stockpile estimates in the zinc market may be skewed given Chinese producers brought forward output the beat increases in excise taxes, but it notes industry figures indicate a small production surplus in the first five months of the year despite stockpiles having fallen to historically low levels.
Assuming the figures are actually skewed Burg sees the market as remaining in deficit through the September quarter, though he expects a surplus to develop by December and extend into 2008. As a result the bank expects prices to average US$3,650 per tonne this year before falling to US$3,450 per tonne in 2008 and US$2,850 per tonne in 2009.


----------



## doogie_goes_off

Nickel stocks should be avoided short term, IMO $20,000/t US is a sustainable level, if a company can not operate with a profitable margin at this price then don't hold them, look for past production. At higher prices other metals become cheap replacements for Nickel in stainless steel. Zinc and lead prices still have big margins, so investors should not be spooked by this information and the world is still using copper flat out in electronics, so no problems there, my only advice would be to hold base metal producing stocks.


----------



## noirua

With pressure on all commodities in this mining sector "Great Slide" we can feel comforted at knowing that the Aussie has been very strong and peaked at around A$1.11 against the greenback a few weeks ago and has now fallen to AUS$1.22 in London.

This great shakeout is far from completed, but remember, even the best go down as people seek  refuge in cash. So this is basically a shakeout and not a great slide. Many a good apple will be shaken from the tree and there will be profits to be made by picking up the good apples that have fallen.


----------



## noirua

Commodities, it seems, have only one way to go from here, and thats down, in US Dollar terms.

The Aussie Dollar has slumped against the British Pound to trade at A$2.5232.
Against the US Dollar, again only one way, and that's to A$1.2688.
Mining producers will indeed be chuffed by this.


----------



## noirua

Avoid direct investment in commodities, but look very closely at those quality profit making, little debt, developed companies in the sector, and ask yourself  "Is this stock cheap with its Aussie mines or wells with the Greenback resergent and you have to pay A$1.30 to get US$1. These miners will rejoice and profits should rebound over the next 12 months; Especially for those with fixed price agreements going forward.

Be warned, that many hope-and-glory stocks, with little cash, are not worth much now.


----------



## BSD

Anybody keen to call the end of the commodities bull again?

Copper - 10% off all time highs
Iron Ore - heading for a 25%+ rise
Coking coal - ready to smash all time highs
Thermal - going up
Oil - all time highs
Softs - going up

The weakness of the USD is a minor factor, but the commodities bull is well intact and the doubters have yet another 12 months of egg on their face. 

Check out some of the arguments on this thread from 12 months ago. 

The US housing/economy bears were all doubting the commodities cycle and despite their accuracy concerning the pathetic state of US affairs, commodity prices continue to gain pace on real economic demand. 

Supply response is NOWHERE to be seen. 

Where is that d!ckhead calling for the 'nuclear winter' in commodities working now? 

I keep asking this - name three new major copper, nickel, gold, iron ore, coking coal and/or oil sources?

The US is no longer the centre of the universe. 

Bring on the Asian century...


----------



## refined silver

Commodity Bull not even half-way yet.

Even with systemic economic collapse in the US, the US Fed will flood will flood with liquidity leading to huge inflation (already on the way) and commodities will continue to increase in price (even though there may be a short sharp downward spike)

Sovereign Wealth Funds hold *trillions* of dollars in diminishing US treasuries. This money is starting to move into commodities and precious metals. The trickle will become a flood.


----------



## Lyn

It's great to see analysts supporting my strategy, which is 100% resources.  Charlie Aitken, a director of Southern Cross Equities posted an interesting article on Eureka stating: 

"People who are looking at the Dow for guidance to resource stock performance are completely missing the point: you should be using this period of Dow-led uncertainty to fill your portfolio up with... and the entire suite of next generation Australian resource stocks. "

He states that we should be looking at the mergers and acquisitions as they are telling us what the future will bring.  I see exciting times ahead.


----------



## vishalt

Check out the article I did: http://www.investordaily.com.au/archive/3397.xml



			
				VTforInvestorDaily said:
			
		

> Resources boom may hit a hurdle
> 
> By Vishal Teckchandani
> Thursday 15 November 2007
> 
> The commodities boom is set to remain strong till 2009 after which it may start to burst, according to Putman Investments chief investment officer Shigeki Makino.
> 
> "We can expect two to three years of smooth sailing before you sense oversupply," Makino said.
> 
> "By around 2012 a lot of projects are expected to be complete in emerging economies like China and India.
> 
> "So when you see a lot of planes, ships, infrastructure and major cities complete, that's when the fundamentals may start to turn and the market will appreciate that a year before. At that point equities could collapse."
> 
> He expected the global economy, along with emerging markets and large cap stocks, to flourish in the current environment.
> 
> "Emerging markets are a long-term positive theme for global cyclicals. We remain bullish on steel, oil refineries, commodities, shipping and airlines," Makino said.
> 
> He said investors were too focused on the credit crunch and housing bust in the United States and should use any declines as buying opportunities.


----------



## rederob

During the week, all the base metals moved from positions of fundamental weakness to strength, or indifference - nickel falling into the latter camp.
Copper is leading the charge again, suggesting that whatever new capacity has come on stream, it's hardly denting demand.
Both zinc and lead have added significant cancellations to their picture, and shoud increase drawdowns next week.
Aluminium is going to go long term bullish, but will move as quickly as a snail.
Irrespective of US market capitulation, it does seem that there remains a strong and vibrant metals market that for now is making its own race.


----------



## Boyou

From todays edition of the Daly Reckoning.

........ article from Simon Hunt over at Mineweb.com that made sense. Hunt says that because 2008 is an election year, "We can be sure that the US authorities and others will produce a trick out of the bag which would temporarily shore up the system, but, in the process, make the crisis even deeper, when the final tsunami wave strikes (2009-2013). 

--"In effect," he continues, "the authorities will inflate their way out of today's turmoil. Money will have to find a home: it will go into equities and commodities, thus creating the final fifth wave of this cycle, which by its nature tends to be parabolic in direction. 2008 should then be characterised by rising stock and commodity markets at least until mid-year. Once these markets have reached their peaks (latest spring 2009), a 4-5 year bear market will unfold, which will be characterised by the unwinding of a decade of leverage." 


Any comments? 
----------------------------------


----------



## chops_a_must

rederob said:


> During the week, all the base metals moved from positions of fundamental weakness to strength, or indifference - nickel falling into the latter camp.
> Copper is leading the charge again, suggesting that whatever new capacity has come on stream, it's hardly denting demand.
> Both zinc and lead have added significant cancellations to their picture, and shoud increase drawdowns next week.
> Aluminium is going to go long term bullish, but will move as quickly as a snail.
> Irrespective of US market capitulation, it does seem that there remains a strong and vibrant metals market that for now is making its own race.




The nicklers here seem to be looking really good.

Whether or not the fundamentals of the base metals have changed because of perceived strength in the USD, thus increasing physical buying... who knows? But that's my reasoning behind it.


----------



## Scuba

Zinc to drop 11% in 2008: Study 
Bloomberg / Mumbai November 30, 2007 
More gloomy predictions from Gerard Burg: Business standard.com smart investor link
Any thoughts on this guy?


----------



## dhukka

The ABS reported Gross Operating Profits for Australian companies fell *-2.1%* in the latest quarter. That was due almost entirely to an *-11%* decline in mining sector profits in the latest quarter. Mining sector profits are down *-15% * year over year and are down more than *-19%* from their peak in June 2006. September was a weak quarter and December is shaping up as even weaker given the falls in commodity prices. Could be a somewhat lacklustre 1H08 profit season for resource companies.


----------



## Nyden

Scuba said:


> Zinc to drop 11% in 2008: Study
> Bloomberg / Mumbai November 30, 2007
> More gloomy predictions from Gerard Burg: Business standard.com smart investor link
> Any thoughts on this guy?




A lot of those article headlines are *very* misleading ; notice in the article it says an 11% drop in their *forecast*.

They still expect it to hit $2,925 a tonne, and currently it trades around the area of 2200-2500. So, many of these articles make it seem like Zinc is going to just keep falling, & falling from where it's at now. So; their forecast says Zinc is going to still rise a fair bit. Of course, these sorts of articles never say that, do they? Negative nellys :


----------



## Kauri

I would have copper under a touch of pressure here.. triple top/old support and all that...
Cheers
,,,,,,,,,,Kauri


----------



## noirua

Article from Aireview "Boom Slows as Resources Run Out of Steam":  http://www.aireview.com.au/index.php?act=view&catid=8&id=7472&setSub=1


----------



## The Mint Man

Interesting to note that this was posted back in 2004


----------



## Kipp

rederob said:


> During the week, all the base metals moved from positions of fundamental weakness to strength, or indifference - nickel falling into the latter camp.
> Copper is leading the charge again, suggesting that whatever new capacity has come on stream, it's hardly denting demand.
> Both zinc and lead have added significant cancellations to their picture, and shoud increase drawdowns next week.
> Aluminium is going to go long term bullish, but will move as quickly as a snail.
> Irrespective of US market capitulation, it does seem that there remains a strong and vibrant metals market that for now is making its own race.




Hmm... I'm very confused by the state of play with Zinc... inventories still haven't really recovered, from the mass emptying that took place from the start of 2005.  Nickel has been pummelled down to 11.50/lb in the same period, but I think it is worth noting that inentories have QUARDRUPLED to 45,000t in the same period.  

What am I missing here?  Are there millions of tonnes of Zinc stockpiled at the Chinese docks?  From a t/a point of view, there is no sign of a break from the steady downrend that kicked off around the end of March.


----------



## ithatheekret

I think this is the lull , I thought they usually lasted for 6-8mths in base metal secular bull markets .

Most projects have been costed , for developers , it's usually at a fixed contract price , variations always get sent to architects on projects , these are add on costs , that either get approved or don't .
Sometimes ( quite often actually ) , the overlaps and under quoting catch up , especially if the developers have to wear any variations .

Mix that with a squeeze on credit , which has been underway since JUNE , it see orders slow down and dribble as inventories are run at lower levels .

That's why there's been a squeeze on steel , because it's expensive stuff and for every tonne produced , around 100 tonnes of water are needed , that's a lot of steam , fortunately they get to reuse a good part of it .

The main market gearing has been toward the Chinese Dam project and infrastructure , with portions leaning to the Olympic games . The US markets may have been heading upwards , but the markets weren't getting reliable data and has been in a technical recession , most of which is product of monetary policy and its effects . That has a domino effect , which will have to be sorted out by the market forces .

There are upsides though , because China and India aren't the only news , there are many large scale projects underway globally . The Korean Pen. will be starting a new channel system , that will take enormous amounts of materials and has come out of left field to much of the market . The figures wouldn't have been done yet on most global projects , until an analyst notices in a companies book .

Then there's the hedge funds , the dobermans of the market , they'll jump between investment vehicles and distort all manor of commodities once they start pressing buttons . A lot of unwinding in many prices is attributed to hedge fund liquidation and the way things look this could continue for a tad longer . 

That's just part of the effect , any administrator coming in to square up books is an A grade position liquidator .

These are just a few things that slow base metal prices , look at nickel , it blew it's hat at $51K . Do I think we'll see that again ? Chit I hope so , that would be just groovy , but I'm not expecting any rush .

The rush looks to be coals , like Thermal again . How about wheat , that was a beauty rise , and that's how quickly focus can change . 

Focus and commodity price don't have that much in common , it's more sentiment , but you can be guaranteed to notice it on shelf prices at supermarkets .

Don't get me wrong here ,  I'm not riding the miners off , although they tend to prey on each other at market peaks , which is usally at the cresendo and it looks like piano (slowly/er) to me at present . Zinc has actually seen demand pick up in China , but it is not reflected in the price . Could we just suppose it's trying to find a bottom ? As most ores have or will do .....

Zinifex and Oxiana are treasure troves , they've got war chests , BIG ones that make the old CPH look like a piggy bank . what they do with all that cash will be interesting , ZFX are on the prowl , a buyback would be nice though .


----------



## ithatheekret

12/20/2007 4:09:15 AM - www.dowjones.com
CANBERRA (Dow Jones)--Australian Prime Minister Kevin Rudd said Thursday that the country's federal, state and territory governments have agreed to a program of national reform that will boost productivity and reduce inefficiency. 

  Speaking after a historic meeting of the Council of Australian Governments, or COAG, in Melbourne Rudd said seven working groups will be established to manage the reforms. 

  But Rudd didn't spell out any specific policy action or areas of cooperation between the federal and state governments - something business groups had hoped for. 

  The meeting was the first of its kind since Australia's federation in 1901 in which all federal and state leaders were from the same party, center-left Labor. 

  Australia's economy, buoyed by strong demand for natural resources, has been expanding rapidly in recent years. But infrastructure bottlenecks are dogging producers, and a tight labor market is pushing up operating costs. 

  That increases the need for federal-state cooperation to address those issues, which are currently pressuring inflation and adding to the Reserve Bank of Australia's tightening bias. 

  The Australian Labor Party's landslide election win over the conservative Liberal-National coalition last month completed the center-left party's clean sweep of all federal, state and territory governments. 

  -By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; rachel.pannett@dowjones.com 

  (END) Dow Jones Newswires

  December 19, 2007 22:02 ET (03:02 GMT)


----------



## tronic72

nizar said:


> Pays a good dividend?
> 
> Its not much more than 1%, and market average is 3.9%, work that one out





I agree. I've held BHP a few times in the last few years but their dividend is simply pathetic.

Spend $40+ on BHP and the dividend is 33.63 CPS
Spend $5 on AFG and the dividend is 24 CPS

Can anyone explain their lousy dividend? Are there simply too many shares?


----------



## Real1ty

tronic72 said:


> I agree. I've held BHP a few times in the last few years but their dividend is simply pathetic.
> 
> Spend $40+ on BHP and the dividend is 33.63 CPS
> Spend $5 on AFG and the dividend is 24 CPS
> 
> Can anyone explain their lousy dividend? Are there simply too many shares?




They are not a dividend stock but a growth stock.

They probably are only paying a dividend as they are so cashed up now.

For them the "proof is in the pudding" in their share price.

Look at their ROE and ROC, it's massive, going from memory

If you want a dividend stock, you wouldn't be buying the big miners.


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## rederob

Real1ty said:


> They are not a dividend stock but a growth stock.
> 
> They probably are only paying a dividend as they are so cashed up now.
> 
> For them the "proof is in the pudding" in their share price.
> 
> Look at their ROE and ROC, it's massive, going from memory
> 
> If you want a dividend stock, you wouldn't be buying the big miners.



Isn't the real question one as to why BHP has not been "sold off" heavily in the present bearish market?
My suspicion is in part it is because BHP has a massive cash flow and, like any cashed-up company at the moment, has the capacity to pick the eyes out of the market.
What is certainly very clear is that companies with large debt components are going to find the cost of borrowings burning a bigger hole in the balance sheet than ever thought.
Companies exposed to borrowings from lenders caught with their hands on too many SIVs will be at greater risk still.
The next 6 months is where the strong get bigger, and the weak fold their hands.
Mind you, if your stable has equities with a good resource base, then don't blink too fast.
There could be an offer too good to refuse, coming soon.........


----------



## BREND

Traditionally, metal minerals demand pick up after Chinese New Year. With copper inventory at Shanghai at very low level now, I'll not be surprised to see a much higher demand for copper from China on the 1st quarter of 2008.

I'll be holding BHP Billiton, but I'll not be interested to buy more at currrent levels. Southern Copper (listed in NYSE) is giving dividend yield of 7%, this might interest dividend players.


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## yawomanjas

guys did copper and aluminium just fall 35% on the london metal exchange..please check www.kitcometals.com....
****TTT, get out of resources...


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## rederob

yawomanjas said:


> guys did copper and aluminium just fall 35% on the london metal exchange..please check www.kitcometals.com....
> ****TTT, get out of resources...



Kitco does not quote LME ring prices.
Don't panic.
Buy aluminium at Kitco's quoted prices and you will make a killing.
The forward cost curve for aluminium is rising, not declining, because energy costs will keep driving it higher.


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## noirua

Soft commodities are thought to have a better chance in these markets. A lot of research is needed into every part of this sector as some commodities will do well while others find themselves in the wilderness.

Overnight prices can be seen from this London website:  http://www.advfn.com/p.php?pid=commodities&btn=allcomms&gid=BM&cb=1198863053


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## treefrog

on the basis that price is determined by supply and demand a check of LME prices and availability (LME stock) I roughed out this from historical (last 5 years) and have put a weighting on each of current price and current stock.
Now this is only very rudimentary (took 30mins to do) and does not factor in demand looking forward but nevertheless gives a rough comparison for buying stocks forward from here.
note: a price of +30% indicates that current price relative to last 5yr hi and 5yr low is up 30% above the 5yr low, so, out of possible weighting of 10 I have scored it the inverse - ie 7
and for available stock in LME +70% similarly means that current stocks relative to last 5yr hi and 5yr low is up 70%, so, out of possible weighting of 10 I have scored it the inverse - ie 3
here are the numbers
PRICE
Zn +30% (7); Ni +100% (0); Pb +60% (4); Cu +70% (3): Al +70% (3)

INVENTORY
Zn +10% (9); Ni +40% (6); Pb +20% (8); Cu +20% (8): Al +50% (5)

then add the two weightings (the numbers in brackets):
Zinc  (16); Nickel (6); Lead (12); Copper (11): Aluminium (8)

the highest score being the most of interest in 2008

of course if we can add projected demand as the third weighting it would be more complete


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## treefrog

Buttttttttt..........
a check into zinc forecasts turns up:

"Chennai, Dec. 30 Global zinc prices are forecast to drop by 45 per cent next year and average around $1,780 a tonne. The projection, made by Australia’s independent government economic research agency Abare, has been made on the expectations that new supply will come on line and stocks will recover as production exceeds consumption."

"Zinc price, which had run to a record $4,260 a tonne earlier this year, was quoted at $2,440 during the weekend."

full article:   http://www.thehindubusinessline.com/2007/12/31/stories/2007123150670700.htm


----------



## SM Junkie

Guess the run is not over for commodities just yet.  Port Hedland will be building 21 new births over the next 5-6 years and China expecting to double its iron ore requirements.  Obviously it's just starting to rev up here in the Pilbara.


----------



## Smurf1976

rederob said:


> The forward cost curve for aluminium is rising, not declining, because energy costs will keep driving it higher.




Aluminium:

1. Mine the bauxite.
2. Add massive amounts of heat. Now you've got alumina.
3. Add most of the output of a decent sized power station plus a bit of pet coke. Now you've got aluminium.

OK, it's a tad more complicated than that. But if you're running a smelter then it's the electricity price that matters more than any other factor in determining viability. In most cases the bauxite gets shipped to a cheap source of fuel. Then the alumina is shipped to a cheap source of electricity. That often means different contries and not simply across town.


----------



## rederob

Amid a see of red the base metals (and precious metals) rose overnight.
Meanwhile oil is refusing to cave in and suggests the fundamentals of supply and demand are holding the price up.
It will be impossible for commodities to remain unaffected as the global recession bites.  However, the Kitco charts clearly show that despite much-anticipated metal stock builds in 2007, most metals are still in short supply.
When this financial crisis has worked-off most of the global woes, the next run in metal prices will make last year's bull run pale into insignificance.


----------



## Kauri

from the HK Standard...

*Jiangxi Copper pulls 300,000 tonnes offline

*_Friday, February 01, 2008_

China's top integrated copper producer, Jiangxi Copper (0358), will shut down 300,000 tonnes of smelting capacity within two to three days due to power shortages, company sources said yesterday, as the country grapples with its worst power crisis in years. 

That capacity is 43 percent of Jiangxi Copper's total smelting capacity of 700,000 tonnes a year. A fall in Chinese copper production could raise imports, as China is the world's top consumer of the metal. 
"We are going to close down nearly a half of the capacity in a couple of days," a company source said. He said Jiangxi Copper expected capacity to remain shut until mid- February, which could see lost output of about 12,500 tonnes, or 2.3 percent of the company's expected output of 550,000 tonnes last year.
  The news comes after China's biggest zinc plant shut down on Tuesday, while stainless steel and aluminum output curbs spread to Shanxi as power shortages and chaotic weather cut deeper into supply from the world's top producer of the metals


----------



## noirua

It's interesting to look at all commodities and have a look at which are going to be affected by a recession and which are not. 
Oil is a basic and at the same time will be hit if the U.S.A. moves towards a zero growth situation, and steel is another that will waver as the Chinese growth situation falls back.  China has forecast growth down from 11.5% in 2007 to around 8.5% for 2008 with pressure in the second half. 
All commodites that are eaten by us and animals, and are listed for use as green fuel, look likely to either push to much higher levels or be vulnerable to push and pull factors, sugar is one of these. 
Coal and to a slightly lesser extent, iron ore, will be set to remain in demand because of China, India and Indonesia's need to build thermal coal powered powerstations. Coking coal and higher grade PCI and semi-soft is used in steel making and will be stronger in price due to rail and port restrictions, that also affect thermal coal.
Anthracite and high grade PCI coal is one for the future as the 20 cent tariff is likely to stay, on all coal from Australia, and the Vietnamese interest appears genuine and the market set to grow and grow. 
Copper may well find the going neutral to weaker as 2008 goes on and it would take quite a bit of research to see likely trends in 2008 and 2009 for other non-ferrous metals.


----------



## chops_a_must

I finally found the statistic that I used against the Dukester in an argument about a year ago, in the course of my personal ventures.

Of course he grilled me at the time for not having it, but it is true.

People in urban areas use around 50% more resources, of all types, than do their counterparts in rural areas.

Currently there are just over 3 billion people urbanised. It looks as if there will be about 5 billion people urbanised by 2030.

So if we do some figures, 3 x 1, + 2 x 0.5 we get 4. A 33% increase in resource consumption by 2030 from this alone.

This does not include the engineering included for these people, nor does it include the re-engineering that developed nation's cities will need due to environmental factors.

In times like this, it's easy to get bearish on a lot of commodities etc. but it is quite easy to see why so many people are so bullish long term.

For example, here are a few recent pictures of Shanghai (just to get some perspective):







And now look at what the plans are for Shanghai by 2020:










And yes that is a person in there. There are people at the end too. The scale and magnitude is staggering. Incomprehensible. The big pointy thing in the first image is absolutely dwarfed, and you can see that the density to the left of that will be 5 or 6 times as high, at least, in the plans.

If these visions do come to pass, there is just no way commodities could really collapse. Barring Chinese price interference.

I just found these pictures absolutely mind boggling, and thought I would pass them on. I hope you can take something away from them.

Cheers,
Chops.


----------



## treefrog

agree chops
would add - LT resources will continue to boom based on world population growth alone - your high city factor is more weight which I was ignorant of.
Temper your enthusiasm for growth in resources only if you think the world can get warming under control because doing that will severly dent many an economy.


----------



## GreatPig

chops_a_must said:


> look at what the plans are for Shanghai by 2020



Plans are exactly that though: just plans. Execution of those plans is dependant on the economy, and a deep recession or depression could easily stifle those plans for years.

GP


----------



## chops_a_must

GreatPig said:


> Plans are exactly that though: just plans. Execution of those plans is dependant on the economy, and a deep recession or depression could easily stifle those plans for years.
> 
> GP




Hence I said what I said, i.e. that if it does come...


----------



## rederob

rederob said:


> Almost a year since this thread began, and the base metals are running a repeat performance; ie running to new record highs in many cases.
> At present, commodity market tightness is the rule and not the exception.
> It is clear that supply side responses are inadequate, despite a 5-year ramp-up phase for most metal miners/producers.
> Unless metals demand wanes, then prices in 2007 will be higher on average than 2006.
> And we might also be setting-up 2008 for an even stronger year again!
> That's certainly where I reckon we are heading right now.  However, as always I review this longer term trend more deeply in the 3rd quarter.
> Between now and then I'm not likely to move too much unless a clear meltdown comes into view.



Almost 2 years since this thread began.
Tin and copper have recently hit new record closing prices, and only zinc is wallowing amongst the base metals.
US housing starts - the few there are - have made no difference to the base metals market.  Nor, it appears, has US industrial production.
2008 will mark the baton transfer, whereby metals markets dance to an Asian tune, and are likely to for several generations ahead.
Although copper has been a barometer for "industrialisation", each of the metals has displayed distinctively fundamentals-driven price action.
Copper itself is about to hit new highs as strike action and poorer year on year output from many producers keeps ratcheting up its price.
Importantly, input costs have gone through the roof and the metals market will never return to anywhere near the price levels immediately before the bull run commenced.
Despite the spectre of recession, there is nothing on the horizon suggesting commodity prices are about to collapse, which is the theme of this thread.


----------



## Uncle Festivus

rederob said:


> Despite the spectre of recession, there is nothing on the horizon suggesting commodity prices are about to collapse, which is the theme of this thread.




This is the bit that concerns me.  The thread topic was perhaps a bit premature, but the time is getting closer to when it will be proven in the affirmative.This last weeks action in everything is telling me some sort of blow off top is building, not based on demand criteria, but rather spec mania and 'flavour of the week' type piling into the latest fad to create a self perpetuating cycle - until it busts. 
The first cab off the rank was the commodity masquerading as an alternative currency (with a little help from 'them'). 

The bottom line is there is way too much liquidity still in the global system looking for a home. A lot of money still has to be liquidated before the next cycle starts.

Food, fuel and metal. It may be good for BHP, RIO & the Arabs but to dictate price rises of over 60% to the Chinese for eg is implying that either manufacturers will have to absorb the cost increases or pass it on the the consumer. I think both are happening, which will seriously put a dent in the China machine as well as consumers having to pay higher prices ie global recession?

There is a limit to what the world is prepared to pay for them; demand destruction is quietly building the foundations for a collapse, only the exact timing is unknown. Maybe 20 June 2008?


----------



## rederob

Uncle Festivus said:


> This is the bit that concerns me.  The thread topic was perhaps a bit premature, but the time is getting closer to when it will be proven in the affirmative.This last weeks action in everything is telling me some sort of blow off top is building, not based on demand criteria, but rather spec mania and 'flavour of the week' type piling into the latest fad to create a self perpetuating cycle - until it busts.



I have stopped counting the years that I have heard this argument.
Commodities, and every other sector for that matter, have their cycles.
What you need to determine is what is driving the cycle, and what is likely to halt it.
The demand destruction argument has worn very thin.  Metal prices have not moved sharply higher (in the main) for several years.  Nickel prices are about 40% off their peak, and copper is only around 10% higher than it was 2 years ago.
Oil prices have certainly climbed strongly, and coal prices are now shooting up as national energy needs are being squeezed by supply shortfalls.  Again, evidence of demand destruction is not yet evident.
The "liquidity" argument is useful if a country needing energy has no money.
Countries need energy to prosper.
Even in recession there will be a strong demand for energy, and until it is priced out of reach, consumers will keep picking up the increasingly high tab.
I don't know the price levels that substitution and\or demand destruction impact the various commodities.  I do know that there is a lot of data that suggests we remain a long way off.


----------



## Markcoinoz

Hi rederob,

I have been in commodities for the last 5 or 6 years.

How often have you heard the threat of the US collapsing would signal a slower demand for commodities and energy?  It has proven to be a complete fallacy.

Chip Goodyear EX CEO of BHP a few years ago showed some brilliant 100 year commodity charts.  The key to us entering a Supercycle was largely due to two major emerging economies China & India to enter the arena.  The US is no longer
the most important country on the planet.  Even if the US were to fall over tomorrow, the key to this can be seen with both China and India requiring massive energy & Resources for their own consumption.

Below is a fantastic read that someone posted from another forum.

Source Southern Cross Equities

According to an excellent report titled "Preparing for China's Urban Billion" by The McKinsey Global Institute (McKinsey & Company's economics research arm) China's urbanisation will lead to the following.

350 million: will be added to China's urban population by 2025- more than the population of today's United States.

1 billion; people who will live in China's cities by 2030

221; Chinese cities will have one million + plus people living in them- Europe has 35 today

5 billion; square meters of road will be paved

170; mass transit systems will be built

40 billion; square meters of floor space will be built- in five million buildings

50,000; of these buildings could be skyscrapers- the equivalent of constructing up to ten New York cities.

5 times- the number by which GDP will have multiplied by 2025.

It's worth noting that MGI's work is completely independent and has not been commissioned or sponsored in any way by any business, government or other institution.

Just have a think about some of those numbers above. 2025 is only 17 years away. If these forecasts are even half right the ramifications for the Australian resource sector and Australia are enormous. I realise we are in an equity market that currently can't see past tomorrow, but just consider what the ramifications of China's urbanisation could be. Remember, we are at the infancy of that urbanisation right now, not the end of it as the equity market wants to believe. Where is the raw material supply going to come from to meet China's ambitious urbanisation and GDP growth goals?

No wonder the talk is now Beijing is preparing to take a stake in BHP Billiton. Personally, I am surprised it has taken them this long to turn up on BHP's register.



The chart above was recently published by BHP Billiton. It's a great chart. The question copper bears have to consider is where is the supply going to come from to meet demand? The answer is "it isn't" and prices will continue to rise to reflect structural change in the demand supply balance (and the cost of getting it out of the ground) for industrial commodities, led by copper.

As we have written numerous times before it is the "supply side" response everyone is over-estimating, and particulalry so in the "red metal" copper. The "supply side" is simply not keeping pace with demand. Copper is the baromtere of resource sector sentiment and the correlation between the copper price and Australian resource sector share price performance is very high. The chart below shows LME spot Copper (red) vs. the ASX Materials Index (XMJ) in blue



Give or take a few periods where the equity market simply didn't believe the spot copper price was sustainable (and they were right for that short period), the direction of the copper price is highly correlated to the performance of the Australian materials index.

I realise many of you will be saying "of course it is", but even commodity super bulls such as myself hadn't realised that this correlation between the direction of spot copper and the Australian materials index (of which BHP is 45%) was so high. It's pretty clear that getting the direction of spot copper right is crucial to getting the direction of the Australian materials index, and its largest component in BHP, right.

Right now the conditions are clearly in place for a copper "super spike". We wrote as recently as the 11th of March on this topic but since then the copper market tighterned even further with global inventories down to just 2.5 days global consumption. The world is short copper; it is as simple as that.

For two years now I have been reading article after article about how slowing demand from the US housing construction sector was going to impact demand for copper and the price would retreat to the marginal cost of production. This is the consensus view.Those who have not analysed the supply/demand fundamentals in detail have come to the very simplistic conclusion that the US is the marginal consumer of the red metal. As the chart pack below from BHP confirms, that is not the case for Copper or any of the other industrial metals (or Oil). The commodity prices are clearly decoupling from the US economy because the US is no longer the marginal consumer or price setter.



According to recent Chinese customs statistics, January copper imports rose 16,400t m.o.m to 128,071t, the highest monthly level since April 07. Global production constraints continue with Chilean production down 1.4% to 439,123t.This represents the first yoy decline since 2006. In addition, the world's largest producer Codelco announced that 2008 production is expected to remain static considering the new Gaby mine will compensate for declining grades and lower production from other operations. Chile, which accounts for 35% of world copper production (and 30% of the worlds copper reserves) also has water and power issues that are not getting better.

Despite the constant predictions of increased supply from new greenfield projects and brownfield expansions, global copper production remains constrained due to lower grades from mature operations and chronic shortages in skilled labour and machinery. We believe global copper production might rise by just 1.5% this year against a backdrop of a 2.9% increase in world demand. This would result in a deficit of close to 200kt.

We expect static global production combined with 6-7% pa demand growth from China, is increasing the possibility of deficits continuing out to 2010. Since the last US recession China has accounted for 70% of the growth in world copper consumption. As a result China now accounts for 24% of global demand while the US has fallen to 10%. The days of $US0.70clb for copper are gone forever.

As a result copper drawdowns continue with year to date LME inventories down by 43%, representing just 2.5 days of consumption due to strong re-stocking from China and Europe. Currently the spot copper price is now only a few cents away from the record high of $US4.04 lb achieved in May 2006. Although speculative and hedge fund buying (short covering) has contributed to the strong year to date performance for copper there is no doubt that Chinese demand remains very strong.

It's also becoming clear that copper consumers believed the consensus view that copper prices were going to collapse and had aggressively run down inventories via de-stocking. That price correction has not come and it appears copper consumers are now dangerously short inventory with prices about to go through record highs (triggering technical buying) and analysts now looking for a supply deficit this year. That is a BIG change from forecasts of just six months ago which showed a substantial supply surplus this year. You watch the consensus copper price forecasts follow the spot price up from here. There is nothing surer than the commodity forecasters will chase the spot price higher over the remainder of this year. I saw some of these upgrades start yesterday, but they are classic rear-view mirror style ones that just push out the timing of the copper price collapse. Problem is they have been doing that for 5 years.

Continued........................

Cheers markcoinoz


----------



## Markcoinoz

Continued from previous post....................

Copper: $4.00, $6.00 or $8.00lb?

Pick a number for copper, but it isn't going to be $3.20lb that is consensus for cy2008. There is no doubt you could see a $5.00 copper price within months if the "super spike" scenario evolves, but the real question is what will the red metal trade with consumer buyers and traders competing to cover shorts, combined with demand from investors and those looking to diversify away from the USD? The answer could easily be $6.00 to $8.00lb.In these sort of "super spike" situations anything can happen because there is no inventory to come to market.

You could argue we are witnessing the start of a "super spike" starting right now in coal/iron ore and there's no doubt copper will follow. The world we see these stunning outcomes in coal and iron ore and realise there is no bubble in commodities, in fact they are underpriced. This is not a bubble; this is true structural change in the pricing of industrial commodities; however equity prices continue to discounting this is the peak of the cycle with commodity price collapse imminent. Short positions are at record highs despite the lowest multiples in the last 5 years, and everyone is trying to be the hero who "called the top of the commodity cycle". The problem is they are 20 years too early.

In my mind this just can't be the top of the commodity cycle because the vast bulk of investors and commentators believe it is. The commodity equities are priced for this scenario too. It was only two weeks ago that the vast bulk of equity strategists were telling you to underweight resources and overweight financials. That worked for two days, yet here we are today and that is the worst advice anyone could have given. Imagine "underweighting" resources ahead of a +200% increase in coking coal prices and the associated huge earnings upgrade? Imagine "underweighting" resources with copper at record highs, oil at record highs, and iron ore prices up a minimum of 71%? Why would you recommend doing that? Why would you "underweight" a sector with almost daily M&A activity, huge interest cover, and excess cash trading at a deep discount to the broader market? Why would you underweight the cheapest sector in the market with the largest net positive earnings revisions and fy09 earnings growth offering 3x the industrial market? Industrial earnings are still being downgraded; resource earnings still being upgraded.

Caught short

The point is we all get things wrong, but many, many people followed this "underweight" resources advice. I believe Australian institutions lowered large cap resource weightings this year. The hedge fund world outright shorted the sector via BHP, OXR, and FMG and they have been caught on the wrong side of this trade. BHP, OXR and FMG are crowded short trades and all three stocks are cum heavy consensus upgrades to fy09. Just to emphasise, have a look at the chart below of OXR underperforming the spot copper price in recent months. This is a 4 year chart which shows a very close correlation, expect for the last two months as shorters got stuck into OXR using the excuse of the ZFX bid and an imminent copper price collapse. OXR is a very crowded short trade.

OXR (blue) vs. Copper (red)



Listen to the bulks

The performance of commodities, both tradeable and contract based, during a US recession is trying to send you a clear message. What it is telling you is when the US economy stabilises and perhaps re-accelerates a little later this year you will get the true commodity "super spike". The bulks (coal, iron ore, manganese) are telling you what is coming for the tradeable commodities. The bulks are telling you the real supply/demand situation. The common view remains that when the US economy shows some signs of life later this year, in response to heavy rate cuts, that the USD will stabilise and investors will dump commodities. I reckon that is rubbish, why are Asian steel mills happy to pay +200% more for coking coal, and the strategists who are peddling that view "hope" it is right. The much more likely outcome is the "super spike" to reflect the tightness of supply, led by copper.

If we are right and copper moves into a new higher trading range it will take the whole materials complex with it. The outperformance of materials stocks over the broader financials/industrials will be dramatic, potentially more dramatic that at any time so far this cycle due to the dramatically superior earnings growth profile. The chart below is a 'daily' chart of BHP vs. the Australian Financials Index (XXJ) it shows you BHP has taken out the resistance level vs. the major banks is moving into a new trading range.

BHP vs. Australian Financials Index (XXJ); look out, a new level of domination starting (breakout)



The vast bulk of earnings upgrade potential lies in the Australian resource sector. The vast bulk of dividend upgrade potential lies in the Australian resource sector. The vast bulk of genuine balance sheet strength lies in the Australian resource sector. The vast bulk of M&A activity is in the resource sector. The vast bulk of outperformance will be generated by the Australian resource sector. It really comes down to whether you are prepared to back 1,000,000,000 urbanising Chinese over 350,000,000 already urbanised Americans.

I am genuinely moving into the "crazy" and very small camp that believes the genuine "super spike" in commodities could evolve later this year. That is completely contrary to the consensus view of imminent commodity price collapse. I can't think of one domestic investor who is positioned in the equity market for the "super spike" scenario, but I can name dozens who are positioned for the commodity price collapse scenario. Let's see what comes, but remember you never overtake anyone by staying in the same lane. It's probably also not wise to drive head on into a billion urbanising Chinese!

Go Australia


Charlie Aitken
Director
Head of Institutional Dealing
Southern Cross Equities


Cheers markcoinoz


----------



## Adam A

Great article Markcoinoz
Now where have i heard the name, of the writer of that article before?
Charlie aitken??

How about the one and only analyst to predict the rise of FMG from $5.50 before its 10/1 split to approx $78.00


----------



## Markcoinoz

Hi Adam A,

We should know within the next 1-2 years exactly where we are placed in this Supercycle.  When Chip Goodyear first made mention of the Supercycle, he wasn't talking about a 5 or 10 year uptrend.  He was talking to the tune of 25 years.  So far he has been correct all the way.  Where we are on the timeline thats the hard part to ascertain as we have 2 superpowers emerging.

From what i have read i agree with Charlie Aitkin that we are still in the early stages.

One thing for sure, its very exciting to have a few stocks that are involved in the history making of this cycle.  If RIO & BHP should tie the knot it is going to be very interesting for some of the juniors.

The soft commodities sector is also an area that had been overlooked until recently.

Been 100% in Materials the last 5 years.

Cheers markcoinoz


----------



## Adam A

Interesting for some of the juniors,how do you mean?

Personally ive been spending a fair bit of time researching the fertilizer industry.

Seems to be plenty of room for growth, oil prices high, future expansion of bio fuels, change of diet in India and china to more protein based,limited supply of essential ingredients, phosphate potash ect with no synthetic substitute

Highest price share in both aus and canada are fertilizer companys

Best performing share in both aus and canada stockmarkets 2008 fertilizer shares

Its both exciting and scary with forcasts of future and curent food shortages

Interesting times. All the best of luck


----------



## Markcoinoz

Hi Adam A,

When i meant by some of the juniors, i am referring to I/O juniors such as 
UMC - ROY - PLV - POL and a few others.

They have a great chance of possible T/O - JV's given the close proximity to infrastructure and high grade Hematite.

In regard to the Fertilizer Demand we are witnessing, MAK for Phosphate & RWD for Potash are standouts.  There are also a few smaller ones that could benefit
just on the hype alone.  STB with its Phosphate & Potash tenements.
COZ for Nitrogen.

I am in MAK as i still think its the best one to have.

Your right, we are heading into scary times with such food shortages in 3rd world countries and appears to be starting to hit developing countries as well.

Where this leads to i don't know.

However, it will add alot of inflationary pressure to many economies who can't afford it.  

Thats the scary part

Cheers markcinoz


----------



## Uncle Festivus

Uncle Festivus said:


> This is the bit that concerns me.  The thread topic was perhaps a bit premature, but the time is getting closer to when it will be proven in the affirmative.This last weeks action in everything is telling me some sort of blow off top is building, not based on demand criteria, but rather spec mania and 'flavour of the week' type piling into the latest fad to create a self perpetuating cycle - until it busts.
> The first cab off the rank was the commodity masquerading as an alternative currency (with a little help from 'them').
> 
> The bottom line is there is way too much liquidity still in the global system looking for a home. A lot of money still has to be liquidated before the next cycle starts.
> 
> Food, fuel and metal. It may be good for BHP, RIO & the Arabs but to dictate price rises of over 60% to the Chinese for eg is implying that either manufacturers will have to absorb the cost increases or pass it on the the consumer. I think both are happening, which will seriously put a dent in the China machine as well as consumers having to pay higher prices ie global recession?
> 
> There is a limit to what the world is prepared to pay for them; demand destruction is quietly building the foundations for a collapse, only the exact timing is unknown. *Maybe 20 June 2008*?




Missed it by 11 days??



Markcoinoz said:


> Hi rederob,
> 
> I have been in commodities for the last 5 or 6 years.
> 
> How often have you heard the threat of the US collapsing would signal a slower demand for commodities and energy?  It has proven to be a complete fallacy.


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## IFocus

Uncle Festivus said:


> Missed it by 11 days??




looks like you have the Bragging Rights there UF, was reading a commentary the other day (cannot remember where) about how the run up wasn't about demand.............still waiting to see how the oil story unfolds $30 oil who would have guessed


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