Commodities tipped to collapse

[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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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>