Commodities tipped to collapse

[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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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.