Friday, May 29, 2009

Commodities Set for Best Month Since 1974

As HAL9000 and the program traders jump from theme to theme, commodities has struck a fire - not 60 days ago deflation was all the scourge - now it is inflation. Notice how the stock market has become like a fantasy football game? Each and every economic report or data point (much like an injury or trade) completely changes the game. Themes that used to take years or at least quarters to reverse, now can reverse in days... based on the last data point.

Well this month's theme has been commodities; indeed the group is headed for it's best month since (wait for it...) 1974. Considering the huge surge in commodities in 2007 and through summer 2008 that is saying a lot. But in a thin market, where program traders dominate - this is the sandbox they've chosen for the time being. Oh Hugh Hendry, what say you?

Mmm... the 1970s. I do believe I've been reading somewhere we'll be having fond memories very soon of the fun times of that decade.

Via Bloomberg
  • Commodities headed for the biggest monthly rally in 34 years, led by energy, as the slumping dollar boosted demand for raw materials as a hedge against inflation.
  • In May, the Reuters/Jefferies CRB Index of 19 energy, metal and agricultural prices has gained 14 percent, the most since July 1974. The dollar was poised for the biggest monthly drop since August against a basket of six major currencies.

  • Crude oil was set for the biggest monthly gain in a decade. Gasoline has soared more than 30 percent in May. Gold & copper surged, while corn and soybeans reached the highest since September. (all excellent things for the nascent "green shoot" consumer recovery)
Ironic quote of the day comes here
  • Investors are seeking a “safe haven from a weaker dollar,” said Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago.
A safe haven FROM the weaker dollar? Just 60 days ago the dollar WAS the safe haven. But in the A.D.D. era of computer trading dominance where we change our minds on a weekly basis, that whole story is over and now we're back to fleeing the dollar. That's just how the short term oriented casino now works. Boo Yah.

But Australia and Canada (resource dominant countries) are seeing the exact opposite.
  • Canada’s currency headed for the biggest monthly gain since the Korean War as commodities surged, global stocks rallied and the U.S. dollar tumbled. The Canadian dollar rose 8.8 percent since April 30, the most since at least October 1950.
  • “This does seem like a historic move,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. “The biggest driver has been the decline in general fear, compounded by an increase in specific fear for the U.S. dollar, which might or might not be appropriate.”

  • The loonie, as Canada’s dollar is known, dropped a record 18 percent last year on plummeting prices for commodities, which generate more than half the nation’s export revenue.
  • The dollars of New Zealand and Australia, which like Canada’s tend to trade in tandem with stocks and commodity prices, added 13 percent and 10 percent respectively this month against the greenback, as the prospects for global growth improved.
They did hide this guy at the bottom of the article...
  • “I don’t know where all the optimism for the economy is coming from,” said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York. “When you look at housing and autos, all of those things are still weak. There is a disconnect between what the reality for the economy is and what people think.”

Please Mr. Groenwegan - please don't rain on our parade with facts. We have liquidity out the wazoo per our central banks and it has to go somewhere. We just put an additional $55,000 of debt onto each American household and its right that speculators deserve to get their just rewards off the backs of taxpayers. It's bubble time 4.0.

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