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Posts Tagged ‘commodity’

Why oil prices will spike again soon

May 23, 2011 Comments off

cnn

How long till the next oil shock?

Energy prices have been coming down this spring as fears of a Middle East blowup fade. But persistent global demand, tepid supply growth and easy money mean it may not be long till the next damaging spike, Goldman Sachs economists say.

Higher and higher

Oil prices could surge again by the end of 2012, economists Jan Hatzius and Andrew Tilton wrote in a note to clients this past weekend. They say the snail-like pace of global oil supply expansion – which Goldman projects at 1% or so annually – can’t keep a petroleum-addicted world economy rolling without prices rising, perhaps sharply.

So don’t get too used to paying a mere $3 and change for gasoline. Higher prices are on the way soon enough, thanks to stretched supplies and a Federal Reserve spigot that is likely to remain wide open for years to come.

“The fundamental story of increased oil scarcity is unchanged, and our commodity strategists now see distinct upside risks to their current forecast of $120/barrel for Brent crude by late 2012,” Hatzius and Tilton write. “So the impact of scarcer oil and higher oil prices on economic activity remains at the top of our list of worries.”

What makes higher oil prices almost inevitable is the depth of the jobs deficit in the United States. Unemployment is officially 9% but is more like 13% if you consider the low rate of labor force participation, says Bernstein Research strategist Vadim Zlotnikov. That number has fallen this year to levels not seen since 1985.

High joblessness and weak inflation will keep the fed funds rate near zero at least through next year and perhaps longer, Hatzius and Tilton write. That should help keep pushing unemployment slowly toward its long-run average of around 6% — but at the expense of further dollar depreciation, stronger global demand and, ultimately, higher oil prices.

So the selloff that has taken the crude price down to $100 or so in New York and $112 in Europe, where Brent is traded, may persist through much of 2011. But it won’t last Read more…

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QE2 Is Damaging The Economy And Reducing GDP Growth

April 27, 2011 1 comment

businessinsider

QE2 is going to go down as one of the worst monetary policy initiatives in the history of the modern Federal Reserve era. On almost any metric applied, QE2 ends up not only falling well short of its proposed goals, but actually turns certain metrics like GDP growth negative compared with the prior quarter, and heading in the wrong direction.

Costs Eat into Corporate Profits = No Hiring

Analysts all over Wall Street are starting to revise their 2nd quarter GDP forecasts down, and some like Goldman Sachs have made several downward revisions as higher input costs due to a weak dollar are creating an additional burden on businesses and consumers and thus slowing economic growth.

A weak dollar (Fig. 1) to a point can help exports, but an extremely weak dollar which in combination with QE2 liquidity juicing up commodities even further, turns out to be a net negative on the economy, and risks sending the Read more…

Chinese Know Real Value

April 27, 2011 Comments off

wealthcycle

The International Monetary Fund reported without fanfare recently its projection that the candidate who wins the 2012 U.S. presidential election will be the last U.S. President to lead the world’s richest super power.

The IMF prediction is based on its calculation that within the next five years China will surpass the United States as the world’s largest economy.

The IMF forecast differs from that of most traditional forecasts, which put the date China’s economy outstrips the U.S. at least a decade or two into the future. However, those traditional forecasters are looking at value as calculated in currency—and as we at WealthCycles.com have reiterated many times, currency lies.

“In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, Read more…

Stocks Sink on U.S. Credit Outlook as Euro Falls on Debt Crises

April 19, 2011 Comments off

businessweek

U.S. stocks sank the most in a month, oil slid and gold rose to a record after Standard & Poor’s cut the American credit outlook to negative and concern about Europe’s debt crisis worsened. Greek two-year bond yields surged to 20 percent for the first time since at least 1998.

The S&P 500 tumbled 1.6 percent to 1,298.09 at 1:13 p.m. in New York and the Stoxx Europe 600 Index slid 1.7 percent. Ten- year Treasury yields lost three basis points to 3.38 percent as concern about Europe’s finances overshadowed S&P’s move. The euro lost 1.4 percent to $1.4227, while Portuguese debt- insurance costs rose to a record. The S&P GSCI index of 24 commodities slid 1.3 percent as oil and cocoa tumbled.

S&P assigned a one-in-three chance it will lower the U.S. rating in the next two years, saying the credit crisis and recession that began in 2008 worsened a deterioration in public finances. Budget differences among Democrats and Republicans remain wide and it may take until after the 2012 elections to get a proposal that addresses the concern, S&P said.

“This is another indication of the need for the U.S. to better control its fiscal destiny, both for its sake and that of the global economy,” said Mohamed El-Erian, chief executive officer at Newport Beach, California-based Pacific Investment Management Co., the world’s biggest manager of bond funds. “Absent credible medium-term fiscal reform, every segment of U.S. society would be faced with higher borrowing costs, a weaker dollar and a less bright outlook for employment, investment and growth.”

Broad Decline

Commodity, industrial and technology companies had the biggest Read more…

Oil Should Spike Higher Following Saudi Riots and Nigerian Elections in April

March 11, 2011 Comments off

businessinsider.com

The following special report on oil (LA Blog Only, leverageacademy.com/blog) discusses the oil market, providing reasons to be bullish  on the commodity given unrest in the Middle East, Nigerian elections in April, and rising domestic consumption in oil producing countries, including Venezuela, Nigeria, and Iran.  According to the article, the rise of oil prices could easily cause the next recession.   In 2010, soft commodities outperformed energy, but that will certainly change given the political headwinds abroad and continued monetary easing in the developed world.  Therefore, the Bernanke “Put,” combined with political unrest will be to blame for continued sharp price increases in the energy commodity sector.

Emerging market demand, especially in China, which now consumes nearly 10mm barrels of oil per day, will also be driving the demand side of the equation.  Money supply in China was also up 19.7% in 2010, because of the rapid Read more…

Food Shortages Will Become A Global Crisis: 7 Reasons

January 7, 2011 Comments off
Friday, January 07, 2011 12:41

Activist Post

Food inflation is here and it’s here to stay.  We can see it getting worse every time we buy groceries. Basic food commodities like wheat, corn, soybeans, and rice have been skyrocketing since July, 2010 to record highs.  These sustained price increases are only expected to continue as food production shortfalls really begin to take their toll this year and beyond.

This summer Russia banned exports of wheat to ensure their nation’s supply, which sparked complaints of protectionism.  The U.S. agriculture community is already talking about rationing corn over ethanol mandates versus supply concerns. We’ve seen nothing yet in terms of food protectionism.

Global food shortages have forced emergency meetings at the U.N. Food and Agriculture Organization where they claim “urgent action” is needed.  They point to extreme weather as the main contributing factor to the growing food shortages.  However, commodity speculation has also been targeted as one of the culprits.

It seems that the crisis would also present the perfect opportunity and the justification for the large GMO food companies to force their products into skeptical markets like in Europe and Japan, as recently leaked cables suggest.  One thing is for sure; food shortages will likely continue to get worse and eventually become a full-scale global food crisis.

Here are seven reasons why food shortages are here to stay on a worldwide scale:

1. Extreme Weather: Extreme weather has been a major problem for global food; from summer droughts and heat waves that devastated Russia’s wheat crop to the ongoing catastrophes from ‘biblical flooding’ in Australia and Pakistan.  And it doesn’t end there.  An extreme winter cold snap and snow has struck the whole of Europe and the United States. Staple crops are failing in all of these regions making an already fragile harvest in 2010 even more critical into 2011.  Based on the recent past, extreme weather conditions are only likely to continue and perhaps worsen in the coming years.

2. Bee Colony Collapse: The Guardian reported this week on the USDA’s study on bee colony decline in the United States: “The abundance of four common species of bumblebee in the US has dropped by 96% in just the past few decades.” It is generally understood that bees pollinate around 90% of the world’s commercial crops.  Obviously, if these numbers are remotely close to accurate, then our natural food supply is in serious trouble.  Luckily for us, the GMO giants have seeds that don’t require open pollination to bear fruit.

3. Collapsing Dollar: Commodity speculation has resulted in massive food inflation that is already creating crisis levels in poor regions in the world. Food commodity prices have soared to record highs mainly because they trade in the ever-weakening dollar. Traders will point to the circumstances described in this article to justify their gambles, but also that food represents a tangible investment in an era of worthless paper.  Because the debt problems in the United States are only getting worse, and nations such as China and Russia are dropping the dollar as their trade vehicle, the dollar will continue to weaken, further driving all commodity prices higher.

4. Regulatory Crackdown: Even before the FDA was given broad new powers to regulate food in the recent Food Safety Modernization Act, small farms were being raided and regulated out of business.  Now, the new food bill essentially puts food safety under the direction of the Department of Homeland Security where the food cartel uses the government to further consolidate their control over the industry. Militant police action is taken against farmers suspected of falling short on quality regulations. It is the power to intimidate innocent small farmers out of the business.

5. Rising oil prices: In 2008, record oil prices that topped $147 per barrel drove food prices to new highs.  Rice tripled in 6 months during the surge of oil prices, along with other food commodities.  The price of oil affects food on multiple levels; from plowing fields, fertilizers and pesticides, to harvesting and hauling.  Flash forward to 2011:  many experts are predicting that oil may reach upwards of $150-$200 per barrel in the months ahead.  As oil closed out 2010 at its 2-year highs of $95/bbl, it is likely on pace to continue climbing.  Again, a weakening dollar will also play its part in driving oil prices, and consequently, food prices to crisis levels.

6. Increased Soil Pollution: Geo-engineering has been taking place on a grand scale in the United States for decades now.  Previously known in conspiracy circles as ‘chemtrailing,’ the government has now admitted to these experiments claiming they are plan “B” to combat global warming.  The patents involved in this spraying are heavy in aluminum.  This mass aluminum contamination is killing plants and trees and making the soil sterile to most crops.  In an astonishing coincidence, GMO companies have patented aluminum-resistant seeds to save the day.

7. GMO Giants: Because of growing awareness to the health affects off GM foods, several countries have rejected planting them. Therefore, they would seem to need a food crisis to be seen as the savior in countries currently opposed to their products.  A leaked WikiLeaks cable confirms that this is indeed the strategy for GMO giants, where trade secretaries reportedly “noted that commodity price hikes might spur greater liberalization on biotech imports.” Since GMO giants already control much of the food supply, it seems they can also easily manipulate prices to achieve complete global control of food.

The equation is actually quite simple: food is a relatively inelastic commodity in terms of demand. In other words, people need to eat no matter how bad the economy gets.  Thus, demand can be basically measured by the size of the population. Therefore, as demand remains steady while the 7 supply pressures outlined above continue to worsen, food prices will have only one place to go — up, up, and up.

As international agencies scramble to find “solutions,” their energy may be just as well spent on questioning if this famine scenario is being purposely manipulated for profits.  Regardless, the average person would be very wise to stock up on food staples as an investment, and frankly to survive the worsening food crisis