Commodities can pull back but the commodity bull will go strong till 2016-2018. It is all cyclical, 20 year cycle based. Jim Rogers wrote a good book on the commodity cycles few years ago.
'This is a very bad recession we are entering.' Do not think so! Oil is going to correct by 20% and consumption happy US folks will turnaround and spend it all on soda pops, cheesy chips and drivethrough coffee loads in the morning.
Unit labor costs and productivity do not show any secondary price effects (in the US, not so in Europe). US GDP is below trend growth and probably will be there over intermediate time frame. Plus, credit dissemination into the corporate and consumer world has been dealt a crushing blow. At this point, I don't see anything that would push 10y rates or CPI measured inflation expectations higher. The TIPS vs 10y breakeven yield is at a five year low right now.
Life is really simple, but we insist on making it complicated. -Confucius Efficiency, which is doing things right, is irrelevant until you work on the right things. -Peter Drucker The moment you rely too much on theory or doctrines or elaborate procedures it disables groundedness, intuition, instinct, adaptability and spontaneity. -Xuan Xian In [a] society which confuses work and productivity, the necessity of producing has always been an enemy of the desire to create. -Raoul Vaneigem Simplicity is the outward sign and symbol of depth of thought. -Lin Yutang http://thegrowinglife.com/2008/02/t...een-bruce-lee-a-productivity-guru-and-others/ Productivity increase is to fire some workers and make the remanining ones work harder.
I remember looking at commodity declines over this century(since they invented commodity index futures) and the biggest I ever saw was a 40% on the goldman index back in the 50s or 60s, cant remember which. those who expect a 50% are delusional, I dont think it will surpass 30% on the CIC(old CRB index)
The only thing that holds the fed back is commodity prices, nothing else. If people truly think there is no free lunch in economics, then commodities is the push back coming from the high deficit, tax, easy money policy. Lower highs made on the fed rate every cycle, 6% in 2000, 5% in 2007. 1% floor in 2004, 2% -so far in 2008. 4 years from peak to valley first cycle. Once we know the exact bottom on this cycle then we'll be able to calculate the amount of time left on to either a completely worthless dollar or a great depression induced by double digit rates. It is a mathematical certainty on this clip, to happen sometime in the next 10 years when factoring in the rate of rise of commodity prices.
Hmm..I think during the 70's we saw a 50% decline after 74... and then explosion to insane new highs afterwards... I wasn't alive, but I remember reading that (or something to that effect) in Jimmy Rogers book...I'll try and find the quote...
What about the collapsing building/real estate/banking sectors? Or shall we just ignore that third of the economy and be very, very happy.