http://online.wsj.com/article/SB123802456807742287.html I have been a big commodity bull the last few months and I sold out of most of my positions this week. Demand destruction hasn't abated yet, it may have slowed but look at the trade numbers out of Germany and China, they don't say that things have started to turn around. Look at Kol, Natty, Iron Ore prices, etc everything just still in a glut. The rally was too much too soon. Despite all the bailouts and the stimuluous and Geithners new plan to unclog credit, demand is just not there to turn things around this year. I am looking for new lows across the board this year.
Jobs are important, but perhaps the most lagging of all indications of economic health. Having owned and run a business with over 250 employees, I know first hand that businesses will wait as long as possible before laying off personnel because of the training and other investments made in those people. When business picks up, business managers will wait as long as possible before hiring new personnel again because of the time and investment required to make those new people productive to the company's bottom line. The market will turn, then the economy, then employment, then (maybe) inflation. Always in that order. If you wait until employment starts consistently growing again, you missed the economic turn by 6-18 months (not to mention the market turn before that). I agree that commodity prices are nowhere near potentially inflationary levels. This factor and availability of other economic capacity will continue to give the world's central banks quite a bit of lattitude in their monetary stimulus efforts. Those that worry about inflation are premature by about 3 stages in the economic recovery process. While we're far from economic recovery, we're also not falling off the economic precipice either. The Obama administration was quite successful in fear-mongering (which drove the market down continuously) during their first 2 months in order to push through some of their radical agenda. When they decided that they perhaps had pushed it as far as they could (public blame was starting to come onto their shoulders rather than just the Bush administration), they let off the fear pedal, and things started turning slightly. As I've said before and will say again, fear is an incredibly powerful weapon in the hands of the powerful. And the media is a willing tool in spreading that fear (primarily because it increases viewership/readership and perhaps because they agree with the agenda behind the fear). Some people are just pawns being pushed around the chess board without realizing whose hand by which they're being pushed around.
So, the raw data showing Japan's exports dropped 50% and China's exports dropped 27% is 'fear mongering?' I won't even get into European issues.
Explain to me the fundamental changes in our economy that will lead us to the next boom? Salaries, they have been undergoing deflation for decades starting in the 80s with the use of outsourcing and H1B visas to depress wages. Cost of living increased over the years (wages did not meet this cost increase) So this "Boom" only worked as long as people could borrow and become leveraged just like Lehman or BSC. So for the Bulls, explain what is different?
Agreed. Excellent. Housing prices were the rocket fuel for the last boom cycle. Not only is that over, but still collapsing home values now - in the wake of the the biggest asset bubble and bust cycle history has ever known (70 trillion dollar bubble) - have dragged other forms of wealth/assets into the abyss that is the financial black hole. And Obama's A Team has come up with shitty plans, lacking clear detail, that are despised as each one hinted at so far appears to punish taxpayers (and real life taxpayers are a rare breed these days, few in number, carrying the weight of a much larger pool of the financial sins of others on their shoulders).