Stock Attack II - A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: Paul Shread who wrote (16522)	8/23/2001 5:51:24 PM
From: isopatch	Read Replies (2) of 52237

Deflation likely? Depends on the commodity index you check! AND the very important changes in Fed policy that go beyond interest rate cuts. All over the web I've seen innumerable discussions about commodity prices in the inflation vs deflation debate. But in almost every one of those discussions, the only commodity index that's used as evidence is: The CRB Index. IMHO that's leading some to place a higher probability on deflation than a more balanced examination of the evidence would indicate. First a monthly chart of the CRB Index: futures.tradingcharts.com (for both this chart and the java chart ref below, there's an interactive box just above the chart where you can change the display to candles instead of viewing a bar chart. Different oscillators are also available on the adjacent menu) The CRB is heavily weighted toward the agricultural commodities vs the metal and energy areas. But food prices usually follow increases in the latter two more industrial commodity sectors. So focusing on the CRB will leave investors a day late and a lot more than a dollar short when it come to catching the emerging trend toward stagflation. Here's a chart of the Goldman Sachs Commodity Index: futures.tradingcharts.com A distinctly different and less deflationary skewed picture than the CRB showed. The GSCI is weighted toward the energy commodities, instead of the food stuffs emphasized in the CRB weightings. Unfortunately metals are also lightly weighted in the GS Index. However it does serve to balance the one correspondingly skewed CRB. The Journel of Commerce has an index that's available to subscribers only. It's focus is on all the industrial commodities, even going well beyond the common metals and energy commodities. It's an excellent index. (Unfortunately I don't have access to their charts to post them here.) IMO, the balance of he evidence indicates we're at the end of a very long disinflationary period that took shape in the early 80s. During the past 7 months the Fed has been expanding the money supply at the highest rate in over 20 years, which just happens to be the last time we we in a period of significant inflation and recessionary or no growth economic conditions: Stagflation. A similar outcome should become more and more apparent as we near the end of this year with precious metals stocks continuing to be the best performing sector in the stock market going forward. Isopatch

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