Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Crimson Ghost who wrote (2970)	3/26/2004 8:46:00 PM
From: mishedlo	Read Replies (1) of 116555

Safe Haven on Commodities safehaven.com Following a brutal two-decade bear market, today is once again a wonderful time to be a commodities investor or speculator. The venerable CRB Commodities Index is trading near 23-year highs and even CNBC manages to find a little time to discuss commodities these days. Will wonders never cease? Since it has been so long since the last major commodities bull, the full implications of this event for general equity and bond investors are not yet widely considered this time around. As history has shown however, a secular commodities bull often exerts great influence on the prices of both stocks and bonds. This influence is not direct, but indirect via the price of money. There is usually a very high correlation between the prevailing long-term trends in commodities prices and interest rates. As commodities power higher in a bull market, interest rates often march higher in lockstep. ... All conventional investors in stocks and bonds really need to carefully consider the dire implications for their portfolios of the high probability of rising long rates. Commodities are already galloping higher, and odds are that interest rates will soon follow. Today Wall Street continues to act like nearly half-century interest-rate lows will persist into the indefinite future, but as every contrarian instinctively knows betting on an extreme existing into perpetuity is the height of investing folly. Interest rates have been stretched to incredible lows, and rising commodities are already heralding their inevitable rebound much higher.

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