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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: UncleBigs who wrote (58538)	4/21/2006 1:13:14 PM
From: bond_bubble	Read Replies (6) of 110194

People dont believe that there is speculation in commodities. Below is the statistics on importing countries!! Ofcourse you wont believe that importers are consuming less because, you are all dreaming of hyperinflation or such thinking has been profiting you. Many people think house speculators are idiots but commodity speculators are genius because commodity demand is genuine!! Even if statistics show differently!! Bottom line - we are getting into the terminal stage of boom where everything inflates madly causing PPI to soar and companies start laying off people. The only way companies can stop that is if PPI falls. So, interest rates are going to go up irrespective of deflation/credit bubble bust. Even if there is deflation in credit, PPI is going to be high for sometime because of currency depreciation. People hoping for Bernanke helicopter are going to surprised that a) inspite of housing crash, credit bust, bank bust and b) inspite of elevated interest rates (i.e helicopter Ben hibernates) - PPI stays relatively high (I dont expect double digit for example). This will be like UK in 1929.... morganstanley.com Commodities have been flying in 2006. The copper price is up by 41%. In contrast, China’s copper imports fell by 19.4% and copper scrap by 5.4% in the first quarter from last year. The usual argument to square the circle is that China will have to buy later. The average price of Brent crude price surged 42.7% last year. It is up by 25.2% this year so far. However, the US oil inventory, which used to drive oil prices, is near an all-time high. China’s crude imports were up 3.5% while refined products fell 16.9% last year. Crude imports did rise by 25.3% in 1Q06 on a low base, but refined products fell by 1.8% from last year. The gold price is up by 21.5% this year, following an 8.8% increase on average last year. India is normally considered the driver for the gold price. However, its imports fell by 38% in 4Q05 in response to the surging price. When 1Q06 data become available, they are likely to tell the same tale.

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