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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

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From: 2MAR$	8/12/2012 11:07:18 PM
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Have You Seen These Absolutely Shocking Charts Of Inflation With global leaders today expressing tremendous fear and concern about one of the worst droughts in history, the world is holding its breath and expecting a massive spike in inflation. The problem is the inflation spike is not isolated to food. Here are a plethora of charts and text that will shock KWN readers around the world. Tom Fitzpatrick latest report: Brent Crude in Euros (See Chart below) – The charts below raise a lot of concerns that as Europe continues to struggle with its financial and economic problems that another area of stress may be developing. – They also suggest the danger of significantly elevated energy and food costs in the months ahead to add to their woes. – If ,as we still expect , EURUSD continues to head lower that will exacerbate the issue even further. Is up 27% since 21 June. •Just 3% below the 2008 peak and 6.5% below the ALL TIME HIGH set in March this year. Brent Crude (Priced in US Dollars) (See chart below) • Having completed what now looks clearly like a false break on its double top pattern at $98.74 (Suggested a target at $70 but failed at good support around $89 which was the May 2010 high) Brent has since rallied strongly. • It is now testing good resistance around $113-113.50 (61.8% pullback and prior trend line support, now resistance) • A weekly close above here would suggest extended gains towards at least $119 (76.4% pullback) and possibly $127-128.50 (2011-2012 highs) • A weekly close above this latter range would firmly re-establish a target to return to at least the all time high at $147.50 if not higher still. • We still suspect that we will see new all time highs on this chart (possibly even as high as $160-200 by the end of 2013. This would fit with our longer term charts that saw Oil surge again in 1978-1979 in a fashion similar to that seen in 1973-1974 (5 year gap between 1973-1974 and 1978-1978 and 5 year gap between 2007-2008 and 2012- 2013?) DJUBS Grains Index (See chart below) - This index comprises the futures contracts of Corn, soybeans and wheat. • It has risen 38% in the last 8 weeks and looks to have formed a very clear double bottom formation with the weekly close above 57. • The minimum target on this double bottom(linear) would be a move towards 85 with a percentage change target suggesting as high as 108- Close to the major peaks posted in 1996-1996 The combination of these charts is very concerning. While the US would also be susceptible to this drag there are a number of things which would suggest that this dynamic would hurt Europe more. • European economic data is deteriorating sharply and collapsing at the periphery • If our EURUSD view is correct (1.10-1.15 this year and lower still over time) the change in price of commodities in EUR terms would be greater in any rise and less in any fall of Commodity prices than in USD terms. • The US is in full blown fiscal and monetary expansion and has been pretty much that way for the last 3-5 years. Europe remains mired in monetary and fiscal policies that are creating a downward spiral in economic growth and driving peripheral countries into a recession/depression scenario. • The rest of Europe is a major market for Germany. What happens to German exports as the price rises of “necessities” (Food and energy) surge? It does not take a rocket scientist to figure that out. In fact that will also likely be true for other German markets as the Global economy continues to falter. •This will also make it increasingly difficult for Germany to absorb the “moniker” of “banker of last resort” for the rest of the Euro zone. Corn (See Chart Above) • We are retesting the upward sloping trend line that has contained all the major highs of the last 50 years. Interestingly this trend line begins off the peak after the 1973-1974 surge in price. That is the period that we most associate with the 2007-2009 period. During those years we also saw: o An Equity market collapse (1973-1974) o A collapse in housing activity (1973-1975) o A collapse in economic activity (1973-1975) o A surge in the Oil price (1973-1974) o A weak USD o A strong Gold price o Aggressive Fed easing (which eventually resulted in rates being held too low for too long and an inflation surge in 1978-1980) • In addition we had a “World food crisis” in the early 1970’s (ominous that a number of events of social unrest in the last few years have had their initial origin in protests about food prices) • In the chart above we can see that after a collapse in the price of corn in 1975-1977 it surged again between 1977 and 1980. This time around we collapsed in 2008-2009 and are surging again in the 2010-2012 period. •For the optimist we can “hope” that this trend line continues to contain these highs (Stands around 830) but as we know “hope” is not a good investment method. Even if we hold these upper levels Corn is still up over 140% since the summer of 2010 and 44% alone since the start of June 2012.(In USD) Soybeans (See chart above) - We have been moving constantly higher here since the lows were posted in 1999 with a number of 76.4% pullbacks along the way. • Following the collapse in 2008 we have moved to new highs in the trend again and stand 108% off the 2008 low. After the 1973 peak Soybeans also collapsed into 1975 before surging again into 1977 • In addition, since this last surge began in December 2011 prices stand 48% higher. •The surge in prices in the last cycle if repeated could see us as high as 2,500-2,600 by mid 2013 (last cycle was 14 years) Wheat (See chart above) - The similarity in this chart to the price action seen in the 1970’s is just astounding. • All the lines above parallel to each other and incorporate o The start of both trends o The peaks of 1974 and 2008 o The subsequent sharp pullbacks into 1977 and 2010 and renewed rally. •Even if this chart ONLY replicates the move seen into the 1980 peak we could still see at least another 25% higher in Wheat prices in the next 12 months or less. Cattle (See chart below) - Cows still eat grains (just as they did in the 1970’s)

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