John > Thanks for the very interesting stockchart charts
It's my pleasure. I'm glad you find them interesting.
> so much info at our fingertips and still as confused as ever - at least I am.
We all are and clearly it is because we are bombarded with so much contradictory information. The great difficulty which we all have is to understand the significance of the US debt and persistent balance of payments deficits. Is this bad, even end of the world stuff, as many make out, or is it part of a deliberate policy of many US governments and thus of little significance in the overall scheme of things? Of course, how one views this apparent contradiction will determine one's investment strategy.
But, quite apart from this, and irrespective of national debt or USD, I have no doubt that there are companies in the US which will do well and which will provide excellent investment opportunities. One does not have to play the "currency game" all the time.
> Isn't it possible (and probable) that the value of commodities relative to USDs does not adjust real time but can have significant lags, thereby miscommunicating actual inflation?
In my opinion, everything in this world is in abundance and thus in potential oversupply. I read an article which showed that in real terms all commodities are cheaper today than they were, so therefore in a "steady state" prices should not rise. In fact, if it were not for inflation they should continually fall.
Of course, markets can be skewed and manipulated. Unfortunately this is the real problem with gold as an investment --- they do not and cannot hold back mining production in order to drive up the price. Maybe with all the mergers the big companies might try it but, so far, it hasn't been possible. Furthermore, when the gold price rises many new deposits, which previously were unpayable, suddenly come on stream all over the world. This absolutely smashes the price. And I'm not even talking about the CB overhang. Only when they are able to "control" the supply will gold, IMO, be a "proper" investment like diamonds used to be.
All commodities have price fluctuations, presumably as result of natural or man-made interference to the supply-demand mechanism and speculation, but if one looks at the CRB basket the average price of all of them tends to be reasonably steady over time --- of course against the paper dollar. As you suggest, perceptions of, or actual inflation, as in the early 1980s, also influences price but this does not seem to be a particular consideration now.
stockcharts.com[w,a]dallynay[dm][pd200,2]
stockcharts.com[w,a]dallynay[dm][pd200,2]
Clearly, there is a powerful negative feedback mechanism built-in to the pricing of commodities because once the price rises new supply appears and this drives down the price again. With copper and aluminium the damping effect is even worse because a price rise in either one of them evokes a demand for the other. At the moment, a rise in the aluminium price is driving up the price of copper. But both copper and aluminium have massive "reserves" so any price rise has to be transient and followed by a big overswing as result of the new supply appearing ASAP. Of course, at the moment, there is considerable speculation about the "great demand" for all commodities in Asia, especially China, and that is adding to the price rises.
> the desire of certain countries desire to protect their export economies has added to this problem?
Only to be expected. And, in fact, most places eg Europe, Japan are not doing all that well so they are very happy to have both a strong US economy and a strong USD in order that they can sell their goods.
There is a philosophical side to all of this. One was led to believe that world economics is a zero-sum equation where, if someone does well, someone has to do badly. There is, in fact, a balance or equilibrium which has to be maintained. This was clearly so when the gold standard was in evidence and, in historic times, nations actually went to war to gain markets from others. Today, however, the ability of the US to create unlimited debt enables everyone to do "well", including the US, the world's major debtor. In this "new world", however, it is necessary to adjust one's mind from the old paradigm to what is actually happening and not believe that only when "economic balance" is restored will sanity return.
What was, was. |
