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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (9907)	9/9/2008 11:28:59 PM
From: nspolar	Read Replies (1) \| Respond to of 33421

Catching up a bit Jon. Excellent comments in my opinion, in many respects. I have not discounted the possibility that the CRB over the last 7 years or so did some sort of 'corrective' wave up. It is a strange looking formation in my opinion, and the bottom line is that I am not convinced it is a true impulse. More in the other camp, to tell the truth. If I am correct the CRB is going to retreat a long long ways. OTOH the CCI during the same time looks impulsive. So I am perplexed at this. I did a bunch of web searches and follow up on the two indexes, and gave up trying to decipher the exact differences between the two. One thought for me is that the CCI maybe represents a bit more of a modern day approach to a commodities index, compared to the CRB. Not sure but I think the CRB may yet even include some content related to molasses. In any event I have limited patience and time, in researching some of these things. Well molasses are not overly important to me these days. After all my main requirement is to make the daily bread for my family, which I do by doing my part in keeping the oil pumping for ya'alls in the L48. Re the latter, w/o explanation, it has not been easy of late. AND winter is a coming. TF

To: Jon Koplik who wrote (9907)	10/3/2008 11:30:13 PM
From: Jon Koplik	1 Recommendation Read Replies (1) \| Respond to of 33421

OMG ! "marginal cost of production" (of platinum) mentioned in WSJ commodities column .................... I guess there is at least one person other than me who understands that maybe it is extremely difficult for the price of a commodity to remain substantially above its marginal cost of production. ************************************************************** COMMODITIES OCTOBER 4, 2008 Platinum Gets Dented in the Auto Industry's Pileup Slumping Car Demand Crimps Need for Catalytic Converters, a Big User of Metal, but Possible Drop in Mining Output May Buoy Prices Platinum is losing its glamour. At Friday's lows, spot-month futures on the New York Mercantile Exchange were down 38% on the year and 59% from the record set in March as the global economic slowdown pinches industrial use. Platinum could fall further on weakness in the auto sector, but then stabilize or rise modestly as investment liquidation runs its course and due to potential for output cuts as the price approaches the cost of mining, analysts said. The impetus for the early year peak was worries about tight supplies exacerbated when South Africa state-owned utility Eskom Holdings Ltd. announced electrical shortages that curtailed mining output. "Supply was being outpaced by demand," said Bart Melek, global commodity strategist with BMO Capital Markets. "We had a massive rally way above the marginal cost of production." Since then, the auto industry has slumped. This hurt platinum demand because its main industrial use is for catalytic converters. Nearby October platinum Friday fell $22.60, or 2.3%, to settle at $957 a troy ounce. Most-active January lost $20.80, or 2.1%, to $965.80. James Moore, an analyst with TheBullionDesk.com, said platinum's recent move is cyclical, reflecting changed fundamentals. Moreover, he said, the fundamentals perhaps were "overexaggerated" as prices soared at the start of the year. But he doesn't look for the recent slide to continue much longer because a "delicate balance" remains in the market. "Eskom has already said they can't increase their energy capacity for at least another five years," Mr. Moore said. "The producers are struggling against rising costs and having to excavate metal from much deeper ore bodies. This has a massive impact on their bottom line." If profitability suffers, downward price corrections such as the current one could prompt producers to shut down some of their operations, he said. "In my view, it would be naive to think that the market is going to continue lower," Mr. Moore said. "We may see some further downside initially, but then look for it to possibly stabilize around $1,000 to $1,300 for the latter part of the year and heading toward next year." BMO's Mr. Melek estimated that the cash costs of production for platinum-mining operations are between $700 and $1,000 an ounce. "They might still go lower," he said of platinum prices. "But they ultimately will have to rebound because we're hitting the marginal cost of production for many producers."** CPM Group analyst Carlos Sanchez also said there could be more selling pressure, but prices may soon stabilize. Not only has platinum been hurt by concerns about reduced motor-vehicle production, but expectations are for a shift toward smaller vehicles at a time of high fuel prices. Smaller engines require less platinum group metals for auto catalysts, Mr. Sanchez said. Meanwhile, no further supply disruptions have occurred in South Africa lately, he said. But at the same time, he said, many investors already may have sold some positions. "You may go to $900," Mr. Sanchez said. "But they're already low compared to what they have been the last couple of years. So you may not have further selling." In other commodity markets: SUGAR: Prices dropped to a four-month low on ICE Futures U.S. as speculators exited from bullish positions, but the market pared losses before a vote by the House of Representatives approving the $700 billion financial-rescue package. ICE March world sugar fell 0.47 cent, or 3.6%, to 12.61 cents a pound. CRUDE OIL: Futures zigzagged before ending slightly lower as traders mulled whether the passage of the rescue bill would stabilize demand. Demand concerns were reinforced after the Labor Department reported that nonfarm payrolls fell more than expected in September, the steepest decline since March 2003. Light, sweet crude fell nine cents, or 0.1%, to $93.88 a barrel, on the New York Mercantile Exchange. Copyright ©2008 Dow Jones & Company, Inc. All Rights Reserved.

To: Jon Koplik who wrote (9907)	10/28/2008 11:37:17 PM
From: Jon Koplik	Read Replies (4) \| Respond to of 33421

five-year TIPS predict deflation / Pimco performance sucks (as usual) -- read all about it ... here ! OCTOBER 29, 2008 Pimco Shifts Its Tilt Toward TIPS By MIN ZENG Wall Street Journal In a shift in strategy, bond-fund giant Pacific Investment Management Co. has begun to see value in U.S. government debt aimed at hedging against inflation risks following the recent months' massive wave of selling. Mihir Worah, who manages the $15.06 billion Real Return Fund at Newport Beach, Calif.-based Pimco, a unit of Allianz SE, said the fund has now moved to overweight Treasury inflation-protected securities, after being underweight the sector in the past few months. He said TIPS prices are at attractive levels. Inflation-protected bonds have been hammered over the past months as the financial crisis triggered a global wave of selling across a wide range of asset classes, from stocks to emerging market bonds and commodities. The rapid drop in crude-oil prices from their highs in July has played a large role in the TIPS' market's woes. Investors sold TIPS to meet redemption demands or cover losses in other investments. This deleveraging has exaggerated the declines in the TIPS market, which, with just $521 billion in debt outstanding at the end of August, is much smaller than the $4.36 trillion in cash Treasurys. While Mr. Worah doesn't see a significant rebound in TIPS prices in the near term, he expects the sector to beat nominal Treasurys over the next six months, betting that government measures to support the financial system will help ease risk aversion. "Obviously as far as 2008 is concerned, the party for TIPS is over," said Mr. Worah in an interview. "But going forward I think they offer good value." TIPS have shed all the gains made earlier this year. So far this year through Monday, TIPS have lost 6.89%, while safe-haven flows have buoyed nominal Treasurys, which have gained 5.5% over the same period, according to Lehman Brothers bond indexes, owned by Barclays PLC. The losses in TIPS weighed on the Real Return Fund's performance, with the fund losing 6.1% in the month through Sept. 30, compared with a loss of 3.8% on its benchmark index -- the Lehman Brothers U.S. TIPS Index -- in the same period, according to data on Pimco's Web site. In the past 12 months, the fund has gained 3.8%, compared with 6.2% on the index. [So, if I am reading this correctly, Pimpco, I mean Pimco had their Real Return Fund under-perform the benchmark both in September, and for the past 12 months. As usual, Pimco does NOT demonstrate any ability to manage bond portfolios well. But -- they sure know how to get their people on TV all of the time ...] Rather than worry about inflation, investors are now focused on the possibility of deflation in the U.S -- a period of falling prices similar to what Japan went through in the 1990s. These concerns have led to a sharp narrowing in the yield gap between 10-year TIPS and 10-year Treasurys. Last week, the so-called 10-year break-even rate fell to a 10-year low of 0.7 percentage point, suggesting that investors expect an average annualized inflation rate of 0.7% over the next decade.Tuesday, the gap was 0.81 percentage point. Over the next five to six years, investors are expecting deflation, as the five-year TIPS now yield more than nominal five-year Treasury notes, a rare phenomenon. Yields on TIPS normally are below those on nominal Treasurys because their principal is adjusted regularly to compensate for inflation changes. Tuesday, the five-year TIPS yielded 3.23%, more than 2.729% on the five-year nominal Treasurys. Bond yields rise when prices fall. Mr. Worah acknowledged that inflation in the U.S. has come down from its peak in 2008, and said that headline inflation in 2009 could well fall to 1% or even lower. "Maybe it will briefly touch zero or near zero in 2009," he said. "But inflation will not remain negative over the next five years. For one year, it could be, but not for the next five years." Write to Min Zeng at min.zeng@dowjones.com Copyright ©2008 Dow Jones & Company, Inc. All Rights Reserved.