Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Return of Inflation, Commodities and Resource Stocks Itching to Takeoff

Commodities / Resources Investing Feb 06, 2009 - 09:06 AM GMT

By: Oxbury_Research

Commodities

Best Financial Markets Analysis ArticleGovernment, Know Thyself - “Why Can't 'Common Sense' Be Applied to Bailouts?”

We welcome President Obama's “basic common sense” announcement of a $500k salary cap for top executives at companies receiving substantial bailout funds. It's a bit of welcome good news.


And the President's definitely right on the money when he states that the average person isn't at all pleased when executives apply for public money “hat in hand ... even as they paid themselves customary lavish bonuses.” In fact, these “executives being rewarded for failure” is the theme we harped upon last week.

We had to laugh at this apparent government revelation, though: the authorities are finally realizing that there's a consensus among ordinary Americans. According to commentators, seems Joe Average believes he's bearing a greater financial burden from the disaster than the guys who helped create the mess in the first place.

Well, who would have guessed? It must have taken a genius to figure that one out.

Could it have anything to do with the mega-bailout funds being lobbed into the laps of these executives and their companies? Even as ordinary folk lose their jobs and watch their mortgage payments go into arrears?

After all, Obama's pet stimulus plan is going to cost another $800 billion (perhaps even $1 trillion) -- all of which will go to companies who basically doused themselves in oil while wandering around in the dark … and then lit a match to see what was going on.

Obama also stated that: “A failure to act, and act now, will turn crisis into catastrophe and guarantee a longer recession, a less robust recovery and a more uncertain future.” Hmm, that's an interesting (if very popular with executives) viewpoint.

But funnily enough, most Austrian economists – these would be the guys that accurately foresaw the current disaster, if you were wondering – they have just the opposite view. They feel that excessive government intervention will only prolong the necessary wringing-out process needed to purge incompetence and mal-investments from the system. They're probably right, given their historical track record.

We'd venture to suggest that limiting executive compensation is like re-arranging the deck chairs on the Titanic. Sure, the seating arrangement appears to be nicer, but that doesn't do a whole lot about the gaping hole in the hull and the flood of ice water rushing inside.

The Empire Strikes Back: Return of Inflation

After all, can you really have faith in the sort of imperious management that's done this to the financial system? ((The Adjusted Monetary Base is the sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury. Graph courtesy of the St. Louis Fed)

With an explosion in free floating dollars like this (and a shrinking supply of goods and services as companies cut back on their operations) what do you think is going to happen to the costs of daily living?

Here's a hint: it will probably something like the graph above. It's just a matter of time. And the propaganda is already preparing the sheep for the inevitable shearing of their savings.

Crispin Odey in the Financial Times : “In a world of debt and deflation, inflation is our friend.”

Martin Wolf in the Financial Times : “If central banks and governments are aggressive enough, they can generate inflation which will lower the debt burden ... But they will imperil – if not terminate the experiment with un-backed fiat (or man-made) money that started in 1971.”

It seems like inflation is coming back into style, and it will look about as good on your bank account as a string bikini on a bag of lard.

Of course, we could be wrong. Price inflation in day-to-day goods and services might look like the following graph instead: (Money of zero maturity (MZM) is a measure of the most liquid part of the money supply, e.g. financial assets redeemable at par on demand. Graph courtesy of the St. Louis Fed)

That graph doesn't look very comforting either. But don't worry. The mainstream media (and governments, and central banks) say it's good for you.

A Golden Future

Could this be why UBS has just upgraded five North American gold producers, including the world's largest gold miner Barrick Gold? Upgrades (honest ones, anyway) are as rare as hen's teeth in a world of crashing earnings and investor expectations.

UBS is optimistic that the 2009 gold price should hit $1,000 per ounce (a dramatic reversal of its prior view of $700 per ounce). And so it's given the thumbs up to Agnico Eagle Mines (AEM), Barrick Gold (ABX), Eldorado Gold Corp (ELD / EGO), Newmont Mining (NEM) and Goldcorp Inc (GG / G).

This is not surprising, considering that gold has been one of the best-performing assets of late and that demand for gold as a safe store of value has recently surged. Check out our other commentary on gold here [link to the most recent B&B article on gold HERE .

There aren't many other investments showing an upward trend lately, are there?

 

Base Metals In The Basement

But that doesn't mean that all miners are doing well. BHP Billiton, the world's largest mining company, reported a first-half profit 57% less than the same period a year ago. This was a larger drop than expected after the company booked one-time charges totaling $2.7 billion to close mines and plants in response to falling metals prices.

BHP is not alone: Xstrata Plc and Rio Tinto Group are also closing mines, cutting output and slashing jobs as the worldwide recession curbs demand for metals other than gold. Freeport-McMoRan Copper & Gold has also posted recent net losses.

But is the bottom in? Given that BHP has a recent history of bottoming with volume spikes, that may be the case and we may see a near term upsurge in the share price.

However, that could very well be a false dawn and BHP could remain down for awhile yet. Right now the only bullish game in town is gold.

Having said that, we also believe there will be other commodities making big gains this year, but let's discuss them next week.

Good investing,

Disclosure: no positions

Nick Thomas
Analyst, Oxbury Research

Nick Thomas is a seasoned veteran of technical analysis and has mastered all intra-day trading in stocks, options, futures and forex. He prefers to scout investments as one asset class of many and shapes his investment strategies accordingly. He writes extensively about offshore banking and offshore tax havens and is active in the career development field of independent investment research.

Oxbury Research originally formed as an underground investment club, Oxbury Publishing is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2009 Copyright Oxbury Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Oxbury Research Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules