“‘Green shoots’ may sprout,” said Celente, “but they will not flower. The economy cannot be coerced back into growth with tons of money manure.”
First of all, dear reader I’d like to let you know that I do not intend to post for the next 2 weeks. Therefore, although this post has a lot of information, take your time.
Following the topics of this weeks post
- Green shoots of economic recovery
- Government statistics, real picture
- Thursday May 23, 2009
- Bond, exploding debt threatens
- Housing, bottom not in yet
- Banks and Banksters, Citi/JPM/GM
- FDIC data on bank failures
- Prepare yourself, outlook of what might be in the cards
- Gold: the epic battle between manipulators and their short positions vs the sovereign funds
- USD: on the dead bed
- Commodities: Recession impact
Well dear reader lately a lot of people were talking about"green shoots of economic recovery". Well it looks like these green shoots may not sprout at all. All the fuss about the green shoots, dear reader, is another way to manage the news and to create positive expectations about an economic improvement that they claim is in the process. Well dear reader, we certainly will see the economic improvement at some point in the future. However this will most probably not be the case in the coming months. We will not be able to see the green shoots sprout until the huge amounts (more than 600 trillion USD) of speculative assets are back to a “normal” level, which, I guess, will be rather in the millions than in the trillions.
Well although the media wants us to believe that everything is fine again and in some cases it might even look so, we must say that there are still many problems to be solved. GM, Chrysler and others are just an example of the whole mess. More is to be expected. My guess is that the Kondratieff winter will not let the green shoots grow soon. It will take months if not years to see the green shoots really sprout.
Before we start with the information, let’s have a look at last weeks overview from www.prudentbear.com
For the week, the S&P500 added 0.7% (up 4.8% y-t-d), and the Dow increased 0.4% (up 0.3% y-t-d). The Morgan Stanley Consumer index declined 1.0% (up 3.0%). The Utilities jumped 4.0%, cutting its 2009 decline to 5.2%. The Morgan Stanley Cyclicals increased 0.5% (up 24.1%), and the Transports added 0.3% (down 5.0%). The Banks jumped 4.2% (down 12.9%), and the Broker/Dealers added 0.2% (up 33.5%). The broader market quieted down a bit. The S&P 400 Mid-Caps added 0.2% (up 10.9%), while the small cap Russell 2000 declined 0.7% (up 5.5%). The Nasdaq100 slipped 0.2% (up 23.0%), while the Morgan Stanley High Tech index gained 2.1% (up 35.6%). The Semiconductors rose 1.5% (up 29.5%), and the InteractiveWeek Internet index added 0.1% (up 45.1%). The Biotechs increased 0.7% (up 5.6%). With Bullion falling $16, the HUI gold index dropped 5.0% (up 15.6%).
One of the ways to manage expectations is trough official economic statistics that show rather an utopist reality than the real world.
Government statistics, real picture
Following an information from www.shadowstats.com about the latest release of employment statistics.
Employment Reporting Assumptions Shift? The Bureau of Labor Statistics (BLS) released a "mixed" report of U.S. employment/unemployment conditions in May, with a better-than-expected 345,000 drop in May payrolls, which appeared to be aimed at supporting "the recession is over" hype, but a worse-than-expected rise in unemployment to 9.6% told a different story. The recession continues to deepen. It is not over and my broad outlook has not changed.
The jobs report also reflected upward revisions to March and April reporting, but such were due largely to the gimmicked recasting of seasonal factors each month on top of slightly improved unadjusted data. The concurrent seasonal factor bias (CSFB) narrowed the reported jobs contraction by about 89,000, while the revamped birth-death model likely narrowed the contraction by at least another 104,000 (60,000 usual adjusted average plus 44,000 in new biases)
Green shoots or yellow weeds?
Back to the topic of green shoots. Following an excellent article by Roubini giving us 9 explanations why we see rather yellow weeds than green shoots
http://www.project-syndicate.org/commentary/roubini13
Well dear reader as I did not post over the past 3 weeks, following some information that might not be the most up to date, however the information pieces as such, are in my opinion still very interesting
Thursday May 23, 2009
Well dear reader what happened on that specific Thursday almost 2 weeks ago? As a very unusual case, on Thursday May 23, the US stock market, bond market and the USD closed lower. As far as I know that did not happen many times before, if at all. This is not a good sign for any of those. Well expecting a lower USD, higher bond yields due to falling bond prices and lower stock prices is, maybe the correct way. I hope you have your life boats or life jackets acquired already. If not maybe it’s time to do so.
Max Keiser
http://maxkeiser.com/2009/05/23/on-the-edge-with-max-keiser-22-may-2009/
Bonds
Exploding debt threatens America
John Taylor
Published: May 26 2009 20:48 | Last updated: May 26 2009 20:48
Standard and Poor’s decision to downgrade its outlook for British sovereign debt from "stable" to "negative" should be a wake-up call for the US Congress and administration. Let us hope they wake up.
Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.
"A government debt burden of that [100 per cent] level, if sustained, would in Standard & Poor’s view be incompatible with a triple A rating," as the risk rating agency stated last week.
I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?
Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.
The fact that the Federal Reserve is now buying longer-term Treasuries in an effort to keep Treasury yields low adds credibility to this scary story, because it suggests that the debt will be monetised. That the Fed may have a difficult task reducing its own ballooning balance sheet to prevent inflation increases the risks considerably. And 100 per cent inflation would, of course, mean a 100 per cent depreciation of the dollar. Americans would have to pay $2.80 for a euro; the Japanese could buy a dollar for Y50; and gold would be $2,000 per ounce. This is not a forecast, because policy can change; rather it is an indication of how much systemic risk the government is now creating.
Why might Washington sleep through this wake-up call? You can already hear the excuses.
"We have an unprecedented financial crisis and we must run unprecedented deficits." While there is debate about whether a large deficit today provides economic stimulus, there is no economic theory or evidence that shows that deficits in five or 10 years will help to get us out of this recession. Such thinking is irresponsible. If you believe deficits are good in bad times, then the responsible policy is to try to balance the budget in good times. The CBO projects that the economy will be back to delivering on its potential growth by 2014. A responsible budget would lay out proposals for balancing the budget by then rather than aim for trillion-dollar deficits.
"But we will cut the deficit in half." CBO analysts project that the deficit will be the same in 2019 as the administration estimates for 2010, a zero per cent cut.
"We inherited this mess." The debt was 41 per cent of GDP at the end of 1988, President Ronald Reagan’s last year in office, the same as at the end of 2008, President George W. Bush’s last year in office. If one thinks policies from Reagan to Bush were mistakes does it make any sense to double down on those mistakes, as with the 80 per cent debt-to-GDP level projected when Mr Obama leaves office?
The time for such excuses is over. They paint a picture of a government that is not working, one that creates risks rather than reduces them. Good government should be a nonpartisan issue. I have written that government actions and interventions in the past several years caused, prolonged and worsened the financial crisis. The problem is that policy is getting worse not better. Top government officials, including the heads of the US Treasury, the Fed, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission are calling for the creation of a powerful systemic risk regulator to reign in systemic risk in the private sector. But their government is now the most serious source of systemic risk.
The good news is that it is not too late. There is time to wake up, to make a mid-course correction, to get back on track. Many blame the rating agencies for not telling us about systemic risks in the private sector that lead to this crisis. Let us not ignore them when they try to tell us about the risks in the government sector that will lead to the next one.
The writer, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of ‘Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis’
Housing
Do you think that the US housing crisis and the debt related to it has touched the lowest point already? Well reading the article on the following link one comes to the conclusion that we still are far away from the bottom.
http://www.economicpopulist.org/?q=content/subprime-meltdown-over-now-comes-bad-news
The United Marxist states of the Americas
http://english.pravda.ru/opinion/columnists/107459-0/
GEAB N°35 : Global systemic crisis: June 2009 -
When the world steps out of a sixty-year old referential framework
http://www.leap2020.eu/GEAB-N-35-is-available!-Global-systemic-crisis-June-2009-When-the-world-steps-out-of-a-sixty-year-old-referential_a3248.html
Banks and banksters
Ciau GM, ciau Citi, both stocks are not in the Dow Jones Index anymore. Investors got rid of the stocks sometime ago. Only the government keeps them alive.
June 1 (Bloomberg) -- General Motors Corp. and Citigroup Inc., crippled by the first global recession since World War II, were removed from the Dow Jones Industrial Average and replaced by Cisco Systems Inc. and Travelers Cos.
GM another AIG
Treasury to inject roughly $50B in various financings to support GM restructuring - WSJ (1.44) In its latest update on the GM restructuring, the Journal cites people familiar with the matter who say that the Treasury plans to inject a fresh $50B in various financings to support a workout. The paper adds that the government wants to leave GM with only about $10B-$12B in debt once it emerges from bankruptcy. The government had previously considered leaving GM with up to $40B in post-restructuring debt, but determined earlier this month that the auto maker could not handle such a burden. In line with earlier reports, the Journal says that to trim the debt load, the government decided to boost its stake in a reorganized GM to roughly 70% from a previously anticipated 50%. Of interest, sources tell the paper that senior lenders will get a full recovery on $6B in loans made to GM
Well dear reader it seems like GM is becoming another AIG. My guess is that GM will need a lot more capital than what is expected and furthermore, like AIG, GM is only kept from bankruptcy in order to use the bailout money to feed the banks like JPM and Citi which in fact would have to bear huge losses due to their exposure to GM. More of the same. What a sad case indeed.
Found on the net
quote
JPM and Citi are getting paid out ....by the US Taxpayer....100% of their GM Debt!
http://seekingalpha.com/article/139844-gm-secured-lenders
-to-get-full-repayment-why-not-chrysler
That means they'll collect not only all of their bad loans to GM but also they'll collect 100% OF THEIR CREDIT DEFAULT SWAPS THEY PLACED ON THE GM BANKRUPTCY!
Unquote
Well anyway dear reader, with GM in bankruptcy the Jeannie is out of the bottle. Once the day to declare any claims on GM is defined, there will be another 60 to settle all these claims. That means we have some 90 days until many of the derivatives such as CDS will have to be settled. Assuming that many of those who would have to pay will not be able to do so is, in my opinion, a safe assumption.
Found on the net www.lemetropolecafe.com
The financial arena has gotten to the point of disgusting. A Ponzi scheme here, a Ponzi scheme there, bogus government statistics, money supply hidden from view, rampant market manipulation everywhere, banks say they want to pay back TARP one week and ask for more money a few weeks later, GM doesn't need bailout money in March and now they go into bankruptcy, where does it all end?
And
It is at times like these that one must step back and try to remember core values and valuations. Does 50, or 100 times earnings sound like a bargain? Or how about lending money to a government at 4.5% for 30 years when you know they are expanding their money supply at something close to 20%? Should you buy a "bargain priced house" that has dropped 40% but still has an asking price of $250 per sq. ft.?
FDIC
FDIC provides data on bank failures during Q1 The FDIC says 305 banks were on the problem list in Q1, up from 252 at the end of 2008, and the highest since 1994. Problem banks' assets were $220B at end of Q1, up from $159.4B at end of 2008. Bank loan loss provisions declined to $60.9B in Q1 from $69.3B at end of 2008. Loan loss provisioning is the most significant factor impacting bank earnings. Sheila Bair says troubled loans continue to accumulate and the costs associated with the impaired assets is weighing heavily on the banks
Prepare yourself
Well dear reader the GM situation leads me to the conclusion that we will have to face some serious troubles ahead. I believe that the GM problem will be a trigger for the next big bank crisis and that this will possibly lead to a declaration of bank holidays (bank holidays that were narrowly averted twice over the past 18 months). Furthermore there are rumors and information about European banks in troubles due to credits to Eastern Europe.
Well dear reader, I know that it is not nice to come across negative information or opinions and I can understand well that one would love to avoid such information. Well there are of course many ways to deal with upcoming negative situations. One is to run for the hills, another would be to close its eyes and wait until the storm has passed or another would be to prepare oneself for what is coming. Personally I prefer to face the challenges and to prepare myself. Following this principle made me write this blog in the first place. Hoping that the information I post from time to time will help you to sail the best way possible through the storms.
Well dear reader, following this principle, I am sorry to let you know that lately I came across several interesting reports that led me to the conclusion that towards fall and before the end of 2009 we probably will have to face some major economic problems that might make the ones we just passed through like a non-event. More on that later. Before I would like to give you a comment regarding the banksters and the way they take your money.
Over the past months, you might have wondered, as I did, how it could happen that the governments were injecting billions and billions into their banks without any effect. The money just disappeared in a huge black hole. How can that happen? Well on one side the banks have already trillions of losses hidden somewhere (SIV’s etc) and the money is used to cover this existing losses. Furthermore it seems that money just disappears in such a way that not even the authorities can find out who has received or taken this money. Well to me it seems like an open burglary. It is incredible that those who own the banks can steal so openly and nobody seem to care. Well the question is not only how they can do that without the masses complaining. The real question is why these people that take all this money do not even care about the risk that anybody who keeps his/her eyes open can see what they are doing. They do not even mind anymore to do it in a hidden way. Why? An interesting question indeed. Well dear reader, there are of course many possible explanations. Some that come into my mind are;
1. They very well know that the shit will hit the fan soon (sorry for the sh word). Sooner than we can imagine
2. As they know that time is short, they are convinced that there will be no retribution for their actions. Once the fan is hit, everybody will be very busy just getting ahead somehow
3. As time is short they need all money available and as fast as possible, in order to buy hard assets, such as gold, land and so on.
So dear reader it is time to prepare. I really do not want to paint the future in black or to seem scary. Nope, not at all. I give you this information because I’d like you to be as much as possible on the safe side. I will not tell you to take any extreme actions but yes, I am going to tell you to take important precautions. Why are you taking any insurance? Because you hope that the event you are taking insurance against will happen? Not at all! Of course you hope that it never will happen but in case it would, at least you have your insurance. Well the traditional insurance, at least the insurance that was regarded as traditional over the past 20 years, will not work anymore, as the traditional insurance companies most probably will have to face the same fate as AIG. Put, dear reader and this is, in my opinion, important to keep in mind, the traditional insurance that existed over 6,000 years should help. Yes I am talking about precious metals, Gold and Silver and arable land with sufficient water. Hopefully you have some arable land in different places. Keep in mind that weather patterns can change and will change. If you own land in a place that is excellent today does not automatically mean that the same might be the case in a couple of years. Sea levels might rise. New land might appear. The higher volcanic activity makes this a realistic possible scenario. Imagine that due to volcanic activity land would rise between the southern tip of South America and the Antarctica. Sounds very much as utopia indeed. Of course this might never happen but we do not really know. Do we? Why do I mention this? Well I do mention it because such a “minor” change of higher sea levels due to volcanic activity could change sea currents, jet streams and weather patterns. What I want to say with that example is that we do not really know all about our future. Things might change and therefore a kind of regional diversification regarding land holdings might make sense. Of course that would mean an important amount of money to be invested. Maybe there are possibilities to share.
Don't forget to keep you reserve stock of food, water and what else you might need for up to 3 months. Remember that we were twice only minutes away from a declaration of banking holidays over the past months. This would have caused a chaotic situation and food stocks would have come in handy.
Why do I mention this again? As mentioned before I do believe that this coming fall will become very challenging. Challenging in a sense that many things will be in deep trouble, especially our financial systems due to possibly failing derivatives structures. Well you could say that so far nothing happened (apart from Lehman Brothers and Bear Stearns, AIG, Fannie Mae, Freddie Mac and all other companies that had tremendous troubles due to derivatives) and that we will not have to face major problems because of the complex derivative structures. Well dear reader if that is your opinion, I can let you know that I clearly to not share this opinion. There are many events that could trigger such troubles, like already mentioned the situation of GM or other US Car manufacturers. Don’t you believe that these companies have not used derivatives or that many derivatives such as CDS are written on them. Well hoping that they can comply with their part is maybe wishful thinking.
Anyway there are still huge amounts of gambling money in the form of derivatives floating around. Possibly only a minor part of all the counterparties will be able to fulfill their obligation. So, once again, get prepared. Kondratieff winter might get harsher, with some ice-cold winds blowing against the economy soon.
Manipulation
Following an interesting article
http://baltimorechronicle.com/2009/052909Lendman.shtml
Gold
U.S. Gold, Going or Completely Gone?
http://www.financialsense.com/fsu/editorials/kirby/2009/0529.html
Well dear reader where has the gold gone? This question can not only be raised regarding the supposed US gold reserves but as well for supposed gold holdings at mints. GATA (www.gata.org) and Lemetropolecafe (www.lemetropolecafe.com) reported a couple of times about rumors that the Australian Perth mint does not really hold the physical gold that they should hold for investors. The explanations given by these contributors to the before mentioned webpage information service, was quite convincing. Now a couple of days ago, news about missing gold holding at the Canadian
Royal gold mint was published (http://www.thestar.com/article/647671). The missing gold and silver amounts to millions and not just pocket change. Well some well known companies (If you check gold and silver charts you might have visited their webpage) have been offering pooled precious metals accounts at the Perth Mint and at the Canadian Royal Mint. Some people warned already some time ago that the physical metal that, according to the pooled accounts should be at the Mints, is not really there and that these pooled accounts were rather used to manage (manipulate) gold prices for the manipulators. Having followed these comments for some time, to me it does not come as a surprise that now we hear about missing gold and silver at these Mints. Please take note that some famous precious metal ETF’s such as GLD and SLV might be used the same way and that both ETF’s do not really hold the holdings they claim to hold. Assuming that both, GLD and SLV are not used to manipulate gold and silver prices, one can say clearly that both ETF’s have no control about all the custodians or sub-custodians and therefore can not guarantee or know if the holdings are really at these custodians in a physical form and not in paper form.
Well dear reader we have indications and/or clear evidence that gold and silver is missing (Mints) or that some supposedly physical gold and silver in fact is only in form of a paper claim (GLD and SLV). Therefore it is very important to be sure to hold physical gold. Personally I would avoid holdings in GLD or SLV.
Regarding the missing gold and silver at the mints, there was an interesting opinion at http://urbansurvival.com making the point that this news about missing gold and silver might very well be another way to de-motivate investors to buy gold and silver. So far, gold and silver where the ultimate store of wealth not being a liability of anybody. However if one buys gold and silver as ultimate store of wealth but at the end one does not really know if the gold and silver is there, what sense does it make to hold gold and silver at all? Well that is what the Central Banks and their allies want to achieve. Why? Well because gold and silver, the only true money that, as mentioned, is not a liability of anybody, is THE competitor to all this FIAT money (http://en.wikipedia.org/wiki/Fiat_currency) that can be printed easily (thanks god that IT allows to print money on a computer screen, if that would not be possible, we might run out of timber to make paper and this would without doubt be a serious natural disaster).
Following a hypothetical list of what could happen according to http://urbansurvival.com
Consider the following hypothetical situation which could arise shortly and ask yourself "How would I allocate assets in this kind of environment?
China begins to back away from dollars in a serious way. As does Europe and other regions. This forces...
The Fed to buy more Treasuries which in turn...
Spurs an increase in interest rates because of more paper chasing the same economy.
Gold (and silver) however, come under a cloud as reports about 'counterfeit' or just plain outright 'missing' reserves start to appear, which would kick the knees out from under the role of the metals as a sort of 'last resort' or benchmark monetary unit, at least insofar as the small investors who buy coins and small bars are concerned.
The ripple here could be that gold coin prices could be attacked - trapping people into paper denominated assets. Safety in stocks? Not hardly...
Simultaneously, the stock market would be under pressure, too, since the arrival of the second leg down (commercial real estate) ought to be heading down around then.
Well dear reader, there is another interesting web service that basically checks the web about an increase in the linguistic use of some words.. According to them, there is normally an increase in the use of some specific words more or less 6 months prior to the actual event. This service mentioned a couple of months ago that there should be, around June/July, an increase of published information about fake gold or missing gold. Well that is what is going on right now. Interesting indeed.
Once again, dear reader, be careful. Make sure you hold physical.
Gold: a comment found on www.lemetropolecafe.com
I find it curious that Kitco (a precious metal dealer company with a webpage that many people visit) didn't publish my weekly letter this week...maybe what I had to say about gold's action last week wasn't up their alley. Below is what I said, and believe to be THE MOST EXTREME MANIPULATION to date. Gold fell 2.51% for the week after an epic battle between the bulls and bears between $990 and $960. We’ve seen these types of battles in the past but this one was the most significant to date. The move above $1,000 would have sent gold to much higher levels than I thought since the short position in gold held by the large financials is so large right now. They need to reduce it before they can "allow" gold to move higher. It was the most obvious and temporarily discouraging display I’ve seen. The green line is the Friday trade. Normally, once NY closes and it moves into NY Globex, trading is very thin and I’ve rarely seen it move at all on a Friday. This market can mainly only be accessed by institutions. Those same ones who happen to be short at the moment. They could not win in a fair fight all week. Any attempt to push gold below $960 woke the bulls who pushed back and moved gold up above, far away from the technical breakdown level at $960. The long and short of it is once their opponents left for the week they moved gold lower into the $950’s. What a cheap and dirty bunch they are and the glaring, obvious move should be investigated, but probably won’t. Their opponents whom are large hedge funds and sovereign wealth funds must not be pleased. They will be forming a plan this weekend and likely will begin operations in Asia, Sunday night in the Americas before NY opens for business Monday. I expect next week to be even more epic. If the late back stab doesn’t convince you that gold is not free trading then I suggest you review some of the public record evidence GATA has collected over the years. All that being said there is not much need to talk about the technical analysis of gold this week since it doesn’t matter. It’s like talking about the weather in the middle of D-day. The fact is there will be a battle regardless of rain, sleet or sun, or in our world, moving average levels, RSI trend-lines etc. But I did draw in some support and resistance lines and more for your enjoyment above. Best Regards, Warren Bevan
http://www.preciousmetalstockreview.com/
Well dear reader as mentioned in my previous post that I do believe that gold and silver do look just fine. Although both have been a bit overbought (at the 980 level) and therefore the correction down to the 925 level is not really a surprise, both metals still look fine . Of course if we would have to face a severe depression/deflation prices might not move as fast as I expect to the levels the prices should already be today. However be it short to long term, any purchase below 900 seems to me like a bargain. Personally I would go on buy on dips.
USD
By Ambrose Evans-Pritchard Last Updated: 5:51AM BST 29 May 2009
"We could be nearing the end-game for the US dollar but the Fed has little choice at this point. We're in a vicious circle where any policy aimed at supporting the US economy must be at the expense of the dollar." And: "Beijing is clearly losing its patience with the Fed's policy of printing paper, seen as a form of stealth default. There is some risk that further moves to step up quantitative easing could cause China to boycott US Treasury auctions."
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance /5402260/Bond-markets-defy-Fed-as-Treasury-yields-spike.html
Well dear reader the USD has broken below an important support level. It might be that we see a small up-move for a couple of days but from a technical analysis point of view we should expect a much lower USD over the coming months. Investments in CHF, CAD, AUD or NZD are alternatives and should do well vs. the USD in the coming months or years. However dear reader, do not forget that although from a technical analysis point of view the USD should fall lower, it is always possible that for a couple of weeks we might see an increasing USD. Furthermore do not forget that all these currencies are FIAT currencies. Some are better than others but all are FIAT. Real money such as precious metals should in my opinion clearly outperform the paper currencies.
Commodities
Gold ended the week down 1.7% to $939 (up 6.5% y-t-d). Silver fell 3.7% to $14.83 (up 31.3% y-t-d). July Crude inflated another $3.76 (4-wk gain of $15.20) to $72.20 (up 62% y-t-d). July Gasoline jumped 5.1% (up 93.4% y-t-d), and June Natural Gas increased 0.6% (down 1.4% y-t-d). September Copper rose 4.2% (up 70% y-t-d). July Wheat fell 6.1% (down 4.3% y-t-d), and July Corn dropped 4.2% (up 4.5% y-t-d). The CRB index rose 1.7% (up 14.3% y-t-d). The Goldman Sachs Commodities Index (GSCI) surged 3.7% (up 35.3% y-t-d
Well dear reader, I believe that commodities possibly will head down. Of course over the past weeks commodity prices have gone up. This is one side due to the fact that apparentely China is filling up its reserves of any commodity possible and on the other side due to a weaker USD. A weaker USD could of course help to move commodity prices still higher. However I do not see how global demand for commodities, once the Chinese have their warehouse and tanks filled up, could really go up. We are not yet out of the recession. Consumers are not yet really spending. More and more people without jobs will not consume as before. Therefore, as mentioned I do not see an increase of demand soon. The Baltic Dry Index shows us rather that we are in a recession and the much higher prices are possibly not yet in the cards. I subscribed to the newsletter from Orlandini. He lives in Lima Peru and he mentions from time to time that he has his own index regarding world economic health. His index is the ships anchored in the port of Lima. Knowing that Peru is one of the most important exporters of copper, silver and so on, his index might be valuable. According to, him for many months, there has been no activity at all in the port. There are many ships anchored outside the port without any movements at all. Well that does not really sound as a demand driven commodity boom.
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