Henry Kaufman Clueless on Commodities

So-called economist Henry Kaufman said recently that commodities are in a bubble, a general statement so far from the truth it's surprising he even made, as it makes him look clueless and irrelevant.

Even more clueless, Kaufman wrongly stated that gold is in a bubble, again showing, he has no idea what a bubble is in order to define what he bases his assertions on.

A gold bubble, as with other bubbles, is when the regular guy on the street starts to buy up a certain type of investment because they heard it was making everyone else money. Normally it's identified by main street investors when the peak of the investment and why it was good is past. That drives a bubble and not a price that is high. High prices can call for a temporary correction, but a bubble has nothing to do with that, something Kaufman evidently is confused about.

Kaufman based much of what he said on people using leverage to buy commodities.

All Kaufman is referring to there is the carry trade, where low interest rates encourage investors to use that leverage to buy better returns. Based on that it's nonsense to speak of a bubble because carry trade is growing, with people using that leverage to acquire commodities.

The truth is, huge sectors of commodities are down, like agriculture in general, silver and palladium. They are far from in a commodity bubble.

Speculators, overall, aren't driving the commodity markets, but safety, a weakened U.S. dollar and inflation are part of the overall picture which is the major impetus behind the interest in commodities, although even there something like gold, which relatively few investors are actually investing in, is far from a bubble as well. All it has done is gone up in price; not what a bubble is defined by.

Kaufman is using faulty reasoning and understanding about commodities and bubbles to make his assertions, which are nonsensical at minimum. Commodities aren't in a bubble, as not only the areas I mentioned are down in price, but energy commodities are down as well. His commodity bubble statements make no sense whatsoever, as he's only taking into account carry trade, which has little bearing on the issue at all.

Peter Schiff Bullish on Agriculture

Peter Schiff Likes Agriculture

A number of highly qualified investors have been bullish on agriculture for some time, and the latest maintaining that position is Peter Schiff, who said in a recent interview on CNBC that he is especially bullish on the agricutural industry in general, and also the fertilizer industry within those parameters.

Confirming what we talk a lot about on Commodity Surge, Schiff added that the Chinese will continue to buy up commodities as their standard of living continues to rise, and their growing middle class will create great demand for commodities going forward.

Another interesting insight from Schiff is the reason stock prices are rising at this time isn't because of stocks going up because of increased value, but because the U.S. dollar is going down. The dollar's collapse and decreased value is the determing factor there, according to Schiff.

Talking about Wal-Mart (NYSE:WMT), Schiff made an interesting observation I've never heard before, and that is that Wal-Mart could become the next Saks Fifth Avenue based on their inability to import cheap products from the Chinese any longer.

Investor Jim Rogers has also been bullish on agriculture for years, and looks upon it as the growth vehicle for the future, based primarily on less land available for crops and growing demand.

Peter Schiff Likes Agriculture

Commodities | Platinum Prices 2009

Commodities and platinum prices enjoyed a rebound last week that could be a sign of what is ahead for us in 2009. Many of the metals, including platinum, enjoyed price increases as the U.S. dollar fluctuates, and confidence in the greenback continues to fall.

Many investors are looking at platinum as a potentially great investment for 2009, as the price ratio to gold makes many think platinum is ready for a strong upward move.

What this means is two different indicators are being looked at to determine where things will go over the short and long term for platinum.

The first indicator is the demand side of the equation for platinum, the obvious industry being the auto sector, which isn't looking too good at this time in spite of the government bailouts used to shore them up.

It isn't known whether demand for platinum will be the determining factor in the price rising, even though it is very low.

One smaller but significant factor in the ratio between gold and platinum, is the rarity issue. There is about three times as much gold as platinum in the world, and that could determine some of the pricing for platinum in 2009 in relationship to gold.

Another player in the field is the strength of the U.S. dollar, which will definitely be under downward pressure for some time ahead, including 2009. All of the money promised by the variety of government bailouts ensure inflation is just a short step away, as the Federal Reserve ramps up its printing presses.

The reason this will happen is Sovereign Wealth funds and other funds are starting to move away from the dollar, as it is increasingly being looked at as an inferior currency. Foreign governments are no longer thinking of it as a place of refuge, certainty and safety.

China is already experimenting with using its currency internally as the way to exchange goods in certain wealthier provinces.

So for the long term the greenback looks bad and gold and platinum are looking pretty good. Gold will advance this year for sure, and platinum, if it moves in lock step with it, could bring solid returns for investors, whether it's moved by demand or the ratio of it to gold.

If it begins to move in the way it has historically, platinum could surge to high prices in 2009, making it a potentially great investment.

There has been a temporary lull in the commodities bull market, but that will only be for a short season of time, as demand for natural resources inevitably starts again. Platinum will mirror that move, and gold will continue to be a haven for investors looking for a place their money can be safe, as well as grow.

We need to continually monitor platinum futures and prices, now, and in the next couple of years, as it has the potential to surprise on the upside, and long term platinum should have a lot of upward movement, as the global economy eventually rebounds and demand skyrockets. Platinum has a lot of potential going forward.

Commodities Reach New Highs, Reuters/Jefferies CRB Index Highest Since 1956

Commodities surged again today, as 18 of 19 raw materials in the Reuters/Jefferies CRB Index climbed. The index itself reached the highest levels since September of 1956, as it rose by 1.8 percent to 422.91. The CRB Index has enjoyed a gain of 18 percent so far in 2008.

The only commodity in the CRB Index not rising was natural gas.

Among records reached today were oil, which went as high as $119.90 a barrel, while gasoline futures, for the first time, passed $3 a gallon.

The euro also broke a record against the greenback, rising to $1.6019 on Tuesday.

"The weaker dollar was the key driver for commodities across the board today," said Evan Smith, who helps manage $1.5 billion at US Global Investors in San Antonio. "The bigger theme is that there is robust global commodity demand."

According to Citigroup, worldwide investments in commodities grew by over 20 percent in the first quarter, reaching $400 billion.

Global Investment in Commodities Surges to $400 Billion

In the first quarter of 2008, worldwide investment in commodities surged by over 20 percent to reach the $400 billion mark, as investors fled the U.S. dollar and sought a hedge against inflation, said analysts at Citigroup Inc.

The commodity indexes also enjoyed a healthy bump, as investment in them for the first quarter increased by around $40 billion, to reach $185 billion. That was more than the entire commodity index investment of 2007.

After the indexes, trading advisors were the largest group investing in commodities, as they added $94 billion to the commodities market in the first quarter, over 18 percent since the end of 2007.

Hedge funds were next, accounting for $75 million in commodity holding, an 25 percent increase in the first quarter.

EFTs added another $46 billion to the commodity sector, increasing 31 percent since the end of the year.

Many think the surge is unsustainable, and there will probably be a general pullback over the strong recent quarter. At the same time it could offer opportunity for investors in the overall sector as well.

U.S. Dollar Continues Slide Against Major Currencies

The U.S. dollar continues its downward trend, as it again dropped to a record low against the euro, and its lowest performance against the yen in twelve years.

Another first for the greenback was it fell below one Swiss franc for the first time in its history.

The news of the bailout of Bear Stearns Co. (NYSE: BSC), along with the growing suspicion that the Fed could cut interest rates up to a full point at their next meeting, caused gold to also surge to historic highs, increasing to $1,009 an ounce.

"The initial reaction is to sell the U.S., sell the dollar, sell the equities," said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products. "This is bad news. It's definitely a confirmation of the reality that U.S. financial institutions are having a hard time."

Against the yen, the dollar plunged to 98.90, the worst performance since September 1995, while against the euro it dropped to a record $1.5688. With the Swiss franc, it feel to as low as 0.9988, down from Thursday's 1.0093.

New Highs for Oil Again: In New York and London

Growing concerns over inflation has had investors flocking to commodities, which has been one of the reasons for the ongoing surge in prices.

With oil being denominated in U.S. dollars, it has helped those buying it up in other currencies as it continues to weaken.

Earlier in the day, crude oil prices for April rose to $111 in New York, a record high before pulling back to 109.65.

Brent Crude in London increased to $107.88, alson a new record, before it also pulled back to 106.72 a barrel.

For oil investors outside the U.S., the increasing fall of the dollar should help them gain some solid profits, and it won't end anytime soon, as the Fed is expected to cut interest rates even further; probably by 0.75 percentage points.

That will cause the dollar to weaken even further, and profits for many other currencies investing in oil to rise. With the fall of the U.S. dollar, you can of course even make money if oil were to stand still in price, and foreign currencies remain strong against it.

Rupee Declines against Major Currencies except ... US Dollar

The rupee was weak over the last seven days, as it was only able to gain against the US dollar in open and inter-bank markets which ended Saturday.

The US dollar traded Monday at Rs62.86, and dropped to Rs62.65 by Saturday. The greenback gained Saturday a little, as it traded at Rs62.70; still lower than Monday's price.

In the inter-bank market, the Rupee fell the most against the pound sterling, trading Monday at Rs124.5813, and reaching Rs125.4430 by the weekend. Pound Sterling also rose on the open market, closing at Rs125.95 Saturday, after trading on Monday for Rs124.25.

With the Euro, it traded at Rs94.7125 on the inter-bank market, and ended Saturday at Rs95.6875. It came close to an all-time high of Rs96 during the week. In the open market, the Euro ended up, closing at Rs95.95, while trading on Monday at Rs95.1.

For the Japanese yen, its inter-bank trading was at Rs0.6042 on Monday, and closed at Rs0.6104. On the open market the yen rose only a fraction, closing at Rs0.605.

How High Will Commodities Go? News around the Web

The continuing "commodity surge" this week shows there's no end in sight for how high things will go. Many currencies reached new highs against the U.S. dollar, and oil and gold also reached levels never achieved before.

Ongoing concerns about recession will keep investors interested in commodities, as well as other concerns of stagflation, inflation, weakness of the U.S. dollar, and the crisis in the banking system.

Here's the commodity news from around the web:

Record euro, commodities driven by fears of inflation

Record highs for the euro, oil, gold and a host of commodities are both cause and consequence of inflation as investors seek a safe haven from an economic storm sparked by the collapse of the US property market, analysts said Friday.

They said the main concern for investors was stagflation, which occurs when when inflation rises even as growth slows in the worst possible economic combination and was the blight of the 1970s.

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Commodities boom to keep breakfast hot for a while

The commodities boom has a long way to run because demand is outstripping supply, with panicking investors snapping up gold and Asian appetites driving up the cost of the world's breakfasts, Schroders commodities product manager Christopher Wyke said on Friday.

With financial markets quaking at the prospect of a U.S. recession, investors are flocking to gold , which has hit repeated record highs and is approaching $1,000 an ounce.

"We think gold prices will continue to rise sharply in 2008," Wyke told a briefing in Hong Kong.

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Commodities Wrap: Coffee and Beef

Coffee Costs Force Price Increase, Beef Acquisition Raises Hopes for Better Profits

It was a week of mixed messages for food makers, as commodity costs forced one company to raise prices for the first time since 2005 and an acquisition in the beef sector raised hopes for better profits.

Green Mountain Coffee Roasters Inc. said Wednesday it would have to raise its prices by 8 percent to 12 percent on average across all of the coffee products sold in the Green Mountain coffee division, on orders placed on or after May 5. The price increase will affect both its Green Mountain packaged coffees as well as its K-Cup single-portion packs.

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U.S. equities, employment, Canadian dollar, Fed, commodities


U.S. equity index futures are lower in pre-opening trade. Dow futures are down 130 points. Traders were disappointed with the February employment report. Consensus for February Non-farm payrolls was an increase of 20,000. Actual was a decline of 63,000. Consensus for the February unemployment rate was 5.0%. Actual was 4.8%. However, the drop was attributed to a decline in the number of people who are seeking employment.

The U.S. employment report triggered additional weakness in the U.S. Dollar and strength in the Canadian Dollar and Euro. The Canadian Dollar also was buoyed by news that Canada added another 44,000 jobs in February. The Canadian dollar is up 0.80 in pre-opening trade.

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Fisher Says Commodities Make Reading Inflation Harder

Federal Reserve Bank of Dallas President Richard W. Fisher said ``persistent'' increases in commodity prices make it harder for central bankers to determine precisely how much inflation may be rising.

``The fact that these increases have been persistent and not quickly reversed has raised tough questions about traditional measures of core inflation,'' Fisher said in the text of a speech today in Paris. That's also ``made it increasingly difficult for central bankers to separate signal from noise in the inflation data.''

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Commodities zoom, but could crash and burn


One sure way to lose money as an investor is to buy something strictly because it keeps going up.

Now, analysts are warning investors not to become carried away with commodities. Although gold, oil, metals and agricultural commodities have been breaking records and enriching investors while the stock market has been a loser, many analysts are growing skeptical.

“The price trend in wheat, oil and gold appears to be similar to the ones seen in the late 1990s for the Nasdaq, and in the mid-2000s for home builders,” Citigroup strategist Tobias Levkovich said last week.

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Rush to commodities not over, analysts say

Investors have turned from risky securities in recent months literally to bread and butter investments, namely raw commodities, such as metals, grains and oil.

But, analysts wonder when the bubble will burst. The run on commodities in world markets is probably not over, analysts told Friday's Science Christian Monitor.

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Major Currency Updates around the web

The U.S. dollar continues to be all over the place against currencies, but continues to weaken against the majors. In Latin America it did find some strength today, as it gained against a number of currencies from south of the border.

Here's some links to major currency stories today:

Forex - US Dollar Edges Higher Versus Latin American Currencies

The US dollar was relatively strong against its Latin American counterparts on Tuesday's New York deals. The dollar recovered from an initial pull back against the Latin American majors during afternoon deals today.

Can Currency Moves Predict Commodity Prices?

If you want to know where commodity prices are going, you can dive down the rabbit hole of raw-materials supply and demand, trying to figure out everything from how the weather in Saskatchewan will affect wheat crops to what the surging Indian economy will do to demand for gold.

Or, you can just watch the currency market.

BSP’s dollar stock outside GIR hits record $13B

The central bank, Bangko Sentral ng Pilipinas (BSP), has built up a record $13-billion stock of foreign exchange outside its official foreign reserves as of end-January, up $2.3 billion from the end-December level, according to its official data.

ICE Futures US Crossrate Currencies Futs Vol/Open Int - Mar 4

Mexico's Peso Closes Weaker As Stocks Sink; MXN10.7230/Dlr

Mexico's peso softened against the dollar Tuesday as local stocks fell on profit taking following big gains the previous session.

The peso was quoted in Mexico City as closing at MXN10.7230, compared with MXN10.6940 at the opening and MXN10.7075 at Monday's close.

FOREX-Yen gains broadly as risk aversion rises

The yen rose on Tuesday as weaker global equities encouraged investors to unwind carry trades, while the euro paused against the dollar after European officials voiced concerns about its latest rally.

Dollar slips against euro on eurozone inflation fears

The dollar slipped against the euro Tuesday in the face of fresh inflation fears in the eurozone and a call by the US Federal Reserve chief for tough action to stem US mortgage foreclosures.

Forex - Euro edges higher as dollar recovery loses momentum

The euro edged higher against the dollar as the US currency's recovery overnight began to lose momentum.