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Natural Gas
by
Adam Taggart
by
Gregor Macdonald
Improbably, the global economy has returned to growth over the past four years despite the ravages of a deflationary debt collapse, a punishing oil shock, ongoing constraint from debt and deleveraging, and stagnant global wages. The proof of this growth comes from the best indicator of all: the growth of global energy consumption.
What Happened to the Future?
by Gregor MacdonaldImprobably, the global economy has returned to growth over the past four years despite the ravages of a deflationary debt collapse, a punishing oil shock, ongoing constraint from debt and deleveraging, and stagnant global wages. The proof of this growth comes from the best indicator of all: the growth of global energy consumption.
by
charleshughsmith
Executive Summary
- The commodity complex is already beginning to rise following oil's upside breakout
- Natural gas is trending higher
- Copper appears to have bottomed
- Wheat and coffee's downtrends are ending
- A secular rise in commodities can happen even in the face of slower economic growth and lower demand
If you have not yet read Part I: Get Ready for Rising Commodity Prices available free to all readers, please click here to read it first.
In Part I, we examined the conventional narratives used to explain the price of oil and found that they no longer account for oil’s breakout to a new uptrend. I suggested that financialization and speculation could power oil much higher, despite sagging global demand for physical oil and a potentially deflationary global recession.
This thesis has been met with widespread skepticism when I’ve aired it privately, and I think this skepticism arises from the newness of this narrative. In the past, oil has responded to supply-demand and inflation/deflation. The notion that oil could rise in a finance-induced “scarcity amidst plenty” is neither simple nor intuitive.
If oil tracks higher, we can anticipate that the primary commodities (energy, agricultural, and construction) may well rise, even as end-user demand weakens, as oil underpins all production and transport. The 2.5% rise in producer prices over the past year suggests this is already occurring.
The secondary reason is that lower prices eventually push marginal producers out of business, tightening supply and giving the remaining producers pricing power.
As noted in Part I, regardless of what we see as key drivers or what we think oil “should do,” oil has broken out technically.
Is there any evidence to support the idea that the uptrend in oil will trigger higher prices in other commodities? Let’s start with the CRB (Commodity Research Bureau) index that reflects a basket of commodities…
Understanding the Secular Shift of Capital into Commodities
PREVIEW by charleshughsmithExecutive Summary
- The commodity complex is already beginning to rise following oil's upside breakout
- Natural gas is trending higher
- Copper appears to have bottomed
- Wheat and coffee's downtrends are ending
- A secular rise in commodities can happen even in the face of slower economic growth and lower demand
If you have not yet read Part I: Get Ready for Rising Commodity Prices available free to all readers, please click here to read it first.
In Part I, we examined the conventional narratives used to explain the price of oil and found that they no longer account for oil’s breakout to a new uptrend. I suggested that financialization and speculation could power oil much higher, despite sagging global demand for physical oil and a potentially deflationary global recession.
This thesis has been met with widespread skepticism when I’ve aired it privately, and I think this skepticism arises from the newness of this narrative. In the past, oil has responded to supply-demand and inflation/deflation. The notion that oil could rise in a finance-induced “scarcity amidst plenty” is neither simple nor intuitive.
If oil tracks higher, we can anticipate that the primary commodities (energy, agricultural, and construction) may well rise, even as end-user demand weakens, as oil underpins all production and transport. The 2.5% rise in producer prices over the past year suggests this is already occurring.
The secondary reason is that lower prices eventually push marginal producers out of business, tightening supply and giving the remaining producers pricing power.
As noted in Part I, regardless of what we see as key drivers or what we think oil “should do,” oil has broken out technically.
Is there any evidence to support the idea that the uptrend in oil will trigger higher prices in other commodities? Let’s start with the CRB (Commodity Research Bureau) index that reflects a basket of commodities…
by
David Collum
Background
I was just trying to figure it all out.
~ Michael Burry, hedge fund manager
Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.
For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4
Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5
2012 Year in Review
by David CollumBackground
I was just trying to figure it all out.
~ Michael Burry, hedge fund manager
Every December, I write a Year in Review that has now found a home at Chris Martenson’s website PeakProsperity.com.1,2,3 What started as a simple summary intended for a couple dozen people morphed over time into a much more detailed account that accrued over 25,000 clicks last year.4 'Year in Review' is a bit of a misnomer in that it is both a collage of what happened, plus a smattering of issues that are on my radar right now. As to why people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods I can only offer a few thoughts.
For starters, in 33 years of investing with a decidedly undiversified portfolio, I had only one year in which my total wealth decreased in nominal dollars. For the 13 years beginning 01/01/00—the 13 toughest investing years of the new millennium!—I have been able to compound my personal wealth at an 11% annualized rate. This holds up well against the pros. I am also fairly good at distilling complexity down to simplicity and seem to be a congenital contrarian. I also have been a devout follower of Austrian business cycle theory—i.e., free market economics—since the late 1990s.4
Each review begins with a highly personalized analysis of my efforts to get through another year of investing followed by a more holistic overview of what is now a 33-year quest for a ramen-soup-free retirement. These details may be instructive for those interested in my approach to investing. The bulk of the review, however, describes thoughts and observations—the year’s events told as a narrative. The links are copious, albeit not comprehensive. Some are flagged with enthusiasm. Everything can be found here.5
by
Gregor Macdonald
It was the best of times; it was the worst of times for the American public over the past month, as it was treated to two high-profile, but deeply conflicting, economic forecasts.
Despite declaring in 2008 that the age of cheap oil was over, the International Energy Agency (IEA) surprisingly announced last week that the United States would become the largest oil producer in the world by 2020. Hooray! This superlative declaration titillated U.S. media organizations, who understand quite well that Americans love to secure a #1 ranking in just about any category (save for prison incarceration, divorce rates, and obesity). As I explained to the Keiser Report, however, the IEA has done little more than produce an attention grabbing headline here. Simply ranking the 'top oil producer' in 2020 may mean much less than the public currently understands.
A Tale of Two Forecasts
by Gregor MacdonaldIt was the best of times; it was the worst of times for the American public over the past month, as it was treated to two high-profile, but deeply conflicting, economic forecasts.
Despite declaring in 2008 that the age of cheap oil was over, the International Energy Agency (IEA) surprisingly announced last week that the United States would become the largest oil producer in the world by 2020. Hooray! This superlative declaration titillated U.S. media organizations, who understand quite well that Americans love to secure a #1 ranking in just about any category (save for prison incarceration, divorce rates, and obesity). As I explained to the Keiser Report, however, the IEA has done little more than produce an attention grabbing headline here. Simply ranking the 'top oil producer' in 2020 may mean much less than the public currently understands.
by
JW
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