Dumbfax sees commodity bottom

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Dumbfax rides to the rescue:

Commodity producers were plunged into despair overnight…But amid the gloom, some analysts point to some rays of hope for the beleaguered sector.

1) Saudi Arabia makes good on its commitment to cut output

Overnight, the oil price rebounded after Saudi Arabia’s official press agency said the country was willing to cooperate with other oil producers to maintain a stable oil market.

2) China’s New Silk Road

In late 2013, Chinese President Xi Jinping announced his “One Belt, One Road” plan that aims to restore the country’s historic overland and maritime trade routes.

3) Canada’s embrace of infrastructure spending

For several years, central banks around the developed world have urged governments to beef up infrastructure spending as a way to lift anaemic domestic demand, rather than relying solely on monetary policy.

Sigh. Saudi said nothing new. OBOR is not big enough and the international relations of it are stunningly difficult. Yeh, Canada will save us.

Or this:

Have the commodities perma-bears gone too far? IG market strategist Evan Lucas asks.

“I understand that the fundamentals in commodities are at the low of the cycle and the fear around the ‘old’ China hard landing story have hit a high, but has it gone too far?”

This morning CME copper is on the verge of having a $US1 handle in front of it, something it hasn’t had since May 2009, Lucas notes. It’s still a long way off the 2009 low of $US1.25 a pound, but the level of short interest in copper hit a net short of 29,000 shorts for non-commercial as of last Tuesday which will have only increased in the past seven days and that is also at 2009 levels.

“The perma-bears are flexing their strength.”

On a technical basis, the selling in copper has approached ‘silly’ levels, Evans says.

“‘Old’ China is slowing but it’s not ending; however, the current trade in copper suggests it has. There must be a snap back in the offing over the next few days – be aware of the short squeeze that is brewing.”

Get you out and buy a property, Goddamnit!

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.