Commodities

41

China spoils the party

Let’s party! Yes, it’s a world party and we’re all invited. At least, everyone else is. I’m sober, and, like some stale chaperone, worried. Still, let’s face plant into the punch before we call the police. Preliminary US Q3 GDP came in at 2.5%, right on expectations. Here’s the chart from Calculated Risk: This is an

22

Iron ore crash

Iron ore is crashing. Overnight the price fell 7% plus to $131.70: Thankfully, 12 month swaps only fell 1% to a new low of $117. Shanghai rebar was also flat on the day. But, as China iron ore port stocks show, there’s plenty in reserve if the draw down continues: So, there’s some inconsistency here. Obviously

1

Woodside parts the brokers

Woodside Petroleum is getting the attention of brokers, with raw enthusiasm the general tenor of the analysis. The stock is on a prospective price earnings ratio of 16 times and gross profit margins in excess of 50%, which gives it some buffer against any weakness in energy prices. Gas looks like a pretty strong long

20

Iron ore still falling

Yesterday brought no respite for iron ore. The 12 months swaps market fell another 3.08% to a new low at $117 and Shanghai rebar was down 2.44%. Ore itself fell 1.3% to $145.80. If you combine this with the dizzying crash of copper, 6% last night to a new correction low, you have to ask

19

Boom and bust in iron ore

You know the ore market is in trouble when contracts start to disintegrate. There’s a raft of reports indicating just that this morning. The pick is from the AFR (and is free) but owing to its archaic attitude to the internet, copy and paste is disabled, so I can’t provide any of it. Here’s an

39

What’s freaked Swan out?

As I posted last night, the Treasurer, Wayne Swan, released a rather dour communique to Parliament indicating that Australia was ready to take on GFC 2.0. The timing of the missive seemed fairly random, though it did obviously seek to bring pressure to bear upon Europe prior to the G20, such as it is. I

25

Who really owns Antarctica?

I have often argued with extreme libertarians (and anarchists) that the existence of property rights first requires the existence of a government with a monopoly on coercive force (ie. government requires the largest armed force).  If such an entity didn’t exist, then the largest armed force would simply take control and become the government.  Many

6

Chart of the Day: Pay dirt in AUD

The Prince is on hiatus for a week, so I’ll be filling his Chart of the Day shoes. Today’s chart shows iron ore and thermal coal prices in Australian dollars.  They are typically quoted in USD however our big miners pay their Oz operations in Oz dollars, so these graphs are important. Iron ore’s recovery from the GFC

18

Iron bomb

Australia’s lifeline in China, John Garnaut reported this morning the worrying news that: The Chinese steel mills that have been holding up the Australian economy are under pressure, with steel prices falling and iron ore prices expected to follow. Robust steel demand in China led Australia to post a record $5.9 billion in iron ore

20

Is mining threatening our food security?

..there must be some data that they could have used to address the “value” of having future food security. This was a request once made of me in the context of losing productive capacity in agriculture from cutting water entitlements on environmental grounds.  It certainly got me thinking.  Given the recent conflicts between farmers and

22

Chart of the Day: Roll over CRB

Today’s chart will be very simple and illustrates what is happening on risk markets around the world. Its an index I’ve followed previously, the CRB Index – which measures a basket of 19 commodities, split amongst the energy, base metals, agricultural etc. And what is the chart saying? Rollover and stay down. The QE effect

29

The commodities crash

No doubt you will have noted the collapse in commodity prices that accelerated on Friday night, even as equity markets remained flat. Just in case you are unaware, here are a couple of quick charts. First the CRB: And its more volatile cousin, the CCI: The crash is across the commodity spectrum but is especially

104

Red gold rush

So, BHP has announced a profit of epic proportions. The Age sets the scene nicely: BHP Billiton has vaulted into the ranks of the world’s top 10 earning companies – and sparked fresh debate over how much tax Australia should collect from its booming mining sector – after the resources giant posted a staggering $A22.46

5

Charting Commodities

On news of the 4.6 percent decline in crude oil yesterday, in response to the International Energy Agency’s announcing a release of supplies from strategic reserves, and after my look at gold yesterday (which also fell last night) I thought I’d have a closer look at where we stand with commodities. First, the two major

28

The commodity bubble

In its recent Bulletin, the RBA has a new piece of research that questions the role of financialisation in commodity prices. The research has some spectacular charts and ultimately concludes that new financial instruments “short-run price dynamics for some commodities, the level and volatility of commodity prices appear to be primarily determined by fundamental factors.”

23

Can the oil stabiliser work?

So, last night oil got thumped, down 2%. Given the fall, and the prospect for further weakness, I thought it might be useful to ask, where oil might head to and what the implications are for this price trajectory. The stakes could not be higher. There’s an opinion at large that the current slowdown in

23

China’s great iron ore pile

I won’t lie, the iron ore price has been making a goose of me for almost two years. At various points my forecast for big falls has almost been right but in total I have been clearly wrong. My prediction has been frustrated by tear away fixed asset investment in China, new market dynamics and

13

Correlated risk is off

Stock markets around the world are either in full flight correction (Australia) beginning, or wobbling along. Yesterday we had the Asian stock markets, with the ASX200 down 1.88%, Japan (Nikkei 225) down 1.52%, Hong Kong (Hang Seng) over 2.11% and Singapore 1.83%. This action was continued through to Europe, with the German DAX down 2%,

19

The silver highway to regulatory risk

Silver is not probably one of the metals you watch. While we hear about the price of gold all the time Silver is in many ways the poor cousin. But if there was ever going to be a useable metallic standard it would probably be silver rather than gold. This fact has been picked up

10

Silver’s Unrelenting March Higher

Another great guest post from The Bullion Baron. The current Silver rally is exhilarating. Even as I write this the chart I’ve used below is basically out of date with Silver having soared higher to almost US$42 during Asian trade today, only around $8 below it’s all time nominal high of $50 set in January

15

The mad, bad commodity rally

There’s something wrong with this rally. To be honest, beyond some vague notion of Japanese reconstruction demand, I can’t find any real cause for it. With China clearly not done with tightening, QE2 about to cease, the ECB hiking rates, global growth past its prime and oil punching through $1.10 on Gaddafi’s scorched earth policy,

3

Boom and bust is back

With Brent and WTI crude both surging to post-GFC highs Friday, I’m beginning to suspect that the world has entered a new era of oil price and growth volatility that spells the end of the Great Moderation. Why so? Supply and demand are the key to all things economic.  Previously at this site, the Unconventional

4

Rio has a whinge

Some days rent-seeking is a challenging business. Take Tom Albanese, CEO of Rio Tinto, who today held forth on the evils of government intervention in mining. According to Reuters: Besides, technical constraints, we are also seeing human constraints. We are seeing a combination of resource nationalism in some cases,” he said, citing “difficult governance” in

4

Gotti is wrong on oil

But should be congratulated for staking out a position, a rare event in today’s world of commentary flip flopping. As Deus Forex Machina likes to say, disagreement makes a market so let’s rip in. Gotti asks: Why should oil prices rise in response to the latest turn of events in Libya? We are already seeing

34

House prices, gold, and long-term investing

One thing I’ve always believed about investing (as opposed to speculating) is that it’s important to step back and take a look at the long-term picture. In the shorter term, markets are subject to periodic “manias, panics and crashes”, as Charles Kindleberger put it in his classic study of financial crises. But in the long-term,

5

Gold, Silver and Oil Ratio

As part of my “Crashlist” I regularly follow the spot price (in USD) for gold, silver and oil as they are the three benchmarks that measure the strength of the global economy, the value of the US dollar and the speculative excess inherent in modern global markets. Bullion Baron has some great insight into these

2

Kloppers, Marius Kloppers…

As this blogger keeps saying, not all markets are created equal. In strategic commodity markets, where governments are big players, the dynamics are not as simple as the balance of supply and demand determining equilibrium. In strategic commodities, when prices go up, demand does not fall. Rather, it increases as governments panic about security of

8

Paul Krugman is wrong (updated)

A few days ago, Nobel Laureate Paul Krugman declared again that there is no ‘financialisation’ element to the current commodity price surge. He began: I’ve been getting a fair bit of correspondence insisting that political unrest, in the Arab world and elsewhere, is being caused by … Ben Bernanke. You see, quantitative easing is responsible for