Jim ‘Bowtie’ Rogers is famous for suggesting we leave the United Steaks for a farm in Indonesia. Not only is he a regular Benedict Arnold, but a prospective war profiteer on the inflationary panic that is to come. The only problem with Mr. I think it’s a good idea to get teeth braces at the age of 70 is that the exact opposite has occurred.
Everyone is watching oil now, as it stuns people with downside pin action. The acquisition of BHI by HAL might stem the wave of margin calling selling in the interim. However, let it be known, oil is in an impenetrable ‘fag box‘ and Jim Rogers is stuck inside of it.
Here are some returns for raw commodities over the past 3 years.
Silver -55%
Coal -53%
Sugar -52%
Uranium -51%
Wheat -46%
Coffee -40%
Natty -36%
Corn -36%
Gold -35%
Cotton -33%
Oil -26%
Lithium -23%
Copper -20%
You get the picture?
At the same time, the equity markets have been hitting new highs and the dollar is up 8%.
Quite a conundrum isn’t it?
This is the question that keeps me up at night:
Is the current trend suggestive of chicanery or does it represent the normalization of commodity prices, deflating prices to realistic post war levels?
Let’s be honest with one another, oil doesn’t belong anywhere near $75 based upon supply vs demand. Hell, it was trading under $30 before the Iraq war. Would it be so terrible if the dollar continued to rally versus the euro and commodities fell? Aside from the Bakken being screwed and oil stocks going lower, wouldn’t everyone else benefit from this sort of deflation?
I can only recall the beginning of the dot com era, when oil prices collapsed and stocks roared. Back then, people thought energy was going to be made on the internet and viewed the collapse of oil as a major tax cut, rightfully so. What’s horrendous for Texas is stupendous for New York.
Everyone is so scared of the deflationary boogieman, they are failing to see the potential upside in such a terrific tax cut.