Sounds like a country song

Sold out this morning. Time to go for a month or so.

Well look what happened to RIO when they reported 4 Q 2006. Same time China said they were
worred about growth and maybe have to raise interest rates. Rio reports are confusing and
a bunch of people sold like crazy after hours when it came out. Dropped to 32 down $3-4 By
accident saw that drop and ran to the computer. Bough at 32.--Don't worry, sold at 38,
yeah me. --- I didn't even check cause I had some faith, just needed more.
I believe Commodtiies will go much higher. Bough back RIO and have still FCX.---- But
somewhere before, during or just after the 2008 Olimpics China will put on the breaks
hard. I keep that in mind. There is talk of closing all coal fired utilities shortly
before the Olimpics starts. Somedays you can't see 30 ft.
China will stockpile also.

Last edited on: 05-07-2007 11:30 am

I'm not saying don't hold gold. I hold some myself. I'm just saying don't be crazy
overweight gold...

Also, everyone, trust me on this one, commodity prices are overwhelmingly influenced by
global growth. That is the number one driver of commodity prices. If global growth all of
a sudden slowed tommorow, commodity prices would come down big time. I'm not saying that
will happen, I'm just saying that it's good to know waht your downside risks of any
investment are.

For evidence of this, note back in late 2001 when 9/11 caused massive fear over a major
U.S. slowdown causing global growth to slow down (at that time Emerging Asian growth was
still very strong). Real imported oil prices dipped from $35.52 in September of 2000 (I
got this from EIA) to $18.11 by December 2001. Oil is a commodity... it dipped b/c of
fears over global growth, even though global growth was strong... that's how commodities
work... asset markets move before real markets (just like equity prices are discounting
based on expectations of future events)

Last edited on: 05-05-2007 12:30 am

"I think it would take much slower growth around the world to stop the commodity boom.
There's a lot of momentum now in the emerging markets (BRIC) and their growth is just
beginning to have an impact on commodities. You ain't seen nothin' yet."

I agree that - long-term - commodities are one of the great plays. But it seems as if no
one sees the possible downside risk of holding commodities on this board.

Asset markets (commodity prices, exchange rates, etc...) move before real economic changes
(output growth, etc...). Thus, for all we know, commodities might have 11% future Emerging
Asian growth priced in. Thus, even 7% growth would prove overwhelmingly dissapointing,
leading to falling (short-term) commodity prices...

Last edited on: 05-05-2007 12:18 am

Also, dollar depreciation is a positive as long as people don't dump U.S. assets (again,
"Bretton Woods II" says that everyone will try their darndest to make sure this doesn't
happen... thus, just an unlikely "fat tail risk").

Again, if dollar depreciation is so bad, why do Asian nations desire such weak currencies?
Why do European officials worry about Euro appreciation crowding out exports? Depreciation
is a positive (in terms of output, employment, etc...), not a negative...

Sad that - even with depreciation keeping export growth at impressive levels - we still
only grow 1.3%... what does that say?
In addition, if dollar depreciaiton is finally creating changes that are long-term
beneficial (boosting exports, reducing foreign debt levels, etc...), why would the Fed
desire appreciation?

Last edited on: 05-05-2007 12:16 am

And if you doubt the importance of oil savings, note that petrodollar savings have
purchase more than $1 trillion in global assets since 2002. That's a lot...

But this is 1-2 years out, I believe...

Also important will be watching how China will react to this USD depreciation caused when
oil producers begin investing more. Will they allow their currency to undergo a real
appreciation versus the dollar? Doing so would mean even lower long-term real interest
rates likely...

Or will they allow real appreciation? This would reduce downward pressure on long-term
U.S. real interest rates, and it could massive global growth problems and inflation
worries... especially considering that CHina isn't ready for a consumer-oriented domestic
economy...

Last edited on: 05-04-2007 07:05 pm