CRB Index Weekly as of 29 February 2008: The Blowoff Phase

When you are wrong, you are either wrong or early. I have been wrong in thinking that economic weakness would take commodities down with them. Markets have not traced out so many charts like those we are seeing today since the 1970’s. I wrote a couple years ago that there was a rising probability that we would experience both rising price levels and economic weakness as a result of the irrational rise in housing prices among other things. Unfortunately it looks like we are. The latest look at the commodity markets looks like a blowoff, the capitulation of the shorts, a euphoric freight train that will wreck just as the bubbles in stocks and housing have wrecked. But with the participation of so many “stock guys” (who are a mite insane I wager), it is anybody’s best guess where the tops are found. If the Nasdaq bubble is any guide it is at a level far higher than anyone could reasonably guess. $20 Beans? Why not. We have already had $25 Wheat (OMG). $1000 Gold? Of course. Platinum has already surpassed $2000. The spread between Palladium and Platinum has gone from $450 credit to Palladium to $1600 credit to Platinum in 7 years. If you had the foresight to sell Palladium and buy Platinum at a total margin of a couple thousand dollars in early 2001, a single contract would be worth $100,000 today. $100 Oil? Why not $120. Why not roll out some more ethanol mandates and subsidies? ;-O As Don King once said in a movie “Geometric progression. The numbers boggle the mind!!!”

The key will be the dollar.  With the dollar on the precipice of a free fall into the chasm, commodities will run.  When and if it finds a bottom, the top in commodities will be nearby.

29 Feb CRB Weekly
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