Your fortune in a coffee cup


While reading the future in the bottom of coffee cups is a well established middle eastern tradition, John Authers has a analysis piece on the commodities run in which he tries to devise the future of the economy from the price of coffee. In "Investors should pick up a reason for commodities run" he muses:


If the "consumer demand" explanation is right, then you should not necessarily sell commodities, as the emerging markets may "decouple". But it also suggests inflation is a real threat to the emerging markets' growth, so this still is not a safe investment for the long term.

If the "investor demand" explanation is right, then commodities are a bubble. You should get out now.

If the "supply" explanation is right, then the economy is in deep trouble and pace the 1970s, commodities offer almost the only protection against what is going to hit us.


He argues factually for consumer demand explaining that emerging economies are consuming more raw material. A US slowdown in GDP growth would not dampen demand. That is the basis of "decoupling". This is probably true of metals. Oil is suffering from a tanking dollar, so may be financial, but reflected in "demand". Corn is definitely the result of the "ethanol" fiasco.

He argues factually for supply, with numbers that are so detailed they put me to sleep like Homer Simpson in front the TV with a loud snore and long saliva string on my shirt. I believe it, supply is not moving much.

So the difference has got to be investor driven? He explain the "investor" demand. Essentially amid the credit market and equities market meltdowns, commodities offer the last inflation protected (since they drive inflation) asset class, at least in theory and we got a lot of investment momentum in there.

Comments

Andrew Meyer said…
Marc,

I agree with you, the commodity rise is probably more investor driven (80%) then demand or supply driven (20%.) Is there a bubble? Yes. The question is, is the investor momentum beginning or ending? I say beginning and here's my logic.

The financial markets are frozen by the question of whether we're facing a liquidity problem or a solvency problem.

If poor lending practices and a lack of transparency are the root cause of the problem, then it will take two to three years to get the loans through the system to resolve the liquidity/solvency question.

If there is a liquidity problem, that means banks just don't have enough cash to cover people asking for their money. My favorite way to think about this is the Jimmy Steward, "It's a Wonderful Life" example. There's a rumor that the bank made a bad loan and a run on the bank could actually bankrupt the bank, even though the bank never made the bad loan.

The FED is addressing this issue by by ensuring that liquidity issues don't cause banks to fail.

But, what if we have a solvency problem? What if the bank really made a bad loan or a lot of bad loans? Then, all the liquidity in the world doesn't matter, eventually, the bank maybe swimming in cash and still bankrupt.

Then add in a fact like you pointed out in a previous post, that there are funds like Carlyle that are 28X leveraged.

So the financial markets are grinding to a halt debating whether there's a liquidity problem or a solvency problem. There's plenty of economic measures to support either view depending upon you're temperament or (probably more importantly) investments.

So now we have a FED that is making sure there isn't a liquidity problem. A bond market that's seized up. A stock market that's down 10%. A Housing market in decline. A dollar that's depreciating. Unemployment that's rising. And inflation that's increasing.

And then there are a couple of commodities rising like shining promises for gain. Is there a bubble? Yes. Now, is the investor momentum creating it beginning or ending? I say beginning.
Tango Juliet said…
Marc,

Add this blog to your bookmark: http://fintag.com/
adt43wt342 said…
Andrew,

thank you for the well argumented comment.
Rosario said…
Marc,

I would like to have your link on my site. I am very interested in Coffee Cup Readings and just started looking at blogs on this topic. I have a site www.cupzz.com that has great prices and a section for "Recommendations for Turkish Cup Readings" that have supplies such as cups, coffees, pots, books, spoons etc . Any suggestions or recommendations to add to my site are truly appreciated.
Rosario
New York City
Anonymous said…
85cc免費影城85cc免費影片免費 a 片台灣論壇免費影片線上免費a片觀看85cc免費影片線上觀賞a片免費看免費A片A片-sex52085cc免費影片免費卡通影片線上觀看小魔女免費影城免費看 aa的滿18歲影片免費a片卡通sex888影片分享區520sex貼片區aaaa彩虹頻道免費影片sex520免費影片後宮0204movie免費影片免費色咪咪影片網成人a影片論壇免費影片下載aaaaaa片俱樂部sex520免費影片sex888免費看影片馬子免費影片免費線上a片gogo2sexaaa片免費看短片免費 a 片aaa片免費看短片免費線上avdvd成人圖片區18成人avoooaaa的滿18歲卡通影片免費線上歐美A片觀看sexdiy影城plus論壇dudu sex免費影片85cc成人影城臺灣情色網線上免費a長片免費卡通影片線上觀看彩虹頻道免費影片洪爺影城浪漫月光論壇bbs x693 com sex888 sex383線上娛樂場85cc免費影片sex888 freebbs hksogo 成人論壇sex999日本美女寫真集日本 avdvd 介紹免費觀賞微風成人av論壇aaaa 片俱樂部免費影片下載a亞洲免費影片線上直播卡通美女a片免費試看免費成人視訊視訊情色遊戲援交av080影片sexdiy影城sex520免費影片sex888movie影城情色小說 杜蕾斯成人一本道 a片 東京熱情色影片本土辣妹34c影片直播吉澤明步sex888免費看影片論壇a 免費影片觀賞aa的滿18歲影片av080免費試看sex888 freebbs hk免費aa片試看免費影片觀賞av博物館aaa免費看影片亞洲禁果影城免費a片aaaaa片俱樂部影片5278論壇金瓶影片交流區383movie成人影城aio性愛dvd辣妹影片直播免費a片線上觀看,sex520貼片ut13077視訊聊天avdvd無碼情色電影日本 avdvd 介紹免費觀賞台南援交友留言hi5 tv免費影片1314視訊成人論壇成人免費視訊 完美女人hilive tv 免費電影34c蒼井空影片下載avdvdsex383線上娛樂場aio交友愛情館sex383線上娛樂場JP成人網免費視訊聊天室微風成人

Popular posts from this blog

$6.66B for BEA: Larry goes Shopping

Thug vs Thug: Porsche 1, Hedge Funds: 0

Quickies #3, protecting IP in OSS