Why Commodities Are Toast

(Forbes) by Clem Chambers – The 1970s were much like the previous decade. While, as Mark Twain said, the past doesn’t repeat itself, but it does rhyme, the 1970s and the 2000s had many of the same elements: war in the middle east, commodities boom, market crashes. It’s likely a generational effect. Commodities are a stand out similarity to me. Commodities soared, resource plays sizzled. Plenty of crazy volatility lit up the various markets attached to commodities. Commodities is the fastest game in town. The volatility and the leverage combine to create a potent cocktail for a dangerous speedball of speculation. Commodity trading is a story of fortunes won and lost. Unless you love high stakes gambling, commodities is strictly for the birds. However, with oil and gold such objects of fascination, it’s hard to leave commodities alone. So what is the big picture? The big picture is the U.S. dollar. Commodities are proxy dollars. Dollar down, commodities up and vice versa. So right now we have a situation where the dollar is going to rise, because interest rates are going to rise. Let’s imagine interest rates will get to 4% at some point from their nearly zero levels. There … continue reading

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