19 May 2006

US$: Revolt, Downgrade & Disorder

Kitco - Contributed Commentaries - Jim Willie CB: "t is hard to say how far this correction in commodity stocks might go. Surely, the mainstream press enjoys what they proclaim as the end of the bull. However, they forget that only a global recession will interrupt this commodity bull market. They forget that energy stocks were the biggest single engine in the S&P500 index last calendar year. A case in point is the strong and growing global demand for gold bullion as the USTBond erodes in confidence. A case in point is the relentless twin deficits indicative of extreme hemorrhage and foreign capital dependence. A case in point is the 20% decline in official copper inventory at the exchange warehouses, the challenge to Indonesia copper supply, the socialist (and water) threat to Andean copper supply in Peru. Sorry, but these three factors remain very much alive, either without evidence in any way, or not even addressed.
Three requirements are necessary before the commodity bull is interrupted:
1) emerging developing economies must stall in growth altogether, like China, India, Southeast Asia, including the construction boom in the Middle East
2) the multi-year USDollar decline must come to an end, in a real sense from remedy to its crippled fundamentals in astronomical trade deficits and burgeoning federal budgets
3) the imbalances whereby global commodity demand overwhelms commodity supply must find equilibrium in the midst of historically low inventories and supplies at risk.
Sorry, but none of these requirements has been met, as all are still in force."

No comments: