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How will commodities fare in 2009?
Global depression accelerates causing commodity prices in 2008 plunge the most in five decades as demand for energy, metals and grains tumbled in the second half. There is lack of buying power and deflation dominates the economies now.
For the last three years I have pointed out in article after article that the stagflation will eventually get replaced with unending deflation, that stage has finally come.
The commodity price patterns show classic bubble formation and a cataclysmic burst of the same.
In 2008, the Reuters/Jefferies CRB Index of 19 raw materials fell 36 percent, the most since the gauge debuted in 1956, to 229.54. After reaching a record of 473.97 on July 3, 2008. The inverted V shaped commodity charts is the signatures of global depression.
Still the questions remain on the future of commodities futures markets. The oversold nature of the commodities market must be alleviated before the next leg of the bear market can start. The alleviation of the oversold characteristic can happen in two ways. First, a sideways movement denying overeager bears their share of continued prosperity and helping the option writers. The second, a sustained rally in early 2009 followed by a massive third leg in the downside.
Close to 13 trillion dollars is earning zero returns in Tbills at this moment. The fear factor, however, is very high. There is a 50-50 chance of a rally or sidewise movement. The right strategy will be to will be to write calls and puts simultaneously.
SMART LIVING & INVST. ARTICLES
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