Comments on: Stock Market, Commodities, & Bond Analysis 3-28-23

By: Ben

Ben — Wed, 29 Mar 2023 19:11:34 +0000

In reply to Scott.

Yes exactly – the commodity prices on that chart have been flat for a decade and started a bull run recently. Which I’m arguing isn’t flat its actually losing value…

By: Scott

Scott — Wed, 29 Mar 2023 17:32:51 +0000

In reply to Ben.

I posted this chart in the previous discussion either last week or the week before.

https://media.discordapp.net/attachments/1076948311950495796/1090689684314788021/cpi-comm.PNG?width=1977&height=617

By: Ben

Ben — Wed, 29 Mar 2023 15:36:32 +0000

In reply to Scott.

Why do you think it should be priced in? Your simply showing the price of a commodity in dollars – you haven’t factored in the degrading purchasing power of the dollar.
I cant just compare the price of cotton in 2008 and now. The dollar is worth less today than it was in 2008. You would have to add a compounding loss of around 2% to the dollars purchasing power or more simply we should see commodities rising by 2% per year in line with inflation. If commodity price is flat – as it was in your charts – then commodities are getting cheaper, not staying at the same value.

By: Scott

Scott — Wed, 29 Mar 2023 13:03:12 +0000

In reply to Scott.

This hit me late last night. The DJP chart is basically the Russian ruble.

https://rightsideofthechart.com/wp-content/uploads/bpfb/2910_0-32986900-1680094942_95ds9comrub44.png

By: Scott

Scott — Wed, 29 Mar 2023 13:01:41 +0000

In reply to Ben.

I replied in another thread about this topic. Will copy/paste that response…

The changes with the dollar should be priced-in when looking at the spot price of each commodity (not any price linked to futures contracts – real prices over time). The distortions arise anytime you are looking at longer-term charts of ETFs due to futures decay. I’ll be looking into the indices today to see whether futures play a role with those as well.

Simple way to disprove any of this would be to look at the current price of any commodity and compare what that same commodity price was back in 2008. Again though, you cannot use anything that is linked to futures contracts. You must look at the real price paid in the economy. I can’t think of anything that is cheaper now versus back in 2008; let alone any commodity that is -50% to -60% cheaper than back in 2008.

By: Manuj

Manuj — Wed, 29 Mar 2023 13:00:55 +0000

Hi Randy, I pretty much agree with most of your analysis, although I guess I am bit more bearish in the long term targets, I am sure we will see the Covid´s low breaking down in the next years.
There is one thing believe we should be considering. During the last 15 years, the positive correlation between the FED Balance Sheet, and the Stock market has been around +0.96 during almost all the last bull run. We have just seen that 50% was the QT was gone in the last 2 weeks (4 months of QT gone in a blink of an eye), probably the last 50% will be gone not far away in time. We should already know by now that a big part of this increment will end in the Market, as it has always happened in the last decade. I guess the market will rally until something really big cracks, and them we will see the continuation of the Bear market. Manipulation is back in the game, and we have to bear that in mind.

By: Ben

Ben — Wed, 29 Mar 2023 12:09:28 +0000

In reply to Jeff Vandenburgh.

That’s quite a good point, have you tried comparing the price of a commodity against the dollar with the dollar depreciating in price by around 2% per annum? A quick look at your charts against the FED’s M2 money supply or total assets on books… it looks flat. Same amount of dollars buys an ounce of copper but my dollar is now worth less, therefore my copper is effectively cheaper.
Maybe compare commodity prices with the average wage of typical American job, or something that is a better track of how much labour is worth today.
I want to know how many ounces of a commodity a typical mechanic could buy after say 100 hours labour in 2008 compared to 2023.

By: jpowell

jpowell — Wed, 29 Mar 2023 08:13:45 +0000

Hello Randy If you do a ratio chart of SHY-HYG this will give you an idea as to if spreads are widening out. As the chart rises this tells you credit is tightening. I do this on tradingview or TOS
Thanks hope this helps.

By: Jeff Vandenburgh

Jeff Vandenburgh — Wed, 29 Mar 2023 01:20:46 +0000

In reply to Scott. I wonder if a lower priced USD in 2008 have an impact on those commodities indexes.

By: Scott

Scott — Wed, 29 Mar 2023 00:52:54 +0000

In reply to Scott.

I’ll put it more succinctly this way… Point to a single commodity that has a current market price -50% to -60% lower than 2008. I can’t find one.

Given those indices you pointed out align with DJP’s percentage drop, I’m inclined to believe they are also tracking futures decay. Again, I’ll dig deeper tomorrow but simple logic isn’t aligning.