Commodity Inflation/Deflation

You read a lot these days about the coming inflation, hyper-inflation, and deflation and of course stagflation. First a few definitions:

  • ‘Inflation’ The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
  • ‘deflation’ The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression
  • Stagflation refers to economic condition where economic growth is very slow or stagnant and prices are rising.

Most people and the equity markets watch the commodity markets for clues as to inflation/ deflation/ stagflation.  You can have an increase in agricultural prices that are weather related and have little to do with real inflation. In theory that will change in the next crop year with better weather and increased farmer plantings. In other words it’s temporary.

The huge drought in California could contribute to that since California is responsible for so much or our produce.  With the advent of Commodity ETFs it becomes easy for us to follow along.

DBC -The fund pursues its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the index, or the Index Commodities. The Index Commodities are Light Sweet Crude Oil (WTI), Heating Oil, RBOB Gasoline, Natural Gas, Brent Crude, Gold, Silver, Aluminum, Zinc, Copper Grade A, Corn, Wheat, Soybeans, and Sugar.

Screen Shot 2014-09-15 at 10.27.25 AM A good overview since 2006. The sharp rise into 2008, the collapse, then the 50% rebound of that collapse. Since that rebound in 2011 the commodities markets overall have just been fading into the sunset, about 37.5% off that top.

Agriculture DBA The index composed of futures contracts on some of the most liquid and widely traded agricultural commodities – corn, wheat, soy beans and sugar. The index is intended to reflect the performance of the agricultural sector.\

Screen Shot 2014-09-15 at 10.36.52 AMDBB – Industrial Metals: futures contracts on some of the most liquid and widely used base metals – aluminum, zinc and copper (grade A). The index is intended to reflect the performance of the industrial metals sector.

Screen Shot 2014-09-15 at 10.42.03 AMFinally everyones favorite, precious metals, DBP – futures contracts on two of the most important precious metals—gold and silver. The index is intended to reflect the performance of the precious metals sector.

Screen Shot 2014-09-15 at 10.51.25 AMThe precious metals appear to be attempting to base inside a descending triangle. I would not draw any conclusions as yet, but I’ll be watching  😎

Talking Points and Tim Cook on Steve Jobs: His Office Is Left as It Was:

The Risk of Concentrated Portfolios (Irrelevant Investor)
Good Times, Bad Times (Alhambra)
Will Apple Pay Kill PayPal? (CNN/Money)
A Warning from Graham and Dodd  (John Hussman)
How to Get It Wrong (NYT)
The Timing Is About Right for King Dollar (Bob McTeer’s Blog)
PricewaterhouseCoopers Just Ran the Numbers on Climate Change — We’re 20 Years Away From Catastrophe (MoJo)
5 Frugal Millionaires and Their Best Advice (INC)
Bill Clinton = Campaign Strategist in Fight for Senate (Bloomberg)
Surveys vs. Hard-Data (GaveCal)
How Cities Are Using Analytics to Improve Public Health (HBR)
Want to deplete your tax base? Give ‘job creators’ what they want (LA Times)
How quitting my corporate job for my startup dream f*cked up my life (Medium)
Facebook Messenger Found to Be Tracking ‘A Lot More Data Than You Think’ (CBC)
Crowdsourced Trading: 21 Investors / 21 Rules (Stockcharts)
The Myth of Venture Capital (Re/Code)
U.S. Exports Reach $2.3 Trillion in 2013, Set New Record for Fourth Straight Year (US Department of Commerce)

Tim Cook on Steve Jobs: His Office Is Left as It Was

Have a Great Day!