Metals Are Getting Smashed
These are tough times to be in the commodity business.
A selloff in the oil market that began in June 2014 has extended to a range of raw materials and is starting to resemble a full-blown meltdown.
Investors reacting to weaker Chinese demand and an end to cheap money provided by the Federal Reserve are rushing to sell positions in companies that produce, trade, and ship everything from oil to gold to copper and aluminum. A Bloomberg commodities index that tracks returns from 22 raw materials has fallen 50 percent since a 2011 high and is trading near its lowest level since 1999. Of the 10 worst performers in the Standard & Poor’s 500-stock index this year, eight are commodities-related companies.
Commodity plunge increases systemic risks
Most of the Emerging Markets debts are U.S. Dollar based making it very difficult (if not impossible) to service their loans. A deflationary blowoff is a very real possibility for these commodity producers.
Most of the Emerging Markets debts are U.S. Dollar based making it very difficult (if not impossible) to service their loans. A deflationary blowoff is a very real possibility for these commodity producers.
Global Shipping Veers into Capital Destruction
by Wolf Richter •
Global Deflation Alert: Hidden EM Debts To China Could Be Immense
by Carmen Reinhart •
IMF Warns Of World Economic Crash If Interest Rates Are Not Kept Low
Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?
The warnings are getting louder. Is anybody listening? For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing. For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“. And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now. The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…DYI Comments: Precious metals mining companies are in a world wide shake out with corporate work outs and out right forever gone bankruptcies. This has driven done the share prices of these companies far lower than the price of the actual metals. In other words...A great time to begin acquiring shares of these companies. The best way to do this is with an open ended mutual fund such as our favorite Vanguard's Precious Metals and Mining Fund symbol VGPMX. This is for long term accumulation of shares at a very low cost basis over the next few years as this deflation/low inflation plays itself out.
Currently today physical gold has moved back to its mean as shown on my sentiment indicators.
Market Sentiment
CapitulationDYI Continues: The mining shares have been pounded down to the level of Depression and if a global recession hits with share prices starting at these depressed levels they would then achieve Max-Pessimism. At that level it would be shooting fish in a barrel for the contrarian value player setting up profits as the world recovers from its debt binge. The extra kicker is that I see the 2020's with all of the unfunded liabilities [Social Security & Medicare] taxes will be raised adn benefits cut to the point of political reality. After that central banks will do what they do best and print the needed cash to maintain the illusion of benefits being paid.
Updated Monthly
AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 10/1/15
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
DYI
No comments:
Post a Comment