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Old 5th October 2006, 05:31 AM
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Why are commodity prices now in a free fall?

Why are commodity prices like raw materials and oil now in a free fall?

In times of economic boom, we are afraid of inflation, and hence interest rates are raised. But within just 2 mths, the whole scenario has reversed!
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Old 5th October 2006, 09:07 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by touchring
Why are commodity prices like raw materials and oil now in a free fall?

In times of economic boom, we are afraid of inflation, and hence interest rates are raised. But within just 2 mths, the whole scenario has reversed!
The price of oil has as much to do with security of supply as free market economics. Everytime there is a crisis in or around the Middle East, or with Russia, prices tend to hike.

The other factor with markets is that they naturally overshoot, and undershoot, resulting in corrections. It takes weeks and even months to correct erroneous assumptions about demand, by reducing the amount of product being delivered at the point of sale. Oil Tankers don't turn back because of an easing of the market.

Conclusion, you might as well get out a crystal ball as try to forecast the direction of the world economy from oil prices or indeed any other commodity.
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Old 5th October 2006, 10:16 AM
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Re: Why are commodity prices now in a free fall?

Yes, i see what you mean. Singapore's real estate market suddenly jumped the recent past siz months, developers are pushing up the market while American and China's markets are tipping over, pure crazinest.

http://www.bloomberg.com/apps/news?p...d=amek881mlELg

I think all the Middle East security, North Korea or chicken flu news, although making very big hooha on the newspapers are old stories, and probably not going to have much of a real impact on sentiments. The real deflationary effect may come from an economic effect - a reversal in American real estate. So the question will be whether the US Feds reduce interest rates, or can do anything in time to boost the home buying market?

Last edited by touchring; 5th October 2006 at 10:28 AM..
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Old 5th October 2006, 10:24 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by touchring
Yes, i see what you mean. Singapore's real estate market suddenly jumped the recent past siz months, developers are pushing up the market while American and China's markets are tipping over.

http://www.bloomberg.com/apps/news?p...d=amek881mlELg

I think all the Middle East security, North Korea or chicken flu news, although making very big hooha on the newspapers, isn't going to have much of a real impact, War, in fact will boost economic activity. The real deflationary effect will come from a home based effect - a reversal in American real estate. So the question will be whether the US Feds reduce interest rates to boost the home buying market?
I am sorry but Oil Prices are very sensitive to any new come out of the Middle East. Oil buyers generally cannot afford to have a big shortage. If the security of supply is threatened within a two to three month window, then Spot Prices Spike dragging Forward pricing with them.
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Old 5th October 2006, 10:48 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by Rubber Duck
I am sorry but Oil Prices are very sensitive to any new come out of the Middle East. Oil buyers generally cannot afford to have a big shortage. If the security of supply is threatened within a two to three month window, then Spot Prices Spike dragging Forward pricing with them.
Yes, certainly, but another $30-$50 more in gas or petrol per month isn't going to dampen demand very much. Whatever effect of oil prices is very small as compared to the bank asking for $50,000 top up on the mortgage loan if housing value falls below the loan amount.

Last edited by touchring; 5th October 2006 at 10:53 AM..
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Old 5th October 2006, 10:56 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by touchring
Yes, certainly, but another $30-$50 more in gas or petrol per month isn't going to dampen demand very much. Whatever effect of oil prices is very small as compared to the bank asking for $50,000 top up on the mortgage loan if housing value falls below the loan amount.
America does more to conserve Water than it does Oil. If it were really hurting, then you would see a massive change in American behaviour. OK, there may be signs, but there is certainly no panic.
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Old 5th October 2006, 11:00 AM
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Re: Why are commodity prices now in a free fall?

Agree, there's no panic - the American stock market is shooting up! I hope the effect is passed to the ASCII domain market - like many around here, i'm still stuck with some names!
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Old 5th October 2006, 11:14 AM
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Re: Why are commodity prices now in a free fall?

It is of course possible that the Texas Oil Cartel Party ( popularly known as the Republicans) have been engaging in Adventures in the Middle East and Asia not to secure Oil, so much as to manipulate the price of it.
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Old 5th October 2006, 09:41 PM
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Re: Why are commodity prices now in a free fall?

Oil is coming down because the party of closet perverts needs it to, as there is an election just around the corner.
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Old 5th October 2006, 10:12 PM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by Drewbert
Oil is coming down because the party of closet perverts needs it to, as there is an election just around the corner.
Sometimes Drew, I wish you would just come right out with it!
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Old 5th October 2006, 10:17 PM
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Re: Why are commodity prices now in a free fall?

I would be buying any weakness right now.
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Old 6th October 2006, 12:32 AM
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Re: Why are commodity prices now in a free fall?

I agree with Drewbert. When the election is over the Repulicans will call the Saudi King and give the green light to cut production and push the price up. So might not be a bad time to buy Oil & Gas right now.

Quote:
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Oil is coming down because the party of closet perverts needs it to, as there is an election just around the corner.
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Old 6th October 2006, 12:51 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by Drewbert
Oil is coming down because the party of closet perverts needs it to, as there is an election just around the corner.
The party of pedaphiles and, let's face it, pedaphile accomplices.
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Old 6th October 2006, 03:04 AM
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Re: Why are commodity prices now in a free fall?

Let's not forget that they are cheering because the Dow Jones has FINALLY recovered to the point it was in early 2000 (not taking inflation into account) and that house values dropped over the last 12 months - first time ever since 1933 apparently.
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Old 6th October 2006, 04:48 AM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by Drewbert
Let's not forget that they are cheering because the Dow Jones has FINALLY recovered to the point it was in early 2000 (not taking inflation into account)

Yah, i just offload some of my local stocks, dun want to wait any more. If America slows down, East Asia will also be in trouble. In fact, the trouble hits the next day for the case of the stock market.

Quote:
Originally Posted by Drewbert
and that house values dropped over the last 12 months - first time ever since 1933 apparently.

I find this puzzling as it doesn't happen in Asia - do you mean houses in America has never gone down in price ever? Does this also happen in the UK?

Quote:
Originally Posted by gammascalper
I would be buying any weakness right now.

Buying stocks on weakness??

You're one who has spent time in both America and China, how would you compare the building boom in China past 10 years versus America?

Last edited by touchring; 6th October 2006 at 05:26 AM.. Reason: Automerged Doublepost
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Old 6th October 2006, 01:33 PM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by Touchring
Buying stocks on weakness??
Commodities!
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Old 6th October 2006, 02:10 PM
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Re: Why are commodity prices now in a free fall?

House prices in the UK fell for just about the first time ever in the early 90s. Needless to say, I got burnt. They have now more than fully recovered and have been robust for just about the last 10years. Real Estate value in general are much more stable than stocks, as trading is based more on need than market perceptions. I think it would be fair to say that falling house prices are indicative of a severely mismanaged economy. Fall stock prices by constrast are a cyclical phenomenon.


Quote:
Originally Posted by touchring
Yah, i just offload some of my local stocks, dun want to wait any more. If America slows down, East Asia will also be in trouble. In fact, the trouble hits the next day for the case of the stock market.




I find this puzzling as it doesn't happen in Asia - do you mean houses in America has never gone down in price ever? Does this also happen in the UK?




Buying stocks on weakness??

You're one who has spent time in both America and China, how would you compare the building boom in China past 10 years versus America?
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Old 6th October 2006, 03:19 PM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by gammascalper
Commodities!

Ic, yes, if you believe in inflation, then commodities like gold are now off record highs, but how would you know if they wouldn't go lower?

For Americans, commodities are better than keeping cash, but for me, commodities are in US dollars and the dollar has been depreciating for years. Even Yuan is dangerous as it's pegged to the dollar (with miniscule fluctuation range), so if the dollar plunges, the Yuan will plunge along with it! And if inflation turns out true, resource backed currency like our Aussi dollar will be very strong.

Last edited by touchring; 6th October 2006 at 03:55 PM..
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Old 6th October 2006, 04:17 PM
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Re: Why are commodity prices now in a free fall?

Quote:
Originally Posted by touchring
Ic, yes, if you believe in inflation, then commodities like gold are now off record highs, but how would you know if they wouldn't go lower?

For Americans, commodities are better than keeping cash, but for me, commodities are in US dollars and the dollar has been depreciating for years. Even Yuan is dangerous as it's pegged to the dollar (with miniscule fluctuation range), so if the dollar plunges, the Yuan will plunge along with it! And if inflation turns out true, resource backed currency like our Aussi dollar will be very strong.
The days when America is going to be able to dictate commodity prices are over.

One of the reasons prices are rising, is that the rest of World are not going to subsidise the US just because its currency is going down the tubes. Dollar drops prices go up to compensate.

If you take a global basket of currencies weighted against their import requirements if demand and supply are static then prices will be stable, allowing of course for global inflation.

If demand is rising and their are supply bottlenecks then you can expect sharp increases. The converse is of course true.

The bottom line is that if living standards are increasing in the World's most populous countries, then America is going to have to compete for raw materials. If America is successful in getting China to raise the exchange rate for its currency, then the affordability for such commodities in China is going to massive increase and China will suck in more. That means that prices in dollar terms will increase sharply.

It is going to be a question of being careful what you wish for Mr. Bush. But then again perhaps he hasn't explained to the voters that the sole purpose of him being incumbent in the White House in the first place is to ensure higher oil prices for the folks back home in Texas.
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Old 6th October 2006, 04:32 PM
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Re: Why are commodity prices now in a free fall?

I do not think America can make China remove it's dollar peg. But if the dollar depreciates, the Yuan will fall along and if Euro doesn't follow, Germany, Italy, etc is going to suffer. As i understand from my sources, Germany isn't doing well already?
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