All one needs to know about how the Fed is attempting to knock down the price of commodities in general was demonstrated in today's FOMC minutes.
The idea that I believe it wants to keep uppermost in the mind of traders is that the US economy is recovering, very slowly, but recovering - enough to justify the idea that growth will be steady, that employment will be increasing - slowly - but that there are still headwinds.
However those headwinds, while they bear watching, are not sufficiently strong enough to derail the recovery - this will prevent any slipping back into recession. If they are - of course the ever vigilant Fed stands ready to act - if not now however.
This means that equities should move higher as long as the economy is growing and moving forward, even if it is moving forward at a snail's pace.
One of those headwinds, which they were very concerned to make known, was the idea that GLOBAL GROWTH is slow (hint, hint - CHINA). That means less need for commodities! Again - HINT- HINT.
This notion is designed to take away the idea of an IMMEDIATE QE3 which works to herd the cattle-brained hedge funds (insert theme from "RAWHIDE" here with Ben playing the part of the trail boss) into selling commodities in general. Down goes copper, platinum, other base metals, other tangibles, etc. - only the markets which have the strongest set of fundamentals on the supply/demand equation are able to withstand the barrage of hedge fund, one way, selling pressure which then immediatey follows the minutes as surely as night follows day.
Thus, if the global economic growth is slow and there is not the same demand for commodities as there was previously, and if there is no need for an immediate round of QE3 - then where oh where can the hedge funds make money? Answer - where else but in equities.
We then see commodities mauled while stocks initially tank but then rapidly bounce off their worst levels of the session to end only modestly lower. Yep - no inflation here anywhere - see - just look at the commodity indices and you can see that our near zero interest rate policies are not creating the faintest whisp of inflation. Oh, ignore that gasoline price chart - it's definitely pesky but we can always have the political branch open up the spigots on the Strategic Petroleum Reserve in time for the General Election and deal with that if those prices are still too high at the gas pump come August or September and the Dear Comrade's poll numbers are not any better.
Yes, Virginia - modern price controls without price controls. What a marvelous innovation from our monetary masters.
Now if they can just get that pesky bond market to cooperate and turn around after today's plunge out of disappointment that the Fed will not be buying bonds forthwith. Ah, but that is another day's work for our saviors.
