"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, December 14, 2011

Commodity complex dealing with Deflationary Concerns

Investors worldwide are making a mad rush towards cash as they seek to become liquid based on their fears of a slowdown in the global economy. There is little confidence that monetary authorities and political leaders in Europe are doing anything substantative to deal with the issues plaguing Europe. Over here in the US, investors are reading the tea leaves from the recent FOMC statement and are expressing disappointment that the punch bowl full of QE is not coming forthwith. Then there is talk about China slowing down as well.

All of this is working to generate visions of the summer of 2008 in the minds of traders as they fear another severe downdraft across a wide spectrum of "risk assets" while watching the US Dollar rally up through technical chart resistance levels.

The result - strong selling across nearly every single commodity futures market with a strong breakdown in the Continuous Commodity Index ( CCI ). It is down at levels last seen in October 2010 and is negative for the year 2011. That chart is signaling deflation is the current fear; not inflation. If it is going to bounce, this level will be where it needs to do so or more losses are in store with a potential move as low as 510 or lower.

It could be that some dovish FOMC members might be looking at the CCI chart thinking that they have plenty of room now to manuever should they be able to convince the rest of the members of the committee that more stimulus is needed. Central Bankers are going to panic if a deflation mindset takes hold and will be forced to act.


  1. Structured small block buys from here. Please keep us posted. From 9/8 top hui presently down 20%. If it goes to >30%. Re-evaluate. Otherwise upside looks stronger than downside to me. Thanks Dan. Please keep us posted on slide. Dont want to be on the ground when the knife hits me in the chest.

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