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Understanding What Happens Next

Wednesday, September 28, 2011, 10:15 AM
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Understanding What Happens Next

Wednesday, September 28, 2011

Executive Summary

  • The sentiment on commodities is shifting in an important way.
  • What happens when a global credit bubble meets a secular rise in energy costs? (Answer: nothing good.)
  • The only chart you need to understand the future
  • Why the next steps of the Fed and other central banks is imminently predictable at this point
  • Given the high probabilities and their huge impact, you need to take steps now to position and protect yourself.
  • The three critical questions you need to be asking

Part I - What Just Happened

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II - Understanding What Happens Next

Global Carnage

During these turbulent periods, it's best to back up, widen the view, and ask where we are. Since the beginning of 2011, we observe that global equities have been hammered for losses, while global oil (Brent) and gold remain positive for the year.

Interestingly, we see that commodities in general (CRB) are down less YTD than even the best performing stock market (New York), which is not quite what I would have expected. Commodities typically lose first and most in a global downturn, or rout, and the fact that they haven't suggests that commodities are now being viewed as a safer place to be than equities. This is a stunning turn of events if it holds out going forward.

 

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