The real reason commodities are tumbling

[FRED]

The real reason commodities are tumbling

JOHN HEINZL - Globe and Mail Update
September 10, 2008 at 6:00 AM EDT

To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.

Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.

“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.

“My attitude is, goddamn it, they're good … it was brilliant.”

To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.

The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.

According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets. more...

Hat tip to member Charles Mackay for finding the story.

[Jim Nickerson]

Re: The real reason commodities are tumbling

I made this same post under McKay's original post.

If whatever Coxe blames for the selloff in commodities did not exist as the cause or the possible cause, then something else would have caused the selloff, because no market I have yet seen goes up unendingly without selloffs. Anyone, please put up an exception.

http://stockcharts.com/h-sc/ui?s=$CR...642&a=90422087

I cannot debate Coxe's credentials, but if one looks at the 10-year CRB chart linked above, and compares it to the runup of the Nasdaq for the 10 years ending 12/2001 linked below, I guess one could surmise that the subsequent decline in the Nasdaq was the result "of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury."

http://stockcharts.com/h-sc/ui?s=$CO...d=p41664377108

I think within the last 2-3 months Coxe just opened a commodities fund in Canada. His timing to do that, at least for this short run, could not have been worse. I think were I he, I would like to blame someone else for my failure to recognize that markets do not go up undendingly especially after or during a parabolic move.

[Supercilious]

Re: The real reason commodities are tumbling

The real reason commodities are tumbling

JOHN HEINZL - Globe and Mail Update
September 10, 2008 at 6:00 AM EDT

To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.

Fed part of a conspiracy to manipulate the markets? Not possible.

The price of commodities is determined only by demand and supply fundamentals. There is no conspiracy. Please read more about the Peak Cheap Oil theory and the Dollar Ratchet.

[Tulpen]

Re: The real reason commodities are tumbling

Excuse my ignorance but how is John Heinzl supposed to know that?

He simply makes a statement here without any backing up of evidence or facts.

Did I perhaps miss something here?

[raja]

Re: The real reason commodities are tumbling

Fed part of a conspiracy to manipulate the markets? Not possible.

The price of commodities is determined only by demand and supply fundamentals. There is no conspiracy. Please read more about the Peak Cheap Oil theory and the Dollar Ratchet.

Good observation, Jim.

And $#* . . . very amusing

[jk]

Re: The real reason commodities are tumbling

if you read the globe and mail article, what coxe is saying is no different than what ej wrote in "it's called selling." coxe says the bailout of fanny and freddy was announced late sunday to goose financial shares in thin overseas trading. this pushed the hedgies to unwind their long commodities/short financials trades. furthermore the guaranty on gse debt supported the dollar and thus further weakened commodities. what coxe is adding is his surmise that the people at the treasury and the fed KNEW, or predicted, that those outcomes would follow their intervention.

[Milton Kuo]

Re: The real reason commodities are tumbling

I made this same post under McKay's original post.

If whatever Coxe blames for the selloff in commodities did not exist as the cause or the possible cause, then something else would have caused the selloff, because no market I have yet seen goes up unendingly without selloffs. Anyone, please put up an exception.

Residential real estate in Vancouver.

[Starving Steve]

Re: The real reason commodities are tumbling

Gut-wrenching corrections are a normal part of commodities trading; anyone who doesn't understand that doesn't belong in commodities.

If you are right about the mega-trend, use sharp corrections as buying opportunities and be prepared to wait. That is the first principle or first lesson of commodities trading.

The mega-trend is peak cheap-oil, and we have past the peak. Solar energy is a joke. What more is there to know?

Finally, the worst corrections in commodities can never do even one-tenth the damage to your net-worth that a divorce can do. Mr. Coxe is obviously a kid in his twenties, and he hasn't enjoyed life's experiences yet. :rolleyes:

[Supercilious]

Re: The real reason commodities are tumbling

Finally, the worst corrections in commodities can never do even one-tenth the damage to your net-worth that a divorce can do.

Only hurricanes can compare to the damage to your net-worth a divorce can do.

Think of this... Tropical storm are initially all warm and wet and after they hit you your house, boat and car(s) are gone leaving you in a deep state of depression...

This guy is obviously a kid in his twenties, and he hasn't enjoyed life's experiences yet. :rolleyes:

Donald Coxe is not in his twenties ....

	Donald Coxe

[LargoWinch]

Re: The real reason commodities are tumbling

Finally, the worst corrections in commodities can never do even one-tenth the damage to your net-worth that a divorce can do. Mr. Coxe is obviously a kid in his twenties, and he hasn't enjoyed life's experiences yet. :rolleyes:

First: Awesome on the above. This is exactly the difference between younger and older investors: i.e. appetite for risks and size of the portfolio. Makes more sense in early 30s to be 50% PMs, while older investors with more ressources would want a lot more cash and a lot more diversification.

Anyway, the TSX melted since July from above 15,000 to less than 12,500. Quite a ride.

Meanwhile, gas prices at the pump are up 13 cents per litre this morning from $1.23 to more than $1.36 in Toronto. In one day! People were furious and lining up at the pump last night. Here is the proof:

http://www.thestar.com/News/GTA/article/497921

So there you have it: Inflationary Depression. Just like the clip on the home page!

Meanwhile, 780sqf - 2bdr condos downtown are still going for more than $350K (7x+ median familly income in Toronto).

[Guest]

Re: The real reason commodities are tumbling

Fred - I read this and assumed that iTulip would disqualify it 100%. Are you guys modifying your original viewpoint towards greater complexity in the recent CRB selloff?

In other words, does iTulip now endorse, that what hit the entire CRB like a mack truck was in part a direct offshoot of the ESF manipulation to support the USD coordinated by central banks?

If so, then the takedown of PM's, alongside the entire CRB was indeed a "manipulation". It was merely an indirect one. This has seemed obvious to a few of us right from the start. The point to acknowledge going forward then would be that the PM's and the oil price are considered an adversary asset class by Central Bank, as their rise reduces the "room to maneouver" that CB's enjoy on fiat money and therefore those PM's as the flagships of the entire Commodities sector, are a natural target for regular "abatement" or "suppression" exercises by those beleaguered CB's?

And on the other end of the spectrum of "reasons" for the entire CRB spectacular collapse / correction of course is Starving Steve's explanation, which is ALSO right squarely on target. A quite natural and predictable correction off of a parabolic spike. But the point being, that it is ALSO, according to Charles Mackay submitting Coxe's thesis (and now with iTulip's implicit endorsement?), originating via, and therefore a product of, a currency "manipulation". In that case, the thread topic in the select forums where iTulip lays the responsibility for the PM sellof directly on the hedge funds would be presenting only half the story, right?
This query is not intended contentiously in the slightest. It is merely a request for clarification.

The real reason commodities are tumbling

JOHN HEINZL - Globe and Mail Update
September 10, 2008 at 6:00 AM EDT

To hear Donald Coxe tell it, the commodity selloff ripping through Canada's stock market is no accident. It is the result of a deliberate, brilliantly executed plan hatched at the highest levels of the U.S. Federal Reserve and Treasury.

Mr. Coxe is no paranoid conspiracy theorist. As the chairman and chief strategist of Harris Investment Management in Chicago, he is one of the most respected investment authorities in North America. He also happens to have lost about 10 per cent of his personal wealth in the commodity rout, which came at the worst possible time for his Coxe Commodity Strategy Fund that started trading in June.

“This has done more damage to my personal wealth than anything in the last 20 years,” he said in an interview yesterday. But he has too much respect for how the U.S. authorities engineered the collapse in commodities – a move he said was necessary to shore up the global financial system – to be bitter.

“My attitude is, goddamn it, they're good … it was brilliant.”

To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.

The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.

According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets. more...

Hat tip to member Charles Mackay for finding the story.

[Supercilious]

Re: The real reason commodities are tumbling

In that case, the thread topic in the select forums where iTulip lays the responsibility for the PM sellof directly on the hedge funds would be presenting only half the story, right?
This query is not intended contentiously in the slightest. It is merely a request for clarification.

What ???? On the premium content, the new party line is that hedge funds were involved in influencing the price of gold ????:eek:

Do they talk about dark pools, dark markets and ETN-like paper as structured investment elements that ballooned the price of gold ????:eek:

If they have the same explanation now also for the price of oil .... I might get a subscription .... you now ... just for a good laugh

[GRG55]

Re: The real reason commodities are tumbling

What ???? On the premium content, the new party line is that hedge funds were involved in influencing the price of gold ????:eek:

Do they talk about dark pools, dark markets and ETN-like paper as structured investment elements that ballooned the price of gold ????:eek:

If they have the same explanation now also for the price of oil .... I might get a subscription .... you now ... just for a good laugh

Those dark pools, dark markets and ETNs have been busy. Can't see why you limit yourself to gold and oil, given corn, wheat, soybeans, natural gas, aluminum, nickel, zinc and even lowly lead, among other commodities, all seem to be at some point in the same parabolic rise and fall as gold and oil?

Those dark market ETNs are sure busy, eh...;)

[bobola]

Re: The real reason commodities are tumbling

"Repurchase agreements involve a sophisticated use of government securities issued every day by the Fed, but little understood or followed, even by sophisticated investors.

A repurchase agreement, as defined by the Fed, is a government security offered by the federal government to a small list of specified primary government securities dealers, for a limited period of time, usually 28 days or less, with overnight return being the most common.

The government securities are "rented" by the primary dealers and they can be added to the primary dealer's portfolio or collateralized and then used in the open market to implement the Fed's open market policy.

At the end of the repurchase agreement, the Fed obligates itself to take back the government securities from the primary dealers, effectively canceling the contract.

Meanwhile, while holding the government securities let out by the Fed in the repo agreement, primary dealers are free to utilize the liquidity provided by the repurchase agreement to manipulate the economy in accordance with the Fed's true monetary policy, whether publicly declared or not.

Primary dealers use the funds provided by the government securities they hold under the repurchase agreements to buy dollar exchange futures contracts, stock market futures, or to buy commodities contracts, including gold mining shares, all in accord with implementing Federal Reserve monetary policy to manipulate currency, commodity and stock markets up or down, depending what goals the Fed wants to accomplish at any particular time, the economist alleges."


full article here; http://www.worldnetdaily.com/index.p...w&pageId=55601