You have to feel sorry for commodity investors. At least those who have not listened to me. They’re getting clobbered, not just in gold, but in just about everything related to commodities.
The Bloomberg Commodities Index — an index comprised of energy prices, grains, industrial metals, precious metals, soft commodities like coffee and sugar and meats — has plunged to a 13-year low, shedding more than 45% since its April 2011 high.
The widely watched Global Commodity Equity ETF (CRBQ) has plunged 22.3 percent since last June, 11.8 percent just since the middle of May.
The losses are everywhere. Gold at a five-year low, down nearly 41% since its September 2011 high. Mining shares at a 14-year low. Copper, down a whopping 49 percent since its 2011 high. Platinum at a six-year low, down 59% since March 2008.
Oil prices are down a whopping 66 percent since July 2008 and an incredible 20 percent in just the past four weeks, just as I had forecast.
I hate to say I told you so, but I did. Way back in September 2011 when just days after former Fed Chairman Bernanke announced QEIII and gold nosedived …
I told you the party was temporarily over and commodities (and the world) were headed into deflation.
Thankfully, Money and Markets subscribers weren’t a part of the clobbering. And my Real Wealth subscribers are enjoying better than a 15 percent year-to-date gain — despite the commodity train wreck.
More damage is coming in commodities. They have not yet bottomed. But in the not-to-distant future — when they do bottom — you will see one of the greatest bull markets ever in commodities …
Not because of inflation mind you, but because the world will finally realize the emperors — western governments — have no clothes, that they are bankrupt and failing.
And you can bet I’ll be right on top of it for you, helping you to ride the new commodity bull market, when it comes, to its full glory.
We had a flood of responses to my column yesterday. I enjoyed reading them. Let’s take a look at a few of them.
Reader Bill writes …
“Here are some questions on your Convergence report If conditions get as dire as you predict for 2015-2020 (and I agree they very well could) …
1. What contingency plans do you have if the following conditions obtain for a prolonged period?
The markets are closed and we can’t execute your recommended trades
The banks are closed and we can’t get access to our accounts to meet investment commitments.
The Internet is down and we can’t get timely updates on trades.
2. If, as you say, we may face a situation where ‘no man’s life and property are safe,’ who picks up the ball, keeps the charts current and publishes the buy and sell recommendations if (heaven forbid) something happens to you?”
My response: Great questions, Bill. However, keep in mind the next crisis is going to be in the government sector, not the private sector. In other words, anyone dependent upon government work or benefits will suffer the most.
Will there be banking problems? Yes, there will be. Which is precisely why I am keeping most of my money outside the banking system.
As to your second question, again, the private sector will survive, and in some cases, actually thrive. I will be here throughout, so no worries! — Larry
Reader Jason writes …
“It’s no news that gold is at times an amazing play and other times a catastrophic play. Fortunes are made or lost on timing. I am grateful for Larry’s work because, without it, I am certain I would be right along with all the other emotional buyers and sellers losing as much as I possibly could and certainly more than I could afford to lose.”
My response: Thanks for the compliment, Jason. And you are 100 percent right: There is a time to be in gold, and a time to be out. Just as there is in any investment. Getting married to any investment is a sure fire way of losing money, lots of it. — Larry
Reader Stu writes …
“Hi Larry — Cashless, electronic currency still equals fiat money! Contrary to conventional thinking, gold is the ultimate currency as it has no debt attached to it.”
My response: Actually, Stu, a gold standard is fiat money. Why? Because the powers that be can change — and did change — the relationship between gold and the currency.
Indeed, the word “fiat” is actually misused. “Fiat” means “an official order given by someone who has power; an order that must be followed.”
Today we have money that is subject to free market forces, the waxing and waning of confidence or lack of confidence, in a country, its leaders, its economy.
That is a far better way to go, and why a gold standard never worked. A gold standard is like fixing the price of something. Price fixing never lasts and always blows up, with negative consequences, both for those who fix the price, and those who invest based on a fixed price.
Free floating currencies are far better than fixed currencies, no matter what they are fixed to.
After Iran, is North Korea next? Don’t hold your breath. The communist country’s government said it has no interest making a nuclear agreement with the U.S. in view of what it calls Washington’s “provocative” policies. The statement from North Korea was its first response to the deal reached between Iran and six global powers designed to limit Iran’s nuclear weapons ambitions.
One company that appears to be hurting overseas because of the stronger dollar is the iconic American brand of Harley-Davidson Inc. (HOG). Still, the motorcycle maker turned in a better-than-expected net profit of nearly $300 million for the second quarter. That was down about 15 percent from the year-earlier figure. The company, based in Milwaukee, said the company’s operating income was hurt by fewer motorcycle shipments as foreign competitors offered lower prices. It said its worldwide retail motorcycle sales fell to 88,931 in the quarter, from 90,218 in the same quarter a year ago.
Are there others out there? We may soon find out. A new effort, known as Breakthrough Listen, will spend $100 million in a 10-year search for extraterrestrials. The project will involve two large radio telescopes to search for radio signals and an optical telescope to look for evidence of laser communications. Yuri Milner, a Russian entrepreneur, has promised the money for the venture, which will also involve Stephen Hawking.
What about you? Are you expecting that we’ll find life outside of Earth? Want to comment on any of Larry’s above views or on any other matter? Click here to join the conversation.
The Money and Markets team