Friday, May 29, 2009

Commodities Spike Up: Here Comes Inflation

Well, the eye of the storm appears to be passing, and the winds of inflation are picking back up. Take advantage of the low prices now to stock up, before the inflation hits the consumer level.

The interest on the long bond is continuing to rise, which will quickly wipe out the idea of housing recovery. Don't buy into this false real estate bottom. As mortgage rates rise up, the price of housing will fall.

Layoffs are going to be a huge problem going forward as well, as we have just begun to see the government cutting bloodbath, not to mention the collapse of the American car industry.

With joblessness, cost of living, and interest rates rising, combined with the negative supply trends of reverse migration and an aging population, the housing market is in for a long long fall. No need to rush there.

Commodities headed for the biggest monthly rally in 34 years, led by energy, as the slumping dollar boosted demand for raw materials as a hedge against inflation.

In May, the Reuters/Jefferies CRB Index of 19 energy, metal and agricultural prices has gained 14 percent, the most since July 1974. The dollar was poised for the biggest monthly drop since August against a basket of six major currencies.

Crude oil was set for the biggest monthly gain in a decade. Gasoline has soared more than 30 percent in May. Gold copper surged, while corn and soybeans reached the highest since September.
Crude-oil futures for July delivery rose $1.10, or 1.7 percent, to $66.18 a barrel on the New York Mercantile Exchange. This month, the price has jumped 29 percent, the most since March 1999.

Gasoline futures for June delivery rose 1.64 cents, or 0.9 percent, to $1.9269 a gallon. In May, the price has surged 31 percent, the most since March 2006.

Today, cotton jumped the most allowed by ICE Futures U.S. in New York. Gold futures topped $980 an ounce, and silver was poised for the biggest monthly gain in 22 years.