Commodities

Commodity prices in general have been soaring for almost one year and based on year over year returns are now at levels only seen a few times. Though very often prices, specially for assets wide traded, usually front run the real economy, with some time in our favor it is possible to at least question those price actions. Possibly could be too early to question that but its getting intriguing in my humble opinion.

Some charts and thoughts below:

Commodities (equal weighted index) YoY + 2 standard deviation.

In the meantime global trade volume (CPB data) have improved somewhat but hardly to the same extend as commodity prices. Last time we have seem those price levels trade volume were running at 5 to 10% against 3% now on YoY. (trade volume LHS)

using the two Y axes:

by the way, its also interesting how trade volume is weak and lagging behind some other economic measures that it used to have some correlation like the US ISM PMI.

Built this easy model to figure out at least to some extend if prices have been running too wild.

Used DXY, real USD yield, global trade and VIX to model it. (R2=0.60). Not perfect but can give some idea. Data up to December (because of CPB global trade).

Finally, another point made by some people is the level of inventory of some commodities, specially iron ore. I have no data to work here on my own so just relying on others. But they seems to point on the same direction. Commodities could be going a bit ahead of itself.

(can't remember now the source of the chart above)

Comentários

Postagens mais visitadas deste blog

It's no different this time...but the "timing"...

One of the biggest question (or the billion question) now is probably if the world and US is heading to a recession as the late cycle is not even a question any longer, as recent ECB and FED turn in monetary policy shows. After a few years of a synchronized global growth ( Link ) a very sharp deceleration in activity awoke markets and central banks late last years. To make things even scary in the market perspective the famous and widely watched 10 years minus 3 month US treasury curve went through the negative territory also (for the more optimists the 2Y x 10Y is still positive). If not big part of the problem trade wars certainly didn't help a late cycle economy but its hard to tell by how much. So this time is no different many would say. And they are right However (yes), the timing could be a bit different this time. First there are some signs of stabilization already on OECD composite leading indicators for Europe (who would guess that!!!) and china, with both impacting

What about the USD now?

Its no news that FX market is probably one the of the hardest to "predict". Maybe that's why I like it most, so I can be wrong very often and use this excuse..."its hard". Seriously, "predict" is not the perfect word to use for most of the financial assets because its a impossible task and carries a burden of a exact value, as many expect it to be. Instead, what is possible is to access all important variables and estimate the likely path, the odds, levels and so on. Even so its nto easy, but we do it. We need to (at least to answer those friends and relatives that always ask "Should I buy USD now or later". I like to compare the FX market with weather forecast - now weather seems to be a more exact science!!! We have longer term forecasts that has to do with cyclical factors like the 4 seasons. For the time horizon of weeks and months they measure pressure, currents, water temperature and many others to gauge what the weather will likely

Brazil: stocks and the real economy

There has been a very big ongoing disconnection lately between stocks and the real economy in Brasil. If in on hand we have seen stocks making new highs (nominal in BRL) and business confidence improving, on the other hand jobs, industrial production and IBC-br, a gauge for the GDP, seems to all have stalled. We could discuss if prices and expectation leads the economy or the other way around, and in fact looking for the historical data both things happen. Sometimes expectations and stocks are high and lead, sometimes not, specially if we add political risks that strongly affect how the economy will be five or ten years form now, which pretty much seems to be the case right now with the pension reform still ahead in the pipeline. The reform (or not) could affect future prices and the economy in many ways. Country risk (and CDS) could sky rocket affecting the currency, treasury rates, corporate funding, depressing investments and so on if not approved. On the other side if approved we c

Plato's Bunker

Pesquisar este blog