Falling Asset Classes

By: Bob Hoye | Wed, May 28, 2008
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Meltdown In Base Metal Prices:

* * * * *

Grain Prices Are Toast:

* * * * *

The talking heads on TV as well as many commodity experts are still going on about soaring prices, but these two important sectors have had their blow offs and have failed.

In some cases such as copper, lead, nickel and wheat their bull markets accomplished the biggest percentage gains in over a hundred years. That is real terms as deflated by the PPI and the gains were greater, by far, than those with the typical bull market or even the best previous. Some examples follow.

The game to load up novitiates with commodities began some time ago and has come to fruition on this business cycle.

"Pork Bellies in Your Pension

"The bullish case is being vigorously espoused. Goldman Sachs...one of the loudest advocates of commodities has been urging large funds to keep 5% of their portfolios in commodities.

- Financial Times November 7, 1994

Financial institutions "investing" in commodities will eventually be seen as a great policy blunder. While a breach of fiduciary responsibility, the blunder has been in response to the most magnificent blunder in financial history - the sure thing that central bankers will be able to depreciate their currencies forever. This has been an ancient practice to serve ambitious government, and an insidious breach of accountability--otherwise known as policymaking.

When this writer started with Canada's premier investment dealer in 1963, the notion prevailing at the highest levels was that institutions should be mainly positioned in high-grade bonds. This was safe as chronic inflation was a disease that only afflicted Europe, or banana republics. This could not happen in Canada, or the US, and high-grade bonds would not increase in yield beyond 5%. The high was 15% in 1981, when bonds were universally scorned.

What asset class will fail next?

COPPER
BIGGEST BULL MARKETS SINCE 1900
(ADJUSTED BY PPI)

Start Peak Gain Subsequent Low Year
79
Nov. 2001
417
May 2006
428 % ? ? ? ?
98
Oct. 1994
262
Dec. 1988
167 % 79 2001
99
Nov. 1946
271
March 1956
174 % 126 1958
98
Nov. 1920
245
Apr. 1929
150 % 75 1932

LEAD
BIGGEST BULL MARKETS SINCE 1900
(ADJUSTED FOR PPI)

START PEAK GAIN SUBSEQUENT LOW YEAR
551
Oct 2002
4155
Oct 2007
654 % ? ? ? ?
507
March 1985
1,966
March 1990
287 % 507 1993
939
Dec 1975
3,249
June 1979
277 % 556 1985
739
Sept 1962
2,290
Feb 1965
210 % 939 1971
517
July 1932
1,964
Mar 1937
280 % 812 1938
616
Feb 1921
1,988
Dec 1924
223% 517 1932

CRUDE OIL
BIGGEST BULL MARKETS SINCE 1900
(DEFLATED BY PPI)

START PEAK GAIN SUBSEQUENT LOW YEAR
16.44
Dec. 1998
133.7 ? 715 % ? ? ? ?
18.91
March 1986
60.99
Oct. 1990
223 % 15.94 1998
14.59
May 1973
82.34
March 1980
464 % 18.91 1986
4.22
May 1933
18.10
Jan. 1950
331 % 14.59 1973
6.13
May 1915
30.69
Dec. 1920
403 % 4.22 1933

Source: TheChartStore.com

 

Link to Friday, May 23, 2008 'Bob and Phil Show' on Howestreet.com:http://www.howestreet.com/index.php?pl=/goldradio/index.php/mediaplayer/863

 


 

Bob Hoye

Author: Bob Hoye

Bob Hoye
Institutional Advisors

Bob Hoye

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

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austrian-money-supply/