Commodity Trade Mantra

A Bloodbath : Commodities Cheaper than during the 2008 Financial Crisis

A Bloodbath : Commodities Cheaper than during the 2008 Financial Crisis

A Bloodbath : Commodities Cheaper than during the 2008 Financial Crisis

Commodities are getting crushed.

The Bloomberg Commodity Index (BCOM), which tracks 22 different commodities, just hit its lowest level since April 2002.

Commodities as a group are now cheaper than they were during the financial crisis.

We told you yesterday that gold hit its lowest price in five and a half years. It’s just one of many commodities struggling right now. The price of coffee is down 27% so far this year… sugar and lumber prices are both down 22% this year… and a barrel of crude oil costs half of what it did a year ago.

A strong US dollar is one big reason commodities are struggling. The dollar is up 21% this year versus an index of major currencies. When the dollar goes up, the price of “stuff,” like oil, gold, and corn, usually goes down. As you can see, that’s exactly what’s happening…

Also, some investors think the Fed will raise rates later this year. That’s hurting commodities too, as Bloomberg explained

Raw materials are losing favor with investors as the dollar gains amid signals from Federal Reserve Chair Janet Yellen that the central bank may raise rates this year on the back of an improving US economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities.

•  At least one industry is benefitting from the commodities crash…

Oil supertanker stocks are doing well… and cheap oil is a big reason why.

Oil supertankers are the gigantic boats that carry oil across oceans. According to the Financial Times, these companies are loving low oil prices…

For the big tanker companies such as Euronav, DHT Holdings, Teekay Tankers, Frontline, and Nordic American, the oil market rout that started in 2014 is a boon that could allow them to reduce debt, invest in new vessels and reward shareholders that have stuck with them through the lean years.

With oil prices 50% below what they were a year ago, demand for oil has surged. That’s caused a boom in oil shipping. Supertankers are now charging 50% more to ship oil than they were one year ago. The “benchmark” supertanker price just reached a seven-year seasonal high of $93,000. It measures the cost to ship oil from Saudi Arabia to Japan.

The Financial Times continued…

A cyclical and volatile industry prone to booms and busts, the tanker market has three main drivers: demand for oil, the distance between producing and consuming regions, and the supply of new ships. They are all positive at the moment.

“It’s a very favorable environment for ship owners,” said Svein Moxnes Harfjeld, joint chief executive of DHT Holdings, a big tanker company. “Companies such as ours are generating a lot of cash.”

DHT Holdings (DHT) is up 16% in 2015. Other big oil tanker companies are up even more. Frontline Ltd. (FRO) is up 19%, and Euronav (EURN) is up 33%.

•  Big banks continue to post strong results…

Last week, we mentioned that big US banks like Bank of America (BAC) and Citigroup (C) have been reporting strong second quarter earnings.

Yesterday, investment bank Morgan Stanley (MS) reported earnings… and it posted the biggest revenue increase of the “Big Six” US banks. The Big Six are JPMorgan Chase (JPM), Goldman Sachs (GS), Citigroup, Bank of America, Wells Fargo (WFC), and Morgan Stanley.

Morgan Stanley’s second quarter revenues rose 9% from last year. Earnings also beat analysts’ predictions. Morgan Stanley’s investment banking and trading division brought in $5.17 billion, a 22% increase from a year ago.

Morgan Stanley spiked as much as 4% in early trading yesterday but ended the day down 0.4%.

•  Greece has reopened its banks… with one huge caveat

Regular readers know that we’ve been following the Greek situation closely. In late June, the Greek government closed the nation’s banks to stop people from withdrawing money when it looked like the banks might fail.

On Monday, Greek banks opened for the first time in three weeks. But there are still severe restrictions in effect. Greek people can only take out €420 ($455) per week of their own money. If they need more than that to pay a medical bill or fix a broken down car, too bad.

Situations like these are exactly why we recommend owning physical gold and silver. The government controls any money you have in the bank. At any time, the government can decide that you’re not allowed to touch it. And there’s nothing you can do about it.

Owning physical gold and silver ensures that you’re not at the mercy of your government. That’s why people have bought gold for thousands of years… to protect their wealth during a monetary crisis. It’s the only way to keep your wealth safe when banks close and the government won’t let you touch your own money. It sounds like a nightmare, but it’s reality for people in Greece right now.



Courtesy: Casey Research

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