Morning Note: No Rush to Rescue Us From Inflation

While commodities (save for gold [which one might argue is a currency]) are (unlike yesterday) not showing any immunity to this morning’s dip in equities, for the moment we’ll attribute these inevitable down moves to profit-taking after what I’ll call a massive, unsustainable runup — as I’ve been pointing out/anticipating in recent videos.

But the thing about the resource space is that it lacks the resources (capacity) to produce the quantity of resources (at yesterday’s prices) an economy coming out of lockdown — while being fed by non-stop money printing and government spending — demands. Hence, well… inflation — particularly in commodities…

And, as we’ve also pointed out, we don’t see a mad dash at this point to aggressively expand production capacity. Per Monday’s Wall Street Journal article Despite Lumber Boom, Few New Sawmills Coming::

“Executives in the cyclical business of sawing logs into lumber said they are content to rake in cash while lumber prices are sky-high and aren’t racing out to build new mills, which can cost hundreds of millions dollars and take two years to build from the ground up.”

“Home buyers and do-it-yourself-ers, who are paying more than four times the normal price for lumber, would like for that to happen. But they are flush thanks to historically low borrowing costs, rising home values and government stimulus. Demand has been unbowed by escalating prices.”

Now, make no mistake, as we’ve been pointing out, while commodities prices will indeed dip (they’re overdue), perhaps a lot, in the short-run, our current assessment is that odds favor that we’re in the early stages of one of those long multi-year bull markets that are historically typical of the space.

Three of the Asian markets we track were shuttered overnight, of the 13 that were open, all but one took it in the chin.

Europe’s taking a beating as well this morning, with all 19 of the bourses we follow down notably.

As are U.S. equities: Down down 515 points (1.51%), SP500 down 1.45%, SP500 Equal Weight down 1.65%, Nasdaq 100 down 1.121, Nasdaq Comp down 1.29%, Russell 2000 1.91%.

The VIX (SP500 implied volatility) is up 20.62%. VXN (Nasdaq 100 i.v.) is up 12.74%.

Oil futures are down 3.77%, gold’s up 0.79%, silver’s down 0.52%, copper futures are down 3.45% and the ag complex is down 1.83%.

The 10-year treasury is up (yield down) and the dollar is up 0.14%.

Solar stocks and gold are our only two core positions in the green so far this morning. Our biggest losers are MP (rare earth miner), oil services stocks, metals miners, uranium miners and energy stocks. Overall our core portfolio is down 1.15% to start the day.


“Bad ideas is good, good ideas is terrific, no ideas is terrible.”

Code breaker Lenny Baum 

Have a great day!

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