We are not so interested in commodities in USD terms we are perhaps more interested in commodities in non USD terms. Last week was key for commodities in breaking out against the USD, but we think that this was merely chapter one! Multi-week highs in commodity prices in USD, EUR, CHF, GBP, JPY, and CAD terms = global inflation! The behaviour of the US long bond (30yr) would have us all believe that inflation is not a problem, but the behaviour of the commodity market, in whatever currency takes your fancy, is telling something completely different!
It is looking increasingly likely that commodities are about to break higher in non USD terms and this is where the “meat” of the commodity story lies! The final nail in the coffin of the deflationists will be when commodities in AUD terms break higher. We think this occurrence will happen before year end!
When commodities break higher against the AUD watch out holders of TLT and IEF…..we think you will be better served by being long TBT!
Our wealth creation portfolio is up 20.94% since the beginning of the year with approximately 40% of the volatility of the S&P 500. This portfolio is not leveraged.
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