Twilight of the Gods
By Sean Corrigan
AT DIAPASON, we typically approach between the main sectors – energy, metals and agriculturals – or
the specifics of how investments in even to choose the weightings of individual components in our more
commodities should be undertaken by active products.
imagining a super-position of three, In trying to gauge the second curve we focus on business activities,
highly-schematic graphs, which take not – like most of the mainstream – on the consumer. As explained
the following form: in our study
2
Putting the Hayekian Horse before the Keynesian Cart ,
•
Firstly, a rising straight line to repre- business spending in a developed economy dwarfs that of end-con-
sent the steady secular upswing occa- sumers and is much more volatile, while the profitable conduct of
sioned by the contemporary industri- business is what ultimately generates all incomes, whether through
alisation and urbanisation of a large the entrepreneur’s payment of wages, dividends, interest, rent, or
part of the world’s population. (alas) taxes.
•
Secondly, a sine wave to show the Worrying about whether consumers will show up when the shops
cyclical fluctuations likely to take open is only justifiable to the degree that they have been supple-
place around this. menting their income through some form of non-saved borrowing
•
Finally, the manic-depressive overlay and may therefore suddenly decide (or be forced) to live once more
of financial market hyperactivity. within their means, without freeing up funds for another to spend in
their place.
To monitor the first of these It could be argued that elements of this May are at work in today’s
[Braudel’s
1
la longue durée ] is the eas- America. If so, they have been largely offset by a combination of the
iest task – if not a wholly trivial one. higher wages and more numerous jobs offered to workers whose
This is because the conviction that one upkeep has proven a relatively remunerative outlay for US business-
is witness to the unfolding of a major es. Given this, we can revert to original thesis that what we need to
socio-economic phenomenon is not a watch is business activity, not retail sales.
judgement which lends itself to much Stateside, this has been somewhat anaemic of late, with manufac-
in the way of short-term revision, turing sales and orders admittedly off their spring lows, but still lower
although this is not to say that risks to in real terms than a year ago. This has left them effectively stagnant
over the course of more than a decade. Non-oil import growth has
“When the music stops, in terms of liquidity, things will
also slowed – a feature which has been reflected in a deceleration in
the pace of Asian exports – while, Canadian, Japanese and Europeanget complicated. But as long as the music is playing,
industrial production has also levelled off this year.
you’ve got to get up and dance. We’re still dancing.”
With labour costs beginning to rise, several key name companies
Citigroup CEO Chuck Prince, FT Interview, July 2007. are complaining of a margin squeeze in their latest earnings reports
– even before the sharply higher cost of finance which they will soon
this trend do not, in fact, exist. These incur is taken into account. The Western corporate sector does not
risks are mainly political, rather than therefore seem likely to provide the same measure of impetus in the
economic, in nature which means that months ahead as it has so far in this cycle. Strike one for industrial
they may be a matter of unforeseeable commodities over the next few quarters, then.
electoral caprice. Nonetheless, the
prospects for higher taxes, increased
... we revert to original thesis that what we need to
royalties, outright confiscation, protec-
watch is business activity, not retail sales
tionism, environmental Luddism, and
war – to name but a few prevailing evils The New Model Army
which might one day derail it – will yield The last of our three curves (under normal circumstances) would
to analysis in broad terms, at least. lend itself to management on the shortest of tactical timescales. It
Given the relative constancy of this is principally concerned with positioning, momentum, and other
primary trend, it is the phases in which technical clues as to the Herd’s remaining capacity to respond to (or
the latter two components find them- its potential to recoil from) the ongoing ‘fundamental’ news flow.
selves which therefore determine However, the vast upheaval we are all currently attempting to
whether we either temper or intensify negotiate has moved such considerations onto a higher plane entire-
the degree of exposure to that trend. In ly. Today, the sheer scale of the disruptions being experienced by the
addition, we can use our assessment of shock troops of high finance as they buy and sell the disembodied
them to help shade our allocations symbols flashing on their monitors in a frantic, quadrillion dollar
34 SEPTEMBER 2007 COMMODITIES NOW
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