Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Stocks 2014 Winning Surprise!

Commodities / Gold and Silver Stocks 2014 Jun 21, 2014 - 07:11 AM GMT

By: Ned_W_Schmidt

Commodities

Half of 2014 is nearly behind us, and little is turning out as popularly expected. That is unless one was watching development of the past year with an unbiased view. As can be observed in the following chart, the GDX, a Gold stock ETF, has been a stellar performer thus far this year. The return on that ETF has far exceeded that widely available in most of the equity markets, and certainly far more than the NASDAQ, a market filled with Techno/Junk. Part of the reason for that stellar performance is that $Gold, Agri-Food Prices, and oil have all staged nice rallies based on strong demand, which was certainly not anticipated by most of the investment community.


Agri-Food Price Index versus Gold, Oil, DJIA, S&P500, FTSE and GDX Chart

The change in the ranking of returns being observed this year is not a chance event. Rather, these returns flow from fundamental changes taking place. Gold has risen this year as the dollar, measure by an unbiased index of foreign currencies, peaked in January. Foreign exchange markets have correctly assessed the dismal outlook for both the U.S. economy and stock market.

Agri-Food prices have risen on continued strong demand. The Federal Reserve maybe able to create high-powered money, but it cannot produce a calf. A popular media report this past week has been "Price Index for Meats, Poultry, Fish & Eggs Rockets to All-Time High" by Ali Meyer of cnsnews.com, 17 June. Per this report,

"The seasonally-adjusted price index for meats, poultry, fish, and eggs hit an all-time high in May, according to data from the Bureau of Labor Statistics (BLS). In January 1967, when the BLS started tracking this measure, the index for meats, poultry, fish, and eggs was 38.1. As of last May, it was 234.572. By this January, it hit 240.006. ByApril, it hit 249.362. And, in May, it climbed to a record 252.832."

The movement higher in Agri-Food prices is not a transitory event, but rather is the consequence of rising demand around the world. Prices for U.S. feeder steers are at all time highs, suggesting that the end to the rising price of beef is not likely till next year. Steaks are not produced in a factory. Corn and soybeans have recently been selling in the U.S. at prices that will likely be lifetime lows. The food in your freezer has outperformed most equity portfolios thus far in 2014, and will likely continue to do so.

Out of the above comes an important question. Will the rising prices for the above commodities combine with the irresponsible monetary policy of the U.S. in recent years to cause inflation to rise? The chart below suggests that yes might be the answer to that question.

CPI Chart

In the above chart, created using data from the Cleveland Federal Reserve Bank, the solid black line is the year-to-year change for the U.S. consumer price index. Red line, which may be of more interest, is the year-to-year percentage change for the median CPI produced by the Cleveland Fed. That index is the median monthly change for the components of the CPI. Half of the component measures rose by more than the median and half have monthly changes below that measure. The median value is not as strongly influenced by extreme values and the fundamental flaws in the construction of many components of the broad CPI. For those reasons, it may be a more useful measure of central tendency.

In that chart two periods have been highlighted by lines of green triangles, labeled Inflation Support for lack of a better term. Note that in the early part of the graph, the year-to-year change for the median CPI persisted at or slightly above 3%. During that time period the headline CPI rate of change plunged to a near 1% rate of change. The median CPI was telling us that the headline CPI was incorrectly assessing inflationary pressures. From ~2% in 2007 U.S. inflation rose to more than 5%, or more than doubled.

Now consider the most recent era. Again, the median CPI is suggesting that the headline CPI is giving a false impression of inflationary pressures. The information provided by the median CPI combined with the fact that the popular CPI measure has already turned up suggests that U.S. inflation is headed higher. Will it only "double" this time? Or will the combination of global needs for Agri-Food and oil send it for higher?

In a world of potentially higher U.S. inflation when the Federal Reserve is already tightening, investment complacency could be a costly error. Relying on fantasies of higher U.S. economic growth could cost considerable money. The most vulnerable group of equity investments in such an environment would be the "growth" stock fantasies which have again become so popular. Investing in "value" stocks, which has been shown to be far more successful on a historic basis, should regain investor interest. That suggests investors take a closer look at Agri-Equities and Gold.

Ned W. Schmidt,CFA is publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food Super Cycle, and The Value View Gold Report, a monthly analysis of the true alternative currency. To contract Ned or to learn more, use either of these links: www.agrifoodvalueview.com or www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in