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Commodity Prices.. why so high?


Libspero
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Libspero

Pretty much as per title.

Mining shares are through the roof at the moment, but dropped suddenly today.    Out of curiosity I took a look at the P/Es and they are incredibly low..  some estimated at 3 or 4.  That doesn’t sound so frothy,  infact, it sounds like screaming good value..  so then why the sell off?    Ok,  let’s look at what they trade in..  all the metal commodities are crazy,  some nearly doubled in the past year..  so, that explains the mining valuations and P/Es,  investors clearly think the commodity prices are set to plunge back down again slashing profitability. Clearly the miners all think the same too because they are all rapidly paying down debt rather than expanding.

So..  long windedly,  my question is this.   Why are commodity prices so high?  Is there some kind of high demand or supply restriction,  or is this all just about commodity brokers and investors betting on it as an inflation hedge?   I know there is likely to be strong inflation,  but nothing that justifies commodities doubling in a year o.O

Big correction coming?

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sancho panza

It's a bit similar to a short squeeze in terms of pricing I suspect.Lot of demand got held back due to covid,as did production/invetories etc.Hence when deamnd shot back up,there wasn't the supply.hence the price rises.

It'll settle back down but likely a higher price than pre covid.

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SillyBilly

Agree with Sancho. Commodity producers don't sit in offices, it is deferred consequences of them not being able to produce as much for months of 2020 alongside an artificial jumpstart to the economy in demand terms coming out of lockdown. When everyone came back online there was no/little "stock" of anything and demand was also trying to capture some of its lost months prior on top of usual demand. Perfect storm really.

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HousePriceMania
14 hours ago, Libspero said:

Pretty much as per title.

Mining shares are through the roof at the moment, but dropped suddenly today.    Out of curiosity I took a look at the P/Es and they are incredibly low..  some estimated at 3 or 4.  That doesn’t sound so frothy,  infact, it sounds like screaming good value..  so then why the sell off?    Ok,  let’s look at what they trade in..  all the metal commodities are crazy,  some nearly doubled in the past year..  so, that explains the mining valuations and P/Es,  investors clearly think the commodity prices are set to plunge back down again slashing profitability. Clearly the miners all think the same too because they are all rapidly paying down debt rather than expanding.

So..  long windedly,  my question is this.   Why are commodity prices so high?  Is there some kind of high demand or supply restriction,  or is this all just about commodity brokers and investors betting on it as an inflation hedge?   I know there is likely to be strong inflation,  but nothing that justifies commodities doubling in a year o.O

Big correction coming?

I post this U.S. Lumber chart on the credit deflation/reflation thread now and again....

image.png.9f3e751e9b44f894d683af2f5702609e.png

There's bubbles everywhere.

I'd expect most commodities to follow this trend more or less now as people get back to normal and/or reality hits.

As an example, look at wheat prices post 2007.
 

 

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38 minutes ago, HousePriceMania said:

I post this U.S. Lumber chart on the credit deflation/reflation thread now and again....

doesn't that prove just how bizarre and 'gamed' markets have become? Prices back down to 1990s levels!!

Looks like some 'big boys' from the banks were playing games with lumbar....moved on from Gold, Silver, Pork Bellies etc for a while?

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HousePriceMania
18 minutes ago, nirvana said:

doesn't that prove just how bizarre and 'gamed' markets have become? Prices back down to 1990s levels!!

Looks like some 'big boys' from the banks were playing games with lumbar....moved on from Gold, Silver, Pork Bellies etc for a while?

The markets are rigged, handing trillions of pounds to people to "help the economy" just means they can use it to control and manipulate markets/people.

The problem is the central bankers, they are running a worldwide cartel now and will not stop.

This is a disaster for anyone who:

a) Lives on a normal wage

b) Buys into their bubbles at the wrong time.

I have no idea how this will all end but I cant see past "badly".

 

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11 minutes ago, HousePriceMania said:

The markets are rigged, handing trillions of pounds to people to "help the economy" just means they can use it to control and manipulate markets/people.

The problem is the central bankers, they are running a worldwide cartel now and will not stop.

you're preaching to the converted BRO!

I can see what they're doing, problem is, it's a bit of a cognitive dissonance mindfuk whether to make some dough riding on their coattails....

or

sing along with Frank Sinatra xD

 

Edited by nirvana
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