Is the Economic Storm Coming to an End?
Wednesday, September 3rd, 2008
By Mitchell Clark, B.Comm. for Profit Confidential
Is there a “sea change” in the works? Has the perfect storm ended and all will be well again? The answer is just maybe.
The commodity price cycle began with a run on gold, silver and other precious metals. Price spikes in these commodities began a global inflationary cycle, making raw materials for just about all products more expensive to produce.
Then, the commodity price cycle migrated to the oil and gas markets, which significantly accelerated the already rising inflation. With this trend, everyone was feeling the pain at the pump and at the hardware store.
Finally, the commodity price cycle decided that it would move to agricultural commodities and a whole basket of food staples became more expensive.
Now I’m beginning to wonder if the commodity price cycle isn’t shifting toward the end of its move. Don’t get me wrong; I’m not saying that commodity prices will all move lower tomorrow. My gut feeling is that the cycle is now graduating to a consolidation period, which will be followed by a slow, declining price trend that will last several years.
If this happens, the world’s inflation contagion will be significantly aided. This would take pressure off of the central banks, which want to raise interest rates. This in turn would help the housing market, which needs stability in order to right itself.
At the end of the day, the best thing that could happen to the economy is if a large basket of commodities would begin to decline in price. I can’t say when or how the commodity price cycle will change, only that something is going to give in the not-too-distant future.
Fortunately, the oil market is leading the price retreat at this time. It’s my hope that this price trend migrates to other commodities and we begin a new era of price stability and renewed economic growth.
Next Post: What’s up with the Selling in Chinese Stocks?Previous Post: What’s Going on with Oil
Tags: Economic growth, gold, interest rates, precious metals, silver
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
