Is this 1980 Part 2?
While I thought the commodity bubble was coming to a close, I thought it'd get at least one more run. With the dollar setting a long-term bottom at 70 on the dollar index chart, it was inevitable that commodities couldn't run much higher. However, the speed and severity seen in the collapse of oil, nat gas, corn, the euro, and gold makes me think it's all over and we're repeating 1980 where cries of "END OF THE WORLD" were replaced with cries of anguish from gold/oil owners within a year. Gold and oil would both almost immediately lost half their value.
Now, we see the Euro utterly collapsing this week to a mere 1.5. Every goldbug was hollering that we were going to bust through 1.6 the moment the bailout fiasco was signed, but no. The dollar has buyers here for good reason, we are less doomed than our competitors. The US has the world's strongest military and economy while Europe and Japan have a rapidly aging workforce, absolutely unfundable SS programs (making ours look downright conservative) and onerous regulation that stunts business. Clearly the dollar has broken out and is heading much much higher--the amount of short covering that needs to occur on the FX markets is momumental--counted in tens of trillions of dollars. Clearly a skyrocketing dollar drives more stakes into the bedraggled oil/nat gas/corn/gold sector.
We see the reality sinking in faster in the stocks, check out a GG to see how people have suddenly gotten a grip on reality. 52 to 31 in a month! People see the future--and it's lights out for the commodities. Downwithinfidels has sunk from the top 5 to #88 at this writing! And a frequent critic of mine--TMFsinchiruna has seen his score drop from 2300 to 312 and his rating from 99+ to 82. That's the problem with bubbles, you never know when to get out and get left holding the bag. I think gold bounces off 750 or 800 pretty solidly and producely inducing enough false optimism to get you out of your gold/silver plays with a decent chunk of your capital. Oil should find a short-term bottom soon--I thought we had it yesterday than the euro's plunge today took that out--but oil should bounce long enough to get you out of USO around 100 before the down elevator turns on again.
One final note: CAPS player BullmarketN09 has been here less than a month and yet is #20 in the game. He went short oil long financials. He will be doomed by the long financials eventually, but his short oil plays have worked beautifully. It's been interesting watching the goldbugs get unceremoniously thrown out of the top 100 of CAPS while people short oil and long financials have taken their place.