Mmmm…..Commodities

July 22, 2023 Leave a comment

I am warming to #commodities.

Readers of my posts may note that I’ve been bearish commodities for about 15 months, which was soon after the Russian invasion of Ukraine.

I have a host of reasons for my commodity bullishness but the study below helps paint a correlated picture to support my broader thinking.

When the U.S. Inflation Rate (blue) ventures below its 50 month moving average, it trades 2.5 standard deviations below its rolling monthly mean and also registers an oversold RSI reading….it seems to coincide with a Buy signal for commodities, with the S&P Goldman Sachs Commodity Index represented in orange.

This chart reprises one posted 6 days ago.

July 22, 2023

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with

Oversold Inflation Rates is a signal to buy Commodities

July 4, 2023 Leave a comment

When the U.S. Inflation Rate is Oversold whilst also trading below its 50 month moving average, then it’s time to ponder accumulating commodities.

I’ve circled the 8 notable moments this has happened over the past 40 years.

We may be approaching another such moment.

My recent writings muses that U.S. inflation may have one more dive to the 3.5% region in the coming monthly reports and this should be enough for the stars to align.

The chart below plots the U.S. Inflation Rate (blue) against the S&P Goldman Sachs Commodity Index “SPGSCI” (orange).

July 4, 2023

by Rob Zdravevski

Karri Asset Advisors

rob@karriasset.com.au

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Commodities are back on my radar

July 4, 2023 Leave a comment

I use this ratio (in blue), being the Wilshire 5000 Total Market Index divided by the S&P Goldman Sachs Commodity Index (SPGSCI) to help identify when equities are either cheap or expensive relative to commodities.

Readers may piece together that I have bearish on commodities for the past 15 months or so.

I have circled 13 notable periods over the past 30 years when this ratio was overbought on a weekly basis.

Commodities are now entering such a period of being relatively attractive compared to equities.

July, 4, 2023

by Rob Zdravevski

Karri Asset Advisors

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , ,

Too much sugar is bad for you

May 1, 2023 Leave a comment

Sugar has surged 27% over the past 6 weeks.

Furthermore, it has risen 50% from a low seen on November 1st, 2022.

The chart below shows an empirical study of the percentage that the price of sugar has traded above its 200 week moving average.

Ordinarily, such rising inputs would normally affect the margins of chocolatiers, confectioners and soft drink manufacturers, however it seems these companies have managed to pass on higher costs under the story of wide spread inflation.

Many of their stock prices are performing very well.

The rising price of sugar is also a boon to sugar cane growers (with Brazil and India being the world’s two largest producers) and those around Mackay, Queensland.

Today, the price of sugar is trading in rarified air.

It is also registering overbought tendencies.

And when my analysis incorporates the outsized ‘long’ positions in the Commitments of Traders then I will recognise it as the momentum trade that it is.

In other words, the probability of higher prices diminishes under the current conditions and any unwinding of those non-commercial ‘trading longs’, can see a sharp drop and test of that 200 week moving average.

May 1, 2023

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , ,

No more juice to squeeze

February 15, 2023 Leave a comment

Selling Orange Juice is one of the ‘bigger’ actionable calls at the moment.

The chart below shows it on a MONTHLY basis, not my normal Weekly views.

Overbought, it’s miles above its 200 month average and trading at 2.5 standard deviations above its rolling monthly mean.

The ‘fat part of the trade’ has been had.

Only the 4th such occurrence over the past 20 years.

Put another way, I wouldn’t be a buyer here.

Who is buying?
Often it’s food companies either panicking or needing to buy and secure OJ for their bottled product.

February 14, 2023
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment Tagged with , ,

When are commodities cheap?

November 10, 2022 Leave a comment

Commodities are cheap when the CRB Index trades below its 200 week moving average and registers a weekly Oversold reading.

Presently, the heavy weighting of the energy complex is keeping commodity indices at elevated levels.

In fact, todays pricing is at levels exhibiting similar stretched moments prior to the CRB Index converging towards its 200 week moving average.

Keep in mind, that this is a study of the CRB Index, for selected commodities are in their own ‘cheap’ territory such as Copper and Iron Ore.

November 10, 2022

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , ,

AUD/USD – it’s time

October 11, 2022 Leave a comment

The next and perhaps last point for the AUD/USD in this last downward leg sits around 0.6210 (+/- 20 basis points)

The AUD/USD is entering a 5th moment of being Oversold in the past 8 years.

This can be paraphrased by saying we are in the vicinity and ‘it’s good enough’.

So, I’m selling some USD and buying AUD.

This currency low and pending reversal or reversion will also has have affect on assets such as Copper, Oil and Gold.

October 11, 2022

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

Picking out the cheap commodities

September 19, 2022 Leave a comment

I am constructively bullish about commodity prices, however that opinion is not broad nor blindly so.

I’m working on how to express my best ‘absolute’ view in a specific commodity or theme. Buying scarcity and those who have capacity will be a key criteria.

I remind myself that commodities can trade sideways (as Rio Tinto did for 7 years) and the broader CRB Index had for a 10 year bear market.

While I find analysis on a ‘relative basis’ irksome, commodities are nearing another visit to being inexpensive relative to equities, as the CRB Index to Wilshire 5000 chart shows.

September 19, 2022

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with ,

The effect of currencies on income statements

September 12, 2022 Leave a comment

And the corporate effect of what todays earlier currencies post translates to…..

AUD high against Yen, Euro and Sterling

Aussie companies selling products into Europe, the UK and Japan have been seeing weaker receipts, while those selling to U.S. customers or in USD denominated products (commodities) are booking handsome profits on favourable currency differentiation.

Japanese and European assets are considered cheap for holders of Australian Dollars while Americans (and their corporations) may see Australian assets as being ‘on sale.

Expect those respective benefits to wane while these ‘extreme’ currency movements correct and consolidate.

On a side note, the almighty strength of the U.S. Dollar seems to be a surprise……

2 years ago, I wrote this note when I remember reports of the pending death of the U.S. Dollar to be palpable.

Reports of the U.S. Dollar’s death are largely exaggerated

Today, there doesn’t seem to be an opposite case against the bullish prospects of the U.S. Dollar.

September 12, 2022

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

Not trusting some of the signals

September 9, 2022 Leave a comment

In the short-term, markets look like they are about to play a little game which can be considered cruel.

‘Set-ups’ are suggesting rallies and lending to the June and July bottoms holding.

I’ll watch whether those lows still hold or make ‘lower lows’…..and in many assets/securities, I think they will hold.

The head fake may lie with many prices bouncing after having reverted to their long term mean but yet to register Oversold readings.

Keep in mind, that there is no rule saying both need to occur.

I think prices will jump a little, drag in a few more people and then spit them out again in the coming week or three followed up with another swoon.

Markets are cruel.

The price of the Baltic Dry Index and Aluminium are 2 examples, where they have mean reverted but yet to trade to weekly oversold levels and have bounced in the past day or two.

Experience and pattern recognition tells me to be patient for lower prices.

When your count is 3 balls and zero strikes, probability suggests you should ‘take a pitch’. You shouldn’t swing or chase a ball outside of your strike zone.

September 9, 2022
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment Tagged with , ,

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