Wednesday, October 1, 2008

the Sky isn't Falling, but Everything Else is

this Deflation thing isn't as fun as it used to be.

late July Trend & Value readers were warned to 'be on guard for an orthodox deflationary environment over the remainder of the year.' show me one asset, aside from Treasurys, that is higher now than it was when I wrote that? I dare you.

now obviously a lot of people had been predicting Deflation, not just me. but, I would guess that I'm one of a handful of analysts to warn about it this summer, who hadn't already been preaching that gospel continuously these last several years. so remember that when prominent forecasting services are incessantly emailing and telling you 'see? see? that's what we said!'

not that I'm always right, or right at the right time (which is really all that matters in this vocation), there's plenty of bad calls to be read in the archives here. but it's like what Bukowski said in the context of writing/poetry:

I felt there was nothing out there, so I had to continue, because they were so bad, not because I was so good. and I'm still not so good, but they're still very bad.

interesting video interview of him here if you got a few minutes to spare:

I've never really been into Bukowski, but my step-father (and friend) Doug (listen to his 'Dollars' song on my link list) has taken a liking to him recently.

anyhoo, back to Deflation. I said 'over the remainder of the year.' I think I was just throwing a duration out there, one safe to write at the time. don't think I really took it seriously. but is it possible this trend could continue for another few months, or longer?

though certainly possible, I do hope not. there's stuff I want to be bullish on. like food stuffs. back in August, when some others were heralding the return of the Food Bubble, Trend & Value counseled patience. for the most part I took the advice, aside from a couple positive mentions of Coffee and Sugar, neither of which have had much success in bucking the overall trend in commodities pricing.

until today, I hadn't much considered the potential extent of the downside in grains. but a cursory look now suggests a downside for the GKX to at least 300 and probably somewhat lower. the price objective of the recently violated distribution pattern = ~280. the price objective on my point and figure chart (below) = 280. Fibonacci retracement target = 280. major (presumed) lateral chart support = ~280.

freaky. though the coincidence of all those seems a little too good to be true. but we'll definitely keep an eye on that number.