Copper's $4,000 Break

I hope that you understand I am not trying to predict the market. I think that is a foolish endeavor.

I believe that it is important to have possible scenarios thought out and a trade planned before the events happen. That way, when the event is unfolding I can take advantage of the opportunity.

I would never try to predict what and when the market is going to do something. I can however know with confidence if a scenario is unfolding in the same manner that I imagined.

IE: If govt buys bonds, the EurUsd will rise... this is my blog where I posted that a few weeks ago http://actionforexalerts.blogspot.com/2009/02/10yr-eurusd-correlationdoc.html

I greatly underestimated the speed and magnitude at which the market would react to that event.

Back to inflation:
I believe one possible scenario for USD weakness is the beginning of a decline in the savings rate. I will watch that economic indicator. From that point I will begin watching commodity prices, and have a bullish biases on commodities and bearish bias on the USD. I will also begin looking for the technicals that support my fundamental biases.

Matt

Ashraf...

Hendry Hugh said something interesting a few weeks ago that I believe applies to the trading action lately... He said that its as if people were reading a long novel and have skipped to the end.

I feel that the fall in the USD and resulting rise in commodities are purely speculative in nature... my Buffet style example follows:

Picture this scenario...

Island inhabitants salary 5k per year
Plane drops 5k per person in 1 day

A) people run out and spend it, prices soar
B) people save it, prices dont move

My point is right now, people are saving the money, there is no inflation, only fear of inflation...

On that note I believe losses in USD are way overdone. Real inflation is not going to set in until the savings rate goes down.

Speculative inflation (right now) is a bubble. I believe once the savings rate peaks and people begin spending inflation will be a problem again, and the USD will suffer.

Matt

Rise in copper could be purely speculative. BDI has been headed down over the last couple of weeks. If industrial buyers were still ordering a lot of copper, they'd need to be chartering ahead of delivery.