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Perfect Storm for Commodities 05 December 2013

War Room. Perfect Storm for Commodities 05 December 2013. HiddenLevers War Room. CE Credit. Macro Coaching. Idea Generation. Archived webinars. Open Q + A. P resentation deck. Product Updates. Scenario Updates. War Room. Market Update Perfect Storm for Commodities Scenarios

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Perfect Storm for Commodities 05 December 2013

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  1. War Room Perfect Storm for Commodities 05 December 2013

  2. HiddenLevers War Room CE Credit Macro Coaching Idea Generation Archived webinars Open Q + A Presentation deck Product Updates Scenario Updates

  3. War Room • Market Update • Perfect Storm for Commodities • Scenarios • Winners + Losers

  4. HiddenLevers Market update

  5. Market Update QE Taper Tantrums Nasdaq 4k Iran Détente Q3 US GDP = 3.6%

  6. Macro Snapshot Employment, manufacturing, equities, and bond spreads trending in the right direction – why won’t CPI get with the program?

  7. HiddenLevers Perfect storm for commodities

  8. Commodities Past Real commodities prices flat since 1870’s – 0% real growth Commodities markets appear highly cyclical over 200 years, and we look to be at a top source: Business Insider

  9. Commodities Present: Oil & Energy Supply is up… And demand is flat. US oil production has recovered rapidly, while total vehicle miles are well below 2007 peak. But global demand and risk premium have kept oil up 4.6% YTD. sources: EIA, DOT

  10. Commodities Present: Metals Gold -27% YTD Silver -37% YTD Silver tracking gold down perfectly, with leverage Copper -13% YTD Aluminum -18% YTD Copper and aluminum falling on weak global demand

  11. Commodities Present: Agriculture Long term trend Agriculture commodities down since mid 1990s Double digit declines in 2014 + 2015 expected -16% YTD -27% since July 2012 source: HiddenLevers, UN, Financial Times triple top • Reasons for continuing drop • - Favorable weather • - Falling input costs • - Larger harvests • - Bumper crop in corn

  12. Commodities Future: Deflation? CPI has generally followed S&P 500 – divergence started mid-2012 US CPI had a lagged correlation with S&P 500 until breakdown in mid-2012, despite Fed efforts. Are commodities and CPI predicting deflation?

  13. Perfect Storm for Commodities – Recap Top of Commodities Super Cycle US oil demand declining Food prices deflating into 2015 precious metals out of favor

  14. HiddenLevers Commodities Deflation – Scenarios

  15. Scenario: Commodities bounce back Equities now a leading indicator economy Will this trend pick up? USD weakness helps spur commodities EM/BRICS recovery is key Signals rising world wide inflation source: HiddenLevers

  16. Scenario: Equities decoupling continues QE meltup + deflation in other risk assets US economy pickup doesn’t increase commodity demand Tech growth in US is not like manufacturing growth in EM Decoupling is the current dynamic QE continuing means decoupling story in tact source: HiddenLevers

  17. Scenario: Equities follow Commodities down Deflation spiral on all risk assets Industrial metals and S&P have long history Fed taper will kick this off source: HiddenLevers

  18. Scenarios: Perfect Storm for Commodities • Good • Commodities Bounce Back • Bad • Decoupling continues • Ugly • Equities follow Commodities EM recovery would lead to rising inflation and a commodities bounce. Commodities could decouple from equities if tech-led growth continues Fed has failed to raise CPI –could be prelude to stronger deflation, with commodities and equities down together

  19. HiddenLevers Winners + losers

  20. Winners – Middlemen Car Makers Utilities Food Makers Oil Refiners Plane Makers

  21. Winners – Lower input costs

  22. Losers – Producers + Resource economies Gold -27% YTD GDX -55% YTD Gold miners + producers are leveraged plays on commodity prices CAD -8% YTD AUD -14% YTD Currencies of commodities suffering with key exports source: HiddenLevers

  23. Find it on HiddenLevers Commodities Economic Data Center Macro Themes Risk Profiles for securities War Room Gold Crash Scenario Library Industry groupings War Room BRICS source: Burtynski

  24. Product Update • Scenario email alerts • Scenario progress visualization • Mobile site improvements • Coming soon: • - Dashboard page • - Product development survey

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