Please review the following article from trading supremo Dan Norcini. It echoes sentiments I have expressed underpinning the commodity sector.

Equipped with this understanding, you can acknowledge the fact that price controls are a gargantuan WOMBAT (Waste of Money, Brains and Time). Unintended consequences of declining production, shortages and a black market are bound to hound politicians too eager to please the populace without learning from past mistakes of socialist states.

"One of the fundamental inputs in a gold bull market is a steady rise in the price of commodities. While in a bull market, gold trades primarily as a currency, its association with the commodity world cannot be neglected in the sense that commodities become an asset class that is sought out by investors to inoculate themselves from the depreciation of the native currency. In general, if commodities are rising, it is a signal that:

1.) economic growth is strong, credit is relatively available and demand for underlying commodities is therefore robust resulting in rising prices across the board

and/or

2.) confidence in paper assets is waning and investors are seeking wealth preservation in things tangible....."

Read more:

http://jsmineset.com/200...inuous-commodity-index/

Long term chart:

http://www.facebook.com/...575924&id=649361247

The heirarchy of commodities is as follows:

1. precious metals
2. energy
3. food
4. base metals

Based on supply and demand fundamentals, some foodstuffs are yet to enjoy their day in the sun. Coffee, sugar and milk come to mind.

"Dec. 14 (Bloomberg) -- Falling production in commodities from rice to milk is bad news for just about everyone except investors.

Rice may surge 63 percent to $1,038 a metric ton from $638 on Philippine imports and a shortage in India, a Bloomberg survey of importers, exporters and analysts showed. The U.S. government says nonfat dry milk may jump 39 percent next year, and JPMorgan Chase & Co. forecasts a 25 percent gain for sugar. Global food costs jumped 7 percent in November, the most since February 2008, four months before reaching a record, according to the United Nations Food and Agriculture Organization...."

Read more:

http://www.bloomberg.com...=aBYSp0.XfXZs&pos=14

Sovereign debt risk is front and centre of investors attention this holiday season. Governments in deficit spending to bailout and stimulate their economies were hoping that the bill would not come due until they left office. Desert wonderland, Dubai changed all that with the threat of the dreaded "D" word.

D is for default.

Debt holders are hoping that the liquidity taps will be left on (ECB's rescue of Austrian bank Hypo) or sovereign wealth funds will come to the rescue (Abu Dhabi's bailout of Dubai). Either way they stand to loose as their holdings are being devalued. Interest rates in the U.S., U.K. and Germany are once more inching up to reflect increasing risk of default going into 2010.

"Ratings agency Moody’s takes up the sovereign subject again on Tuesday, with its 2010 outlook on sovereign risk. And the mood, as the below chart should demonstrate, is rather miserable.

Moody’s has compiled a 1970s-style ‘Misery’ index. But instead of showing inflation and unemployment rates, it shows the fiscal deficit and the unemployment rate.

On that basis, Spain, followed by Latvia, Lithuania, Ireland, Greece and the UK are the gloomiest Moody’s-rated sovereigns in the world. The US is eighth — just after Iceland...."

Read more:

http://ftalphaville.ft.c...eign-states-a-suffering/

While shepherds watched

While PMs watched their stocks last March
Go crashing to the ground
Bernanke and his angel Tim
Declared the system sound.

“Fear not,” said they, for mighty dread
Had seized investors’ minds.
An endless stream of dollar bills
And bailouts we’ve designed.

Thus spake Bernanke, and forthwith
Appeared a shining throng:
Economists and strategists
Recommending you go long.

The markets soared, liquidity returned
To sceptics’ great surprise;
You even bought the ABX
As home prices did rise.

The moral of this story is
In grave financial trouble:
Injecting soap makes things look clean
But beware the coming bubble.

http://ftalphaville.ft.c...christmas-credit-carols/

Steve Keen understands debt better than anyone. Another good interview that he did for Frisby’s Bulls And Bears. His take on the lack of understanding of economists is spot on.

http://economicedge.blog...iew-predictions-for.html

Manufacturers are facing ever growing headwinds from rising inflation and a commensurate decline in consumption or substitution for cheaper alternatives. Producers of commodities, on the other hand, are laughing all the way to the bank. The article mentions the effect of the recent bull run in sugar prices.

The Vision 2030 plan should review its emphasis on manufacturing as a key pillar for growth. The 2001 - 2015 commodity supercycle will be a lead weight on the cost structure of the industrial sector.

"Continued surge in retail prices is forcing Kenyan households to consume less manufactured goods leaving a dark cloud over the industrial sector that is expected to persist in the new year.

Industry data indicates that demand for goods dropped by an average of 30 per cent in the first nine months of the year compared to a similar period last year as consumers grappled with high inflation and the ripple effects of the global economic recession that they expect to persist till mid next year..."

Read more:

http://www.businessdaily.../0/-/o39e7i/-/index.html

At the said time.. the land on which the imperial palace stood was worth more than the entire Britain..
Just seen on Aljazeera, what we term as 'self confused' shacks go for 150dollars a month...

Hopefully China gets its first Bubble burst. they need it to sober their aggresive escapades... further more experts say the wavelegth btn bubbles and bursts have narrowed..

China stands out amongst nations for its amazing growth over the past three decades. For those that imagine it a fluke, review the first article as a prelude to the second. Africa, blessed with natural resources, is key to China's developmental agenda.

"With its voracious appetite for a whole range of commodities including energy products, base metals and precious metals, as well as agriculture, China continues to amaze the global commodity market participants.

In no small measure has the Asian major's import demand for a wide variety of commodities to meet its internal consumption requirement been a key driver of the remarkable recovery the markets have witnessed in recent months.

Latest data confirm the dominant role China plays in the marketplace."


http://www.thehindubusin...es/2009122950120500.htm

+++++

"BEIJING, Dec. 27 (Xinhua) -- China is likely to replace Germany to be the world's largest exporter in 2009, said a senior Chinese commerce official.

Zhong Shan, vice minister of Ministry of Commerce (MOC), made the forecast during an economic forum held at the University of International Business and Economics in Beijing on Sunday."

http://news.xinhuanet.co.../27/content_12712464.htm

Please review the chart on the U.S. 10 Year Bond Yield available here: http://tinyurl.com/ydp9vcf. I have used technical analysis to obtain a price objective of 5.8%. Note, interest rates are determined in the bond markets and not by central banks. Rates are a product of supply and demand of debt instruments issued by commercial or governmental entities.

Inspite of the Federal Reserve's self-anointed duty of setting overnight borrowing rates at about 0 - 0.25%, rates in the bond markets are inching upwards with the 10 Year Bond Yield at 3.8% from 2.03% in December 2008. Interest rates in other Western states are also inching upwards. The decade long debt binge that erupted into a debt crisis has the interest rate thorn pressing into its flesh.

The following article addresses the harmful effects of price controls. Notwithstanding the fact that the author is a manufacturer and is certainly talking up his book, price controls cause distortions in the market place. Faced with a high cost business environment and ever rising input costs, a cap on prices could well be the straw that breaks the manufacturers back.

Picture a situation whereby salaries of accountants by government decree are capped at KShs. 50,000 regardless of responsibility, company size and scope, education background or experience. Where is the incentive for the best, brightest, hardworking and experienced to scale the monetary ladder? How does one offset the rising costs of energy, food, education etc. if at 50,000 the salary scale comes to an abrupt end? The accounting industry would begin to witness a migration of the human resource to more beneficial sectors leading to a shortage of labour, declining standards and a "black market". Why a "black market"? For levels of accounting expertise that would be highly priced in a free market, the cream above the capped figure would be paid under the table.

"The Bill introducing Price Controls on some essential goods —moved by the Mathira MP Ephraim Maina — without taking cognizance of the entire price chain that affects the final goods of products is totally misguided and harmful to producers of final products in Kenyan.

The cost of inputs and production are essential for determining the prices of goods

While we all appreciate the mischief the Bill intends to fix — the pricing of essential goods and concern with the livelihoods of most Kenyans, the proposed solution of price fixing only focuses on one end of the spectrum, namely consumer prices and not the producer prices...."

Read more:

http://www.businessdaily.../0/-/6hsjb7/-/index.html