{"id":31803,"date":"2015-11-19T22:06:47","date_gmt":"2015-11-20T06:06:47","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=31803"},"modified":"2015-11-19T22:07:15","modified_gmt":"2015-11-20T06:07:15","slug":"bottom-for-commodities-rba-says-no-fortescue-says-yes","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/11\/19\/bottom-for-commodities-rba-says-no-fortescue-says-yes\/","title":{"rendered":"A Bottom For Commodities &#8211; The Reserve Bank of Australia Says No; Fortescue Says Yes"},"content":{"rendered":"<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2015. <a href=\"http:\/\/seekingalpha.com\/article\/3698036-a-bottom-for-commodities-the-reserve-bank-of-australia-says-no-fortescue-says-yes\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<blockquote><p>&#8220;&#8230;the changing nature of China&#8217;s development implies that the potential for commodity prices to rise from here is somewhat limited.&#8221; &#8211; <a href=\"http:\/\/www.rba.gov.au\/speeches\/2015\/sp-ag-2015-11-17.html\" target=\"_blank\">Christopher Kent, Assistant Governor, Reserve Bank of Australia (RBA) at the UBS Australasia Conference, November 17, 2015<\/a>.<\/p><\/blockquote>\n<p>Kent of the RBA did not provide a specific forecast of commodity prices or a breakdown of different commodities, but this one sentence was sufficient. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_31805\" aria-describedby=\"caption-attachment-31805\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_commodity-prices.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_commodity-prices.png\" alt=\"Are commodity prices still historically high or have they crashed from historically high levels? Or both?\" width=\"550\" height=\"466\" class=\"size-full wp-image-31805\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_commodity-prices.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_commodity-prices-300x254.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-31805\" class=\"wp-caption-text\">Are commodity prices still historically high or have they crashed from historically high levels? Or both?<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.rba.gov.au\/statistics\/frequency\/commodity-prices\/2015\/icp-1015.html\" target=\"_blank\">Reserve Bank of Australia &#8211; Index of Commodity Prices, October, 2015<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>This perspective implies that commodity prices could continue to fall and still deliver a strong overall growth rate from what was at least 20 years of a tight band of pricing. {snip}<\/p>\n<p>A lot of course depends on the speed, depth, and breadth of China&#8217;s economic transformation. Kent notes that China&#8217;s industrial output has naturally declined in the face of over-capacity in housing and infrastructure. Moreover, China&#8217;s economy is maturing from a reliance on manufacturing and exports to services and domestic consumption. {snip}<\/p>\n<p>In parallel with Kent&#8217;s remarks, Nev Power, the CEO of Australia&#8217;s largest homegrown iron ore miner Fortescue Metals Group, licked his chops at the prospect of an imminent bottom in iron ore. Power foresees a looming moment of truth for his big competitors when cash flows no longer support  continued over-investment in capacity. {snip}<\/p>\n<p>Of course, Power is eager to convince the market (and himself) of an imminent bottom in iron ore. The price of iron ore has retreated significantly from its latest relief rally. {snip}<\/p>\n<p>In the middle of this back and forth is the Australian dollar (FXA) which sometimes trades as a proxy for the market&#8217;s expectations for commodity prices, particularly iron ore which is still Australia&#8217;s largest export. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_31800\" aria-describedby=\"caption-attachment-31800\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_AUDJPY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_AUDJPY.png\" alt=\"The Australian dollar seems to be gaining steam for a very bullish breakout against the Japanese yen.\" width=\"550\" height=\"375\" class=\"size-full wp-image-31800\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_AUDJPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/11\/151118_AUDJPY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-31800\" class=\"wp-caption-text\">The Australian dollar seems to be gaining steam for a very bullish breakout against the Japanese yen.<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/www.freestockcharts.com\/platform\/v1\" target=\"_blank\">FreeStockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>On a related sidenote, the U.S. Federal Reserve expects energy prices to start increasing soon. {snip}<br \/>\nBe careful out there!<\/p>\n<p>Full disclosure: short the Australian dollar<\/p>\n<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2015. <a href=\"http:\/\/seekingalpha.com\/article\/3698036-a-bottom-for-commodities-the-reserve-bank-of-australia-says-no-fortescue-says-yes\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2015. Click here to read the entire piece.) &#8220;&#8230;the changing nature of China&#8217;s development implies that the potential for commodity prices to rise from here is somewhat limited.&#8221; &#8211; Christopher Kent, Assistant Governor, Reserve Bank of Australia (RBA) at &#8230; <a title=\"A Bottom For Commodities &#8211; The Reserve Bank of Australia Says No; Fortescue Says Yes\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/11\/19\/bottom-for-commodities-rba-says-no-fortescue-says-yes\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[386,199,58],"tags":[1109,1536,1537,676,306,203],"class_list":["post-31803","post","type-post","status-publish","format-standard","hentry","category-australia","category-commodities","category-federal-reserve","tag-fortescue-metals-group","tag-fsugy","tag-fsumy","tag-iron-ore","tag-rba","tag-reserve-bank-of-australia"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Bottom For Commodities - The Reserve Bank of Australia Says No; Fortescue Says Yes - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/11\/19\/bottom-for-commodities-rba-says-no-fortescue-says-yes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Bottom For Commodities - The Reserve Bank of Australia Says No; Fortescue Says Yes - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on November 19, 2015. 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