From Bloomberg:
It’s going to take a prolonged slump in commodities to break a cycle of too much money and excess production, according to Goldman Sachs Group Inc.Since we posted "Commodity Producers Still Struggling (CRBQ)" on June 26 the situation for the commodity producer ETF has gone from bad to worse:
The market is caught in a “negative feedback loop,” where lower raw-material prices are strengthening the dollar and lowering production costs for countries with weaker currencies, Goldman analysts wrote in a report. That boosts the prospects of higher U.S. interest rates and a reduction in emerging-economy debt, according to the bank. Demand for commodities will subsequently decline, capping prices and further reinforcing the greenback, it said.
“Commodity markets still have access to far too much capital relative to future demand and a declining cost structure,” analysts including Jeffrey Currie in New York wrote in the note. “Long-term surpluses in most commodity markets require prices to remain lower for longer to balance both the near-term physical supply and demand, but more importantly, the longer-term supply and demand for capital to fund future investments.”
If longer-term prices don’t decline further to restrict capital, the availability of funds will exacerbate the market oversupply, the bank said. That will force prices to a level where it’s no longer viable to keep producing, according to Goldman.
Raw Materials
The Bloomberg Commodity Index of 22 raw materials has slid 4.8 percent this week, taking 2015’s decline to almost 7 percent. That’s after the measure rebounded in April to June for its first quarterly increase in a year.
The dollar has climbed 5.4 percent in 2015, with the greenback reaching a record high in March against a basket of 10 major currencies....MORE
...From FinViz the AlpsFunds Global Commodity Equity ETF:
Here's a graphic depiction of a strange loop:
Drawing Hands M.C. Escher, 1948
And here's Cardiff Garcia:Rally Monkey gets sucked into the self-referential vortex of psychologically important thresholds
If interested see also:
"Why strange loops could be an argument for artificial intelligence"
Strange Loops and Dollar Denominated Assets with an Especial Look at Gold
