John Hussman

John Hussman writes a weekly market letter. Last week's letter was titled:

March 10, 2008 Recession, Far More Foreclosures, and Eventually, Commodity Weakness

You can find the full text of it here. I wanted to lift two paragraphs (within JH's quotation parameter) to pique your interrest:

Finally, on the commodities front, the CRB (a broad index of commodities process) has hit fresh highs in recent days, but Friday's weak employment report has spurred questions about the sustainability of the runup in commodities. If you look at long-term commodity charts, you'll quickly become convinced of one thing – commodity prices are cyclical. They don't necessarily overlap economic cycles, but it is dangerous to believe that the cyclical dynamics of commodities prices have been forever changed by China and India. The price levels may very well be higher in the future than they were in the past, but cyclicality is something that should be expected in both commodities and the stock prices of companies that produce them.

It is accurate intuition that commodities are generally stronger in economic expansions than they are in contractions, but that intuition can fail when U.S. real interest rates are negative. At those times, the heavy downward pressure on the U.S. dollar tends to be supportive for commodities. Given that commodities have already had an extremely strong run, it would be overly speculative to take positions here on the expectation that the run will continue, but the evidence suggests that we should expect a serious break only when the rate of inflation breaks.

I read JH every week--though clearly I'm a week behind! He serves as a welcomed antidote for the perennially sunny forecasts of most market pundits. All issues are good, but this week was chock full of gems. I hope that you'll check for yourself.