Many folk will be scratching their heads when we say that commodity markets have broken to multi-week highs. We have always used the “old” CRB Index (now referred to as the CCI index) as our proxy for commodity markets. In essence the old CRB was an equally weighted index of 17 commodities where the price of each commodity was derived from the average of the next 6 months contracts. We like the old CRB because each commodity “sector” (grains, energy, metals, industrials, softs) was more or less equally weighted. So the index itself gave a reasonable representation of the performance of the “average” commodity rather than a performance heavily weighted to energy as the other commodity indices do these days.
Yesterday was a critical juncture for commodity markets this year. We had confirmation of the primary bull trend in commodities. We believe that it is now only a matter of days before the new CRB Index breaks to a multi-week high and in so doing crude oil should break the $75 barrier. Thereon we believe that crude will quickly race to the $100 level.
Yes it appears that inflation is coming and it will be considerably quicker than the average economist in the street perceives.
