With high commodity prices could we be close to a recession?

[MushinT]

With high commodity prices could we be close to a recession?

Reading the book Technical Analysis Explained by Martin J. Pring, there is a part where he says that before there is a recession, commodity prices rise very quickly and then there is a reduction during the recession.

"After the recovery has been under way for some time, capacity starts to tighten, resource-based companies feel some pricing power return, and commodity prices bottom. Occasionally, after a commodity boom of unusual magnitude, industrial commodity prices bottom out during the recession as a result of severe margin liquidation due to excessive speculation during the previous boom. However, this low is often subsequently tested, with a sustainable rally only after the recovery has been under way for a few months. three financial markets are in a rising trend."

Martin J. Pring - Technical Analysis Explained page 21

You can see the page on this website online

https://archive.org/details/technical-analysis-explained-martin-j-pring-2014/page/21/mode/2up

Looking at commodity prices.

Looking at 2007, where there was a crisis, the price rose a lot.

link: https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

In this graph, the volume that caught my attention.

This is one of the charts I saw, later I realized that there are more commodity charts.

I found it interesting to share this study, but there are other reasons to be seen as well, such as:

Reason for rising commodities: If the rise is caused by an increase in demand, this could be a sign of a strong economy and not necessarily an imminent recession.

Central bank reaction: Central banks can take measures to contain inflation and avoid a recession, such as raising interest rates.

Performance of other indicators: It is important to analyze other economic indicators, such as GDP, unemployment and consumer confidence, to have a more complete view of the situation.

Thanks for your attention!

 

[zdreg]

+1 for content and politeness

 

[schizo]

With high commodity prices could we be close to a recession?

High commodity prices = Inflation

Commodity prices will usually drop in a time of recession. Actually, falling commodity prices is a precursor to recession.

 

[GreatCamel]

Define Inflation
And are there different types ?

 

[piezoe]

With high commodity prices could we be close to a recession?

Reading the book Technical Analysis Explained by Martin J. Pring, there is a part where he says that before there is a recession, commodity prices rise very quickly and then there is a reduction during the recession.

"After the recovery has been under way for some time, capacity starts to tighten, resource-based companies feel some pricing power return, and commodity prices bottom. Occasionally, after a commodity boom of unusual magnitude, industrial commodity prices bottom out during the recession as a result of severe margin liquidation due to excessive speculation during the previous boom. However, this low is often subsequently tested, with a sustainable rally only after the recovery has been under way for a few months. three financial markets are in a rising trend."

Martin J. Pring - Technical Analysis Explained page 21

You can see the page on this website online

https://archive.org/details/technical-analysis-explained-martin-j-pring-2014/page/21/mode/2up

Looking at commodity prices.

Looking at 2007, where there was a crisis, the price rose a lot.

View attachment 340827
link: https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

View attachment 340830
https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

In this graph, the volume that caught my attention.

This is one of the charts I saw, later I realized that there are more commodity charts.

I found it interesting to share this study, but there are other reasons to be seen as well, such as:

Reason for rising commodities: If the rise is caused by an increase in demand, this could be a sign of a strong economy and not necessarily an imminent recession.

Central bank reaction: Central banks can take measures to contain inflation and avoid a recession, such as raising interest rates.

Performance of other indicators: It is important to analyze other economic indicators, such as GDP, unemployment and consumer confidence, to have a more complete view of the situation.

Thanks for your attention!

Does Pring say anything about earnings? I believe that company earnings forming a peak is a harbinger of a likely recession to follow. Not all earnings peaks are followed by a recession but all recessions, so far as I am aware, have been preceded by an earnings peak. In other words recession is unlikely so long as earnings continue to rise.

In my estimation, as a general rule, fiscal stimulus is more powerful than interest rate cuts, and tax increases, especially in the middle brackets, are more powerful than interest rate increases. An exception would be an intentional, large devaluation of currency, as occurred in the U.S. for example during the Great Depression. This is clearly a monetary action.

https://advantage.factset.com/hubfs/Website/Resources Section/Research Desk/Earnings Insight/EarningsInsight_052424.pdf

 

[schizo]

Define Inflation
And are there different types ?

Are you asking me? Well, here's the textbook definition of inflation.

Inflation is when prices go up and the value of money goes down. It can happen when demand for goods and services goes up, or when the cost of making those things goes up.

Now to the different types of inflation. There are really only two types of inflation: demand-pull inflation and cost-push inflation. For those, I'm just gonnag have you check out the following link.

https://www.investopedia.com/articles/05/012005.asp

 

[poopy]

With high commodity prices could we be close to a recession?

Reading the book Technical Analysis Explained by Martin J. Pring, there is a part where he says that before there is a recession, commodity prices rise very quickly and then there is a reduction during the recession.

"After the recovery has been under way for some time, capacity starts to tighten, resource-based companies feel some pricing power return, and commodity prices bottom. Occasionally, after a commodity boom of unusual magnitude, industrial commodity prices bottom out during the recession as a result of severe margin liquidation due to excessive speculation during the previous boom. However, this low is often subsequently tested, with a sustainable rally only after the recovery has been under way for a few months. three financial markets are in a rising trend."

Martin J. Pring - Technical Analysis Explained page 21

You can see the page on this website online

https://archive.org/details/technical-analysis-explained-martin-j-pring-2014/page/21/mode/2up

Looking at commodity prices.

Looking at 2007, where there was a crisis, the price rose a lot.

View attachment 340827
link: https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

View attachment 340830
https://www.investing.com/etfs/ishares-s-p-gsci-commod-chart

In this graph, the volume that caught my attention.

This is one of the charts I saw, later I realized that there are more commodity charts.

I found it interesting to share this study, but there are other reasons to be seen as well, such as:

Reason for rising commodities: If the rise is caused by an increase in demand, this could be a sign of a strong economy and not necessarily an imminent recession.

Central bank reaction: Central banks can take measures to contain inflation and avoid a recession, such as raising interest rates.

Performance of other indicators: It is important to analyze other economic indicators, such as GDP, unemployment and consumer confidence, to have a more complete view of the situation.

Thanks for your attention!

Completely lacking causation.

 

[GreatCamel]

Are you asking me? Well, here's the textbook definition of inflation.

Inflation is when prices go up and the value of money goes down. It can happen when demand for goods and services goes up, or when the cost of making those things goes up.

Now to the different types of inflation. There are really only two types of inflation: demand-pull inflation and cost-push inflation. For those, I'm just gonnag have you check out the following link.

https://www.investopedia.com/articles/05/012005.asp

Thank you

Does the above definition truly fit todays economic condition ?

 

[schizo]

Thank you

Does the above definition truly fit todays economic condition ?

The current inflation was largely driven by the pandemic, which nobody experienced in their lifetime. Plus, many people who have experience the previous inflation back in the 70s are either dead or too damn old to remember (well, I remember but I was too young at the time to know what an inflation was). Anyway, this ain't something I can tell you in a few words. I suggest you go grab some economic books (like "Macroeconomics for Dummies" as a starter) or read up on the web (there are plenty of good resources out there).

 

[GreatCamel]

Isn’t there a third type which better suits what you state above as the primary reason

Asset Inflation because of government policies, actions and restrictions or sanctions or climate policies all that from govt and spendings too much without control. Taxations / Trade Tariffs etc etc

govt policies