We have been worried sick by rising prices of commodities. It was largely due to movement of money from stock markets to the commodities market. The issue with commodities is that for most things (such as oil and food) the demand is price inelastic. That is world has to live with whatever the Oil costs. The decrease in consumption due to price shock is not very high. Same with food. In the past year a lot of liquidity left stock markets and fled to commodities. All of that is now changing with tightening liquidity. Punters are unwinding their positions and so size of the futures market is shrinking. I've not seen the numbers but I can promise you that the capital in futures mkt has shrunk more than the equities mkt.
This is also causing the prices of underlying commodity itself to crash. Oil has already come down from 147 to 64 in 3 months despite OPEC cutting production. Same will happen to food and other commodities and by this time next year a large part of the world will see deflation. It would be largely on account of high base in 2008, but I do expect prices to go down.
Same will happen to interest rates in India. By end of next year housing demand will pick up due to softening of interest rates.
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