Tuesday, December 30, 2014

Fill'er Up

The powerful disinflationary trend that has broadly benefitted equities at the expense of commodities - and which was set in motion in early Q2 2011 with a major low in the U.S. dollar, has been expressing in various iterations the tell-tale signs of a major blow-off move in the back half of this year. 

What started off in silver and gold - and which we believe exhausted first in the precious metals sector; then bled into the oil market - where the move has overshot most downside expectations. As we described in our note from two weeks back (see Here), oil was capitulating in a similar fashion to the low that was completed at the end of 1998 - that became the blowoff peak of the disinflationary trend between equities and oil. We believe a comparable reversal could manifest heading into next year, and similar to our affinity with precious metals - we very much like oil here.