There’s a lot of back and forth on this site between deflationists and inflationists (in terms of dollars). So, I thought we’d take a purely neutral look at the scoreboard for the year and the past 9 years (in ALL major fiat currencies) in the hopes of perhaps better understanding the overall primary market trend. Because after all, the primary trend is one of the most important things to be aware of when investing.

First, there’s gold, which is the inflationist’s best friend.

Gold was a winner for the year in 4 major currencies, but a loser in yen and dollars (albeit not much of a loser in dollars given that it has merely fallen back to September 2007 levels). Nevertheless, the longer term uptrend remains well intact.


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Second, Let’s look at the CCI (equal-weighted CRB) for our “commodity” representative:

The CCI was clealrly a loser in all currencies for 2008, and roughly back to where it was in 2006 in most currencies. However, the longer term bull market remains well intact.

I’d also note that if you were long “commodities” as opposed to “stocks” for the past several years, you’ve done far better, since your “commodity” holdings have fallen back to where they were in 2006. Stocks, on the other hand, have collapsed back to levels not seen since 2003 in the major indices, with many stocks simply going to zero in the financial sector as well.

That’s an important fact to be aware of, since some people have called commodities a “bubble.” When bubbles burst, they’re the biggest losers, just as the NASDAQ was in 2000-2002. Yet here, the so-called “bubble” has held up better during the recent liquidiation when taking a long-term view. So, where was the real bubble for the past 9 years? Was it in financial assets, like stocks, or was it in commodities?


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Third, let’s look at the US 30-year Treasury bond, which is a deflationist’s best friend.

The bond has been a loser in yen and a very slight loser in dollars. But it has been a clear winner in the other currencies thanks to the combination of the July-November meltup in the dollar and the virtually unchanged bond price in dollars for the year. However, a longer term view reveals that US bonds have been in a bear market since 2001 in most currencies, which by no coincidence was when the dollar topped out.


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