Tuesday, November 11, 2008

AIG Commodity Index Falls to 5-Year Low


The Dow Jones-AIG Commodity Index (^DJC), which is composed of futures contracts on physical commodities according to the weights in the bottom graph above, fell to a five-year low of 125.93 today, the lowest level since November 2003 (see top chart above). From the July peak, the AIG index has fallen 47%, the largest four-month percentage decrease in the 48-year history of the AIG going back to 1960.

6 Comments:

At 11/12/2008 2:53 AM, Anonymous Anonymous said...

Computers cost less now than they did in 1979.

Long distance phone calls cost less than they did in 1963.

An ounce of gold costs less now than 1980.

Neel Kashkari just gave a 30 minute Q&A to Wharton's best & brightest and not one person asked about either inflation consequences or the moral hazard.

We live in strange times.

 
At 11/12/2008 3:03 AM, Anonymous Anonymous said...

Just curious, but wasn't severe deflation the harbinger of the Great Depression? Should we be concerned if this goes on for too long?

 
At 11/12/2008 3:32 AM, Blogger 1 said...

"An ounce of gold costs less now than 1980"...

Really?!?!

I don't follow the precious metals game but I wouldn't be suprised...

Looking at the Kitco historical gold page specifically the 1985 to the present it looks like you got a real point now: aproximately $300 in '85 to something shy of $750 today...

I used this inflation calculator (no idea if its accurate) and it came back with: "What cost $300 in 1985 would cost $570.91 in 2007"...

From Bloomberg, dated Nov. 11: Gold, Platinum Drop on Concern Recession May Damp Metal Demand

Nov. 11 (Bloomberg) -- Gold futures fell on speculation a global recession will damp demand for precious metals and other raw materials. Platinum and silver also declined.

Equities in Asia, Europe and the U.S. fell today. More than $28 trillion in value has been erased from global equity markets this year as banks have posted more than $920 billion in credit losses and writedowns. The Reuters/Jefferies CRB Index of 19 raw materials is down by almost a third this year. (there's a bit more)

Good call anon @ 2:53 AM!

I think you have a potentially good call there regarding the price of gold...

 
At 11/12/2008 7:22 AM, Anonymous Anonymous said...

Just try buying physical gold or silver in the US anywhere close to the spot price. Good luck.

 
At 11/12/2008 10:55 PM, Anonymous poor boomer said...

What are "softs"?

 
At 11/14/2008 7:12 AM, Anonymous William Davies said...

It is always difficult to use one commodity index to support a particular line of argument as each one uses a different methodology to compile the proportions of each commodity class.

While the Dow Jones AIG Commodity Index shows petroleum with a share of 20%, others such as the RICI (established by Jim Rogers)have crude oil at much higher percentages.

It was not so long ago, if I remember correctly that the Goldman Sachs commodity index had petroleum and other energy products making up about 70% of the index.

It is possible to have sub indexes and some where a commodity index has lower weightings of energy (or none) in it, if for example, you want to monitor commodity prices excluding the energy complex.

And softs refers to those agricultural commodities such as cocoa, sugar and coffee.

 

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