Stocks have fallen to near-bear market territory. Bonds have suffered big price declines. Foreign currencies have nosedived against the US dollar. Cryptocurrencies, SPACs and other speculations have collapsed. But commodities have been on a tear. The Bloomberg Commodity Spot Index has surged 33% this year, with energy, metals and agriculture prices all showing big gains. Investors, spooked by faster inflation, rising geopolitical risks and accumulating portfolio losses, are pushing into commodity exchange-traded funds to hedge their portfolios. This year through April, $21.4 billion flowed into commodity ETFs in contrast to the $63 billion in outflows in the first four months of 2021, according to Morningstar. Commodities bulls may soon regret their enthusiasm as both demand and supply forces look like they will soon start to depress prices. Covid-19 has led to continuing lockdowns in China, causing dramatic production cutbacks in the world’s second-largest economy, which accounts for 18.1% of global gross domestic product and 23.9% of manufacturing. The pain has spread to China’s imports of commodities from countries such as Brazil, Chile and Australia of oil, copper and iron ore as well as manufacturing exporters like Germany, South Korea and Taiwan. According to Nomura Holdings Inc., Chinese imports of iron were down 13% in April from a year earlier, copper fell 4% and imports of cars and chassis dropped 8%. Russia’s invasion of Ukraine has also disrupted global demand and the robust dollar has curtailed demand for commodities by developing countries since their currencies have fallen 3% on average since April. Of 45 major commodities traded globally, 42 are priced in dollars. The only exceptions are wool (Australian dollars), amber (Russian rubles) and palm oil (Malaysian ringgit). Developing economy commodity imports are also depressed by their growing need to use scarce foreign exchange to service dollar-denominated debts. From 2018 through 2021, Chile’s non-bank dollar debt rose from 34.7% of GDP to 50.3%, Mexico’s from 21.9% to 30.1% and Turkey’s from 23.0% to 28.2%. Commodities also suffer as economic growth favors services over goods. Since World War II, American spending on goods has dropped from 61% of their total outlays to 35% while spending for services rose from 38% to 65%. That’s also true for developing countries like China. On the supply side, the world d continues to face higher commodity prices. NN: Its a dangerous game we play. Shorting the bear market rally back. Their is no doubt in my mind that another sell off in stocks is coming. But we are playing a dangerous game that could blow up in our face. We are selling this rally back. As we often do. AND WE COULD GET CRUSHED…. SO you might rightfully ask WHY DO IT: The simple answer is that’s what we do!. But a better answer is markets this nervous stop on a dime and CAN make stunning reversals. Some of the greatest gains to be made are in markets that are about to see capitulation. Which has not occurred….. yet. The reality is the fed has only just begun raising rates and inflation is out of control. The drivers for inflation becoming more powerful by the day. I still see eenrgy prices soaring, I still see supply chain shortage and material shortages…. I still see Russia pounding the shit out of Ukraine. Embargo and food and energy shortages are growing war is polarizing Europe. Dragging in more participants. With more and more countries taking side and supplying more and more and bigger arms. And do not forget the FED is way behind the power curve on raising rates and has not begun to claw back stimulus…..