Saturday, February 24, 2007

Commodity Indexes

Commodity indexes can be used to adjust the Dow to a more realistic level just like gold can be used, to see how much its purchasing power has really increased. They can also be used to see if the gold and silver bulls are still in place since commodity bulls are an element of gold and silver bulls. But, use the more realistic one, the CCI (Continuous Commodity Index) rather than the widely used and more unrealistic CRB (Reuters/Jefferies CRB Index).

The CCI is composed of 17 commodities equally weighted at 5.88% each.
Energy = 17.64%
Grains = 17.64%
Livestock = 11.76%
Softs = 29.4%
Metals = 23.54%

The CRB is composed of 19 commodities unequally weighted.
Energy = 39%
Grains = 13%
Livestock = 7%
Softs = 21%
Metals = 20%

Sooooooo, has the commodity boom (an important part of a gold and silver bull markets) ended like some are saying? Not if you are using a realistic commodity index.

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money .” - Sir Josiah Stamp, who became a director of the Bank of England in 1928

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