Since commodities have little to do with actual supply and demand in the physical market (as the world swims in oil, and the U.S. in natural gas), and everything to do with the supply of fiat currencies chasing physical assets, let us see if Bernanke can cause natural gas to take off. This has been the one huge laggard of the year, as nat gas is difficult to transport and hence reflects the domestic economic situation more than most other commodities.

The commodity has spiked the past 2 days and the ETF (UNG) now sits at $6, just below the 50 day moving average. With oil peaking its head over its yearly highs yesterday, speculators are in desperate search to find the next hot thing, as driving cotton and sugar limit up every day for 3 months in a row has gotten boring. The performance of natural gas has not just been bad, but indeed horrid when you consider it is priced in dollars just like every other commodity!

For economic reasons, energy is the most important commodity to watch because while not everyone is going to take a hit if silver jumps $2 a day... we're all going to enjoy the fruits of Berannke's labor if nat gas starts surging (for no fundamental reason) and oil can go on an early 2008 like rampage.

If this does happen, let us prepare for the April 2011 Congressional hearings where we drag the "Big Oil" CEOs up to Capital Hill and watch the politicos berate them publicly for "causing" prices to jump (while meeting with them privately to accept campaign donations) despite the "fantastical economic recovery"....

Meanwhile Bernanke will be skipping in his office a few buildings over sporting the Family Circus "Not Me" T-shirt.

No position

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

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