Tellurium, used in both photovoltaic and thermoelectric technologies, has become a recent topic of debate in cleantech and materials science because of its rarity. With massive recent commodity price increases in rare earths and precious metals, I attempt to make some sense of the tellurium demand picture and whether we might expect a similar rush for the inconspicuous chalcogen element.

As Dennis Gartman used to say: “inflation, where is thy sting?”  Here we have a booming commodity market with the CRB index experiencing a classic triple-top, and yet, underlying inflation is barely existent.  Headline inflation came in at a mere +0.1% MoM and the YoY inflation rate is at a paltry 1.1% rate.  The core CPI (which excludes the effects of food and energy) was up by less than 0.1% MoM and the YoY, at 0.8%, is actually overstating things because the three-month pace is running at a tiny 0.4% annual rate.  And this is occurring despite a 3% growth economy, massive fiscal and monetary steroids, and what has been for the most part, a squish-soft U.S. dollar and surging raw material prices.  If any or all these developments shift into reverse for whatever reason, then at the least a mild deflationary backdrop is sure to ensue.  While there is concern over bond supply from the fiscal largesse, make no mistake — inflation is twice as important for the direction of long-term interest rates.

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The controversy over QE2 continues, but the real action is in the bond market, where bond yields and inflation expectations are moving up daily, if not hourly.

Before QE2 was even a possibility, yields and inflation expectations were declining from May through August. The fuel for this move was the belief that sovereign defaults in Europe would spread contagion through the global economy that could result in a double-dip recession in the U.S. Weaker growth, in turn, would intensify deflation pressures, thus making 10-year Treasuries an attractive hedge. So everyone piled into 10-year Treasury bonds, driving their yield down from 4.0% to 2.5%.

Elliot Wave International notes that S&P futures traders are the most bullish they’ve been in 4 years! Other sentiment surveys indicate even more bullishness among individual investors.

Anyway … much of the optimism likely stems from unusual improvement in usual economic data. Besides some improvement in manufacturing numbers et al, there seems to be improvement in sentiment numbers too. Small businesses optimism is steadily, albeit slowly, improving. A growing number of CEOs of major US companies expect to see sales growth, increased capital spending, and payroll additions over the next six months.

We acknowledge the small improvements that small businesses and big-time CEOs see in the economy. But we think the improvements don’t yet outweigh the potential risks that the economy will be held down, and recovery really won’t equate to self-sustaining progress.

But then again, maybe we’re just perennially seeking that black swan event …

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Jim Rogers, the famous contrarian investor, stands behind his prediction that gold prices will hit $2,000 (U.S.), but isn’t buying any more gold at record highs.

Rogers has been a gold bull for years and well before this year’s 25 per cent rally. There are many ways to buy gold like the gold exchange-traded fund, SPDR Gold Shares (GLD-N135.39-0.79-0.58%), up 24 per cent; gold stocks like the Market Vectors Gold Miners (GDX-N61.47-0.66-1.06%), a basket of large-cap miners, up 30 per cent; or physical gold. Rogers favors the physical commodity.