"Thank you for a superb service as always and for guiding us through these turbulent waters.

"I notice that your sister service, Investors Intelligence, UK Hotline 30th May 2012, "Commodity Complex Still Struggling" by Jackson Wong, talks about the mining / commodity sector experiencing a major shakeout and unlikely to produce the type of returns seen during 2001 - 2011. I just wonder what your thoughts on this are and how you are squaring up with Jackson Wong and his thinking? Also, has the "major shakeout" actually occurred or has it got further to run?"

David Fuller's view Thank you for your thoughtful words. Re "turbulent waters" in financial markets, the best thing about them, although people can lose site of this at the time, is that they improve valuations and are followed by more benign conditions.

Jackson Wong is a friend, colleague and the newly appointed director in charge of Investors Intelligence. We have adjacent offices and converse regularly.

I do not think that he and I are very far apart on this subject. The commodity complex is indeed struggling, due to the global economic slowdown. You can see the evidence on this weekly chart of the Continuous Commodity Index (CCI) which I have often posted.

In commodities, the cure for high prices is high prices, because this leads to increased production, less consumption and substitution. Conversely, the cure for low prices is low prices, because this eventually leads to decreased production and more consumption of commodities. These are natural, recurring cycles.

Accordingly, I maintain that the high commodity prices which helped to slow global GDP growth are now experiencing an important reset by reducing inflationary pressures prior to the next economic recovery. You can see from CCI above that the decline is becoming overextended relative to its declining 200-day MA. In my opinion, this indicates that the "major shakeout" to which you refer is now in a mature stage. I have previously mentioned that I would not be surprised to see it bottom in the 500 to 475 region, although the charts will show us.

The most important catalyst for the next sustainable low in CCI would be somewhat stronger growth from China, a subject which I wrote about yesterday.