Commodity Bubble?
March 29th, 2008 by 
reality
As a confirmed bubblephobic, I exited my metals and energy positions last summer. Of course they’ve gone on to new highs by a lot. But my bubble detector went off. Too much unanimity, too many TV ads and retail speculation.
So, for the record, I think commodity prices are cruisin’ for a bruisin’.
And if as and when commodities start to collapse then we might well see the stock market go too.
Posted in Commodities, Energy, Metals & Mining | 
March 29th, 2008 at 7:11 pm
There has been talk of coordinated central bank intervention in the greenback and the sale of 40 tons of gold by the IMF. Who knows, it may be all bluff and bluster or too little and too late if they really go through with it.
Are you expecting a rebound in the dollar?
With T-bills closing in on a one percent yearly return after fees there aren’t many places for money to flow to (carry trade anyone)?
Is it time to repost your model portfolio?
March 30th, 2008 at 2:18 pm
Everything depends on who is “holding the bag” of low quality debt, and when to expect write-downs to happen.
I feel a lot of toxic waste landed in Europe, but up till now is not fully calculated down in balances. If so, some pain for European financial sector is ahead. But not before the announcements of quarterly financial results.
If so, expect bailouts, rate cuts, weakening currency. Dollar under such circumstances can strengthen, commodities - weaken, but only temporary.
A lot more of financial problems are coming, governments will further intervene in financial sector, they possibly are intervening in stock and forex markets already, and they eventually will become protectionistic in commodities. That is inflationary.
I would expect real hysteria and volatility in the equity markets, if commodity prices would rebound and rose to new highs. Maybe in second half of a year.
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All that is just intuitive speculations. I have no numbers, and don’t see any clear signals. Just a feeling, that “when UBS sneezes, the Europe should catch cold”.