Lex, today attempts to prick the commodity bubble with a blunt pin. In “Reading the commodity leaves”, Lex suggests that the relationship between actual changes in demand for commodities and the prospects for growth in world manufactures mean that there is scant justification for the current commodities price level.
But Lex could make this observation currentlyabout most other investment capital asset indices. Neither does he show awareness that it is only relatively recently that the prices of commodities have been determined to a unquantifiable but significant extent by ‘investment’ demand, and not just end-user demand.
The one year commodity index chart (S&P/GSCI), looks just like most other capital asset indices one year charts, i.e. united by similar levels of capital asset price inflation.
Common sense suggests that the driver that links all investment asset classes price levels must be liquidity and credit levels. Since Lex (nor anyone else) does not understand precisely how credit and capital asset price inflation act on each other, it would be helpful if Lex would just shut up.
Bun rating: 0 but waffles are available instead.
Trevor E Brown's Blog 