William Trent_

Not Yet Enough Focus on Commodities For a True Bubble To Have Formed

WC,

The obvious reason, which I am sure you have considered in your own analysis, is that in 1981 inflation was very high and beginning a long-term downtrend (at the end of which it reached acceptable levels.) The current <i>level</i&g... of inflation is much lower today, so there is much less room for disinflation to benefit financial assets.

The next logical argument is that the <i>direction<... of inflation is uncertain today. However, it seems to me that either higher inflation or outright deflation would favor real assets over financial assets.

So to me the argument against commodities today is that inflation will stay in a sweet spot, declining somewhat from current levels but not entering deflation territory. Given my sense of the risks, I don't see that I am receiving an adequate risk premium for financial assets and thus prefer the real ones.

Given that you clearly feel otherwise, would you be up for making the case that distinguishes 2006 from 1974?