enviro111

Burst Bubble? Commodities' Long-Term Story Remains Intact

No market goes straight up forever. All mania's eventually end in a bust.

First it was the stock market mania in 1998-2000 with the speculative Nasdaq stocks leading the way. This went to a bust; but the bust was buffered by FED actions. Too low interest rates and massive infusions of cash. Also, buffering the Nasdaq bubble was the fact that many 'traditional' stocks didn't move in sympathy during that period; thus, the bust was muted and could easily be transferred to a new arena.

Second, the next bubble was the housing bubble. It was caused by exceptionally low interest rates, massive tax cuts for lower income people and a renewed focus on 'a house for everyone'. Construction jobs and new retail for everyone to replace former industrial jobs - who wants to work in a dirty factory anyway?
The bust came... Lots of low income folks now 'rent' their homes from banks and many house flippers own multiple houses. This bust is now in progress and is being buffered by cheap credit, massive FED bailouts and huge deficit spending.

Third, the next bubble WILL BE the commodities bubble. Before this one is over, commodities will be at:

Unheard of prices
Hundreds of commodity funds will be launched
Experts will view commodity investing as a one way street to riches.
More than 20% of the general USA public will be buying and hoarding gold and silver.
The US dollar will be much, much lower unless other nations coordinate and devalue their currencies simultaneously.
The Dow Jones stock average will be equal to the price of gold.
The gold / silver ratio will be 15 or less.
The gold / Wheat ratio will be 30 or less.

Note that none of these conditions have occurred yet.

Fourth, the final bubble will be the CASH bubble when the entire ediface of shakey debt and overpriced everything comes crashing down. Inflation will have been out of control for a long time and interest rates will have risen considerably. The US dollar may not even be the currency of choice for American's much less for anyone else. The place to be might be Chinese Yuan, Russian Rubles, Swiss Francs. Maybe even Canadian loonies??