The coming commodity bubble '2009-2011' - Page 8

Thanks BullMarket29 and ezrider.

Look Skwerl, your not the minority and I'm not the majority. Let's just set this non-sense aside and lets focus on the topic of the thread. Let talk about what really matters, come on now.

I'll post some relevant articles later next week and give my thoughts on it.

True, emerging market demand will provide a floor in price for most of these commodities for the foreseeable future, but you have to remember two things; a) with rising commodity prices come rising costs. As the marginal cost for each unit sold increases, marginal product will decease. That means that most companies are close to hitting their earnings growth peak, so a higher move in commodity prices doesn't represent companies with higher revenues, but with diminished revenues, does a probable deceleration in growth, and b) a lo of companies are making profits because of the inventory build back in 2009. They (i.e. resource companies) basically amassed large quantities of inventories (i.e. raw materials) at a very low cost, and now their selling at a much higher pirce. With higher commodity prices, these companies will have to pay up foro these commodites, so the margin of revenue is going to be smaller going forward.

Just thought I shared my comments. Does htis mean an end to this commodity bubble. Not yet, but I'd be careful were I entered these trades.

Kevin, thanks for reviving the thread.

Very true. Low interest rates typically coincide with low commodity prices (i.e. input prices) but you have to remember that Fed hasn't only lowered rates, it is in the process of injecting another $105B (by December) of fresh debt into the market. As such, people are expecting costs (and prices in general) to go up because of the excess debt accumulation.

As far as the U.S trying to become an export economy. I cannot phantom how that would happen, when the U.S consumer is clearly the biggest consumer out there. I think China will have to be become net importer for the U.S to become a net exporter. Otherwise, world trade would collapse.

I doubt that that's what the Fed's real intentions are (perhaps they want the U.S to be more competitive on the export market, but not become a net exporter).

I tell you one thing though, with the debt deleveraging that is currently going here in the States, the Fed must counteract out with higher commodity prices to avoid deflation. There is no question commodity prices are going to still elevated for quite some time. The question is, how high is too high, and how long is too long? There is a very thin margin (fine line) between an asset class bubble and a cyclical bull market.