2011 commodity bubble

Over the past several decades, the world financial system has produced a seemingly endless series of bubbles.  For example, there was the "dot com bubble", the "housing bubble" and the "yen carry trade".  So what bubbles are being created currently?  Well, nobody wants much real estate right now and investors are still a bit wary of the stock market.  Instead, money has been flooding into U.S. Treasuries and into commodities.  In 2011, agricultural commodities have been going crazy, precious metals have been setting records and even the price of oil is now starting to move up. According to Commodity Tips All over the globe, there is a growing lack of trust in paper currencies, and that is helping to fuel the move towards commodities.  Unfortunately, "the 2011 commodity bubble" is going to have a very real impact on American consumers.  As the prices of wheat, corn, pork and oil continue to rise on world markets, it is inevitable that those price increases will be passed on to the rest of us.

In the future they might coin this the “Bernanke Effect” or the great commodity bubble of 2011. The truth is that commodity prices are rising…dramatically. You might have started to notice this disconnect in your grocery store shopping or in gasoline prices, but if you were to ask our government they would tell you that a basket of goods consumed (CPI) is rising modestly. How modest do these numbers (click to enlarge image) appear to you? Sugar and corn? Those are luxury goods.

If the basic ingredients to food are skyrocketing, then prices of food will eventually have to keep pace which will directly hurt consumers.

Of the 853 ETFs that I looked at, which unleveraged funds do you think had the greatest return over that same time period? My conclusion is simple: this time is NOT different. Commodity prices cannot go up forever and China will not continue to support the market regardless of prices.