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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Joan Osland Graffius who wrote (160995)4/19/2002 3:13:54 PM
From: reaper  Read Replies (2) of 436258
 
Joan -- IMHO there will NOT be commodity inflation, at least in long-term time frames (i.e. I don't want to guess where the CRB will be in 12 months). It is not a mystery to anyone that the price of a commodity in the long-term is the cost of production of a marginal unit (plus some return on capital for the producer). A combination a technology & productivity improvements and exploitation of lesser-developed nations has kept commodity prices in multi-decade downtrends and will continue to do so. Of course a wild-card is the US dollar (the high dollar has kept commodity inflation as realized by US consumers low) but I am inclined to think that the dollar, while over-valued, is only over-valued by 20% or so which will IMO more likely limit deflation as opposed to cause inflation.

I don't think that the bull market in bonds (govies) is over; I am even more sure of this opinion when I read that everyone, from Bill Gross to Martin Barnes to Jimmy Rodgers to the editors of Barron's thinks that it is. I still think we see a 3-handle on ten-years before the end of CY03. I am not wedded to this opinion, however, and as most on this thread know I have a sizeable stash of TIPS to hedge my low inflation opinion.

Cheers
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