RE: Your inflation forecast
From Barrons Commodities Corner:
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THIS YEAR WILL GO DOWN in history as one of the few in which commodities behaved like one market, rather than as a group of disparate markets being buffeted by different supply and demand influences.
Indeed, the remarkable pattern of this year's commodity updraft, which has seen the DJ-AIG index rally about 24%, is that it has carried along commodities not even counted in mainline indexes. So while energy, grains, metals and soft commodities are all higher, so are rubber, wool, and some obscure ones such as the metal antimony.
This time last year, some of these markets weren't far from multiyear lows. Part of the reason for the rebound is explained by the old saw about "low prices curing low prices." In effect, low prices have discouraged production and helped restore demand.
Speculative money has flowed into commodities this year as a stock-market recovery has proven fitful. What's also at work, according to some observers, is the effect of extra liquidity resulting from Federal Reserve rate cuts and a weaker dollar. That's the conclusion drawn by investment managers Bridgewater Associates, who discern that "we are in the midst of the most powerful commodity move in the last 22 years." Bridgewater compiles its own "commodity diffusion gauge," including a broader array of commodities than the mainstream measures, and 96% of those are higher in the year to date.
online.wsj.com
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Rising commodity prices are often a leading indicator of inflation.
Sam |
