Tuesday, April 13, 2010
This may be the most V-shaped recovery of any I've seen of late. It's an index of the prices of some relatively obscure commodities (hides, rubber, tallow, plywood, and red oak) that are included in the larger Journal of Commerce index. Now, I would argue strongly that these commodities are simply not the object of speculators' affection. If I'm wrong, please point me to data which show that speculators are gobbling up tons of this stuff and storing it in massive warehouses around the world. There's a very thinly traded futures contract for rubber, but the fact is that none of these commodities have an easy way for speculators to accumulate large positions in anticipation of price increases. The inescapable conclusion here is that prices are up (and have reached a new all-time high) because global demand is strong. You can't argue with a bullish price signal like this.
Oh, and the last time this index surged was in the latter half of 2003, which just happened to be when the U.S. economy grew at a 5.2% rate.
Posted by Scott Grannis at 9:37 AM