Monday, October 18, 2010

Phil Flynn: Ben's Bubble!

There is no doubt that Ben Bernanke can inflate the commodity bubble and at the same time let some of the air out. Ben Bernanke has somewhat disappointed commodity bulls by not being more forthcoming about the size and the scope of the next round of quantitative easing. While today the Wall Street Journal is raising legitimate concerns about the potential backlash from his policies due not only to rising commodity prices but also the surge of investment in some emerging markets.

The Wall Street Journal writes, “The Federal Reserve's latest effort to juice the U.S. economy is making many investors in emerging-market and commodity-producing nations confident the rally has longer to run. Others see trouble ahead, concerned too many investors are jumping into the rally and that these markets can't keep raising if the U.S. economy stays sluggish.” Already this year a record $60 billion has gone into emerging-market stock and bond funds... and investors expect another $500 Billion...”. The question becomes what will happen if investors run for the exits at the same time. Commodity inflation is now thought to be......Read the entire article.


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