Friday, May 19, 2006

Stephen Roach try to talk down commodities...

Stephen Roach - Morgan Stanley Chief Economist try to talk down commodities, will it work? - I don't think so... It amaze me that all those highly "educated" economists fail to understand that higher commodities prices are exactly what it takes to reduce demand and increase supply.

05-18-06 03:17 PM EST
BOSTON (Dow Jones) -- Morgan Stanley Chief Economist Stephen Roach thinks there's a speculative bubble in commodities, and it's not a matter of if it will burst, but when.
"Asset bubbles have dominated financial market experience over the past six years," Roach wrote in a note to clients earlier this week, pointing to the initial bounce in stocks followed by runs in bonds, real estate and derivatives.
"Like clockwork, liquidity-driven investors have migrated from asset to asset, desperately in search of yield," he said. "The world is now in the midst of another bubble -- this one in commodities."
The economist said the jumps in prices of materials the past few months are reminiscent of charts of dot-com stocks in late 1999 and 2000.
"That speaks to an important aspect of any speculative bubble -- price excesses that spread into the far reaches of an asset class."
Last week gold futures hit a high of $728 an ounce, their highest level in almost 26 years, but since then metals have suffered a sharp and unsettling three-day pullback. - source

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