BUBBLE SPOTTING….

I’ve laid my cards on the table and so have a few other notable bubble spotters.  But few would argue that Robert Shiller is not the king bubble spotter and in an article today Professor Shiller showed his hand.  Where’s the next big bubble?  Like John Hussman and myself believe Shiller says a bubble is forming in commodities, but Shiller is far more exact.  He says the commodity bubble is leading to a much bigger bubble in farmland.  He says:

“A continuation of today’s commodity-price boom seems more likely, for it has more of a “new era” story attached to it. Increasing worries about global warming, and its effects on food prices, or about the cold and snowy winter in the northern hemisphere and its effects on heating fuel prices, are contagious stories. They are even connected to the day’s top story, the revolutions in the Middle East, which, according to some accounts, were triggered by popular discontent over high food prices – and which could themselves trigger further increases in oil prices.

But my favorite dark-horse bubble candidate for the next decade or so is farmland – and not just because there have been stories in recent months of booming farmland prices in the US and the United Kingdom.”

It’s nice to know I am not the only one who is seeing signs of irrational exuberance in these markets.   But like my housing market call of 2006 it’s likely that I am early to the game.  But forewarned is forearmed….

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. Best bubble spotter I know of: John R Talbott.
    Why:
    Published “The coming crash in the housing market” April 28, 2003
    Published “Sell Now!: The End of the Housing Bubble” January 10, 2006
    Published “Contagion: The Financial Epidemic That is Sweeping the Global Economy… ” June 1, 2010

    Shiller is very good as well.

  2. So, how can one buy/sell farmland via available financial instruments? I suppose when they create a farmland case-shiller index and/or farmland backed cds index, that will be the time for the bubble to end?

  3. No one thought it was a housing bubble in 2006 (or at least few did). In fact, reviewing my client notes from back then shows that I was pretty close to calling it near the peak although I had definitely been wary of housing in 2005 when I warned my own parents about not buying houses (which they did anyhow)….the bubble didn’t actually start to implode until well into 2007….

  4. I’m with you TPC. It is coming and it will hurt. Waiting for QEII to end (near end). Fed pulling liquidity now is a sign the end is near just like last April. Crash then bring on QE III.

  5. While many agriculture products currently have high nominal prices when adjusted for inflation the prices are still low. I agree with Marc Faber and Jim Rogers on ag fundamentals being very bullish long term. That doesn’t mean there won’t be a set back along the way.

    To be fair Shiller said the bubble would occur over the next decade or so, which is something I could see happening too.

  6. He’s never very precise about timing. He doesn’t claim to know when it will end. But by the time Shiller starts talking about it it’s likely that we’re closer to the end of the bubble than the beginning….

  7. As someone who has owned over three dozen farms, I’m with Shiller on this one. There is no shortage of agricultural land; if anything there is an over supply. I’ve cashed out of everything except one small 40-acre place, and that I’m holding just for fun.

  8. New Zealand is basically a giant farm and prices seem like they’ve been rising since the mid 90’s, sale’s have slowed some since 08/09 but value’s appear stable.
    in general the return’s seem absurdly low when compared to the cost of the land. I’m not in that industry obviously
    I’ve heard Faber and Rogers pointing to farmland as opportunity and I wonder then could they include NZ in that and ultimately then how high price’s could go, way higher than most think – like all bull markets.

  9. You’re correct there is no shortage of farmland in the USA, but worldwide that’s an entirely different matter. The amount of arable farmland is shrinking fast, especially in China http://www.chinadaily.com.cn/china/2009-06/24/content_8315418.htm.

    Throw in a growing population and peak agricultural productivity / production and prices are going much higher. Not many people know about what’s happening to our bee population with CCD http://www.pbs.org/wnet/nature/episodes/silence-of-the-bees/impact-of-ccd-on-us-agriculture/37/.

    BTW, my family has owned the same farm for over 170 years, so I know a little bit about farming too. IMHO this ag bull is at best half over and that’s if you consider the starting point is 2006.

  10. Shiller did say it would happen over the next decade or so and I happen to agree with him, if he’s right we’re closer to the beginning than we are to the end regarding a bubble in farmland. See my reply to JD below for my reasoning.

  11. I’ve read similar stories but don’t buy it. The day farming is profitable, the guy in Pennsylvania with five acres will be able to put his land into tomatoes and retire off the annual income.

    Since I’ve farmed in three different countries, let me put things into perspective.

    1) There is about one acre of farmland for every one of the 7 billion human beings on this planet (and no way any one individual can come close to consuming an acre of food in one year). So there is no shortage of farmland, despite what your read.

    2) Technology to increase production becomes more viable as prices increase, meaning less land can produce more, creating more competition on the price front. That means you have to invest in technology to stay even with what you were earning previously.

    3) The price the farmer gets for produce is a small fraction of what you pay at the supermarket. This year (where I live) half of the plums, apricots and pears went unpicked because of over-supply and the fact that buyers reached early quotas. The price for plums (delivered to brokers) after picking costs were about 5 cents per pound. Apricots and pears paid less, due in part to a boom production. In other words, farmers finally got a “full” harvest.

    3) The price of produce retail is not determined by the cost to produce it, but by the cost to pick it, transport it, warehouse it, package it (or can it) … and give wholesalers and retailers their cut while factoring in spoilage. These steps increase the retail price exponentially.

    SUMMATION: Work a farm and you’ll get the idea. You might pay a buck for an apple in New York, but the farmer who grew it might be paid two cents for that apple.

    Agriculture is a high-risk, low income business. Those who do it for a living do so out of love, or because that is all they know. If you want to get rich, forget farming as a business and write a blog about farming or sell the stuff wholesale or retail. Or better yet, sell your farmland now!

  12. In the past 100 years, productivity in farming has been driven by fossil fuel use (as well as genetic engineering.) You can’t compare the productivity of a hoe and shovel with a diesel driven combine. That’s why the world’s population has swelled many fold in just the last 100 years.

    You have to keep in mind that much of the fertilizers, herbicides, and pesticides are derived from petroleum and natural gas. Farming equipment runs on diesel, the food is shipped to be processed, and then shipped again to be sold – more often than not, using fossil fuels.

    From seed to store, fossil fuels are needed every step of the way. If we are truly facing peak conventional oil, then unless a new energy system is developed, food prices will continue to rise.

    The diets of many people in Asia are also becoming westernized.

    Also keep in mind, many newer “greener” energies such as ethanol and biodiesel shift available arable farmland and water use from food products to fuel products. So that’s another issue.

    I think there may be a farmland bubble near term, but long term, it is an energy crisis.

  13. Regarding your available acres to the world population: How many acres are required to grow beef? Cow’s gotta eat too, right? It’s not all the same. If everyone ate rice or wheat and not beef or pork, etc… then there is no crisis. But more diets are getting diversified, which represents a long term issue in my opinion.

    Fresh fruit and vegetables are difficult. I agree with you. I have seen piles of rotting fruit on farms, while reading about food riots elsewhere in the world. Unless you are a very large grower or belong to a huge cooperative, your food is not going too far. Unfortunately, that’s how the market works. And with globalization, your competition can be thousands of miles away.

  14. It’s interesting that in discussions like this you don’t the see simple financial information that shows whether the economics of farming makes sense given the price of land.

    It’s highly localized, of course, so I’ll just focus on the highest-profile and most productive ground, that of the Upper Midwest.

    Given the prices being paid, there’s no doubt that substantial anticipated increases in the price of land (or in the prices of crops) are part of the equation. Sounds to me like the kind of logic that has marked other bubbles.

  15. Since I’ve done a bit of cattle, I’ll answer the question.

    Many places in the world, cattle are initially raised on non-arable land (in other words dry range that wouldn’t support agriculture without irrigation). You put calves on the land, quite a few acres per head, let them forage best they can and once they reach about 400 pounds you sell them to the feed lots where they fatten them up.

    You could slaughter them at 400 pounds if you wished, and some folks do, but there is more profit if they are finished off with corn and grain to increase the fat content.

  16. I attribute most of the commodity (mini-)bubble to the leverage inherent to commodities trading. Futures prices drive spot prices in the short-term, which feeds a cycle of speculation both within and outside the futures exchange, until the fundamentals ultimately catch up.

    Commodities can look attractive because the other sectors currently look scary (real estate) or crowded (equities.) Meanwhile, demographic arguments can be used to rationalize high prices, ensuring that high prices get paid for a time. The futures trader is indifferent to the short-term blip because his time horizon is short and his view technical, so he’ll gladly overpay for a time until it’s clearly unsafe to do so.

    In essence, futures markets are supposed to create stability, but lately they do the opposite, fostering instability and volatility instead. Until this glitch gets fixed through intervention or another more exciting trade comes along to replace them, this is going to remain an ongoing problem.

  17. I am a New Zealander, and yes, it is a farming intensive country.

    I would say that it is not quite accurate to suggest a bubble is farmland is building (at least over here). In NZ, the fortune of a farmer heavily depends on the price of milk solids and dividend from Fonterra (monopoly dairy co-operative).

    http://www.interest.co.nz/images/fonterra-payout.gif

    After the financial crisis, payouts to the farmers fell along with their land prices. Maybe the bubble has already burst…

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10632187

  18. I don’t think that is correct.

    How much fuel does a tractor require to dig up an acre, or harvest an acre of wheat, etc… ? Relatively little.

    The bigger problem for farmers is climate change. If climate change brings about increased volatility in weather patterns, then we have a problem. There is nothing worse for a farmer that an ongoing drought, or out of season snow storm that ravages crops or kills young calves and lambs. If these events happen more often, then a farmer doesn’t just face increased costs, but rather has nothing to sell!

  19. If you read my post carefully you’d know I’ve worked a farm. I assuming your farm is in Washington or Oregon or maybe Northern CA based on you growing pears and the stone fruits you mentioned. My family’s farm is in MI and we grew a lot of apples and we’ve left fruit hanging in the orchard because it wasn’t worth harvesting or didn’t have the labor in some years too. So, I know all about things you mentioned.

    What’s your take on CCD?

    I think China and other developing markets have an advantage growing fruits and vegetables because of cheap labor. I’ve also had a business making fruit juice in China and have seen first hand their farms. One thing that blew me away was them harvesting wheat with a sickle. So, yes there is an opportunity to increase productivity.

    That said, I’m really bullish on grains for a number of reasons, but most importantly is the demand which is growing. The big driver for this increase in demand is people in Asia moving from a grain based diet to consuming more meat and it takes 16 pounds of grain to make 1 pound of beef.

    I agree with Misthos comment about an acre of land is enough if you’re growing fruits, vegetables and grains, but not cattle. We raise cattle on our farm, pasture fed right up to slaughter with each cow consuming an acre of arable farmland.

    I agree that farmers will plant fence post to fence post and there will be a bunch of hobby farms popping up all over, but I don’t share your optimism that this increase in supply will be enough to offset the increase in demand making farming unprofitable.

    But hey bulls and bears are what makes a market, so we’ll have to agree to disagree.

  20. Bob Farrell’s Rules of Investing come to mind, especially Rules 3,4 & 9.

    3. There are no new eras-excesses are never permanent.

    4. Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

    9. When all the the experts and forecasts agree-something else is going to happen.

  21. Good comments Angry…

    Regarding exchange traded commodities and the prices, I think most will agree that in the simplest sense a “bubble” is a good idea taken too far. This whole conversation shows there is a lot of genuine belief that the fundamentals of farming look excellent well into the future (some of you of course don’t agree).

    Given fundamentals “look” good, it re-affirms to speculators that they’re looking in the right place and as prices rise it drags more in because the rising price is seen as confirmation of the solid fundamentals.

    The same is happening in industrial commodities – as an Australian-based money manager, all I hear from analysts these days is the excellent fundamentals of copper and iron ore, underpinned by China’s unstoppable demand. The rising prices are simply seen by the analysts as proof they’re right and surely nothing could derail the rise.

  22. I questioned one of the regulators on a possible bubble in Iowa farmland a couple of months ago. He said that there were no indications at present although demand was rising in spite of the recession because of the good returns available if one buys right, and knowledgeable people are well aware of this. While prices are rising fast enough in some areas to generate some concern, he said that the regulators are on the lookout for bubbles forming after the previous experience of the ’80’s, and we are no there yet.

  23. I sold a house in August of 2006 it had been on the market 18 months. The house had appraised for $250,000 in 2000 and in 2005 $535,000. We already owned another house and wanted to sell this place. The housing market felt like stocks in March of 2000. The house sold for $500,000 and is likely worth maybe $400,000 today. Two houses have sold here since last November…………

  24. Another farmer here, berry farmer to be exact.
    Futures trading is certainly not to blame for commodity prices.
    The simple explanation is overly expansive monetary polices by the world’s largest central banks. One in particular.

  25. I read fonterra is ‘demutualizing’ and will eventually sell shares to the public. Is this true? If so, what do you think of this event?

  26. Slightly off topic, but similar – I was having this argument with someone over the weekend about how there is no speculation because futures involve physical delivery and settlement. I don’t buy it. When I see Chinese “farmers” hoarding cotton in their kitchen I don’t think We need to call him a farmer any longer. He’s speculating and directly driving price. The fact that someone takes delivery is meaningless.

  27. I am so sick of commodities bubble callers every frigging where I look and am especially disappointed to continue to see it on this blog. Here’s a question:

    HAS ANYONE ACTUALLY LOOKED AT COPPER SUPPLY/DEMAND FUNDAMENTALS FOR THE NEXT FIVE YEARS?????

    If not, then everyone should just shut the hell up about this so-called “bubble”, or at least get more specific as to what the specific commodity is and why.

    Let me tell you what I think the biggest bubble is = ASSUMED CONFIDENCE in government debt instruments (backed by nothing except paper).

    And I have charts to back me up for that. I do not argue that we face hyperinflation, not yet, but our money is being repriced. Folks, THE DEBT IS KILLING US and we need to do something about it. It is not the Fed, it is not QE, etc., etc., etc. I think BB is doing a fabulous job, WHAT THE HELL ELSE IS HE SUPPOSED TO DO?? In fact, government’s crazy spending may force him to continue to buy this debt, anybody think about that??

    It is not as important to understand where capital is flowing, it is important to understand why. Precious metals, commodities and stocks shall continue to rise in the face everything until we get this clown out of the White House and these crooks out of Congress and at least ATTEMPT to get the budget and entitlements under control. AND YOU CAN PUT THAT IN THE BANK…

    I see Dow 14k and moving even higher if the Repubs put up another piece of garbage candidate like McCain to try and recapture the WH in ’12.

  28. Don’t take it personally bud. For me, I wouldn’t feel too comfortable owning commodities at these levels aside from some gold. I don’t know if there is a bubble, but the risk that there might be is a risk I don’t need to take….

  29. One guy is not a good global snapshot, but I don’t like relying on low labor costs because things can change dramatically. I’m actually in Argentina, and labor costs here are more than five fold since I started here nine years ago. You never know what the government is going to do to labor rates.

    Tomorrow I harvest a quince orchard and we’re looking at 4.5 US cents per pound delivered to the broker after picking costs. They’ll turn the fruit into preserves, which has a good domestic sales market as well as an export to Europe. I’m not sure what totals are going to be, but I’m estimating about 1/10th of normal harvest since this farm was hit by hail last year and it’s still recovering.

    I’ve only had it since December (I just sold a large cattle ranch and took this small farm as partial trade because the buyer couldn’t come up with all the cash). But it would have been a money-loser this year. I don’t think the quince harvest will get me back what I have already spent in tractor work at $12 an hour or the cost I’m paying labor for flood irrigation since December.

    The olive orchard part of the farm is still suffering from last year’s hail, and the apricot orchard as well, so the previous owner didn’t even bother to harvest.

    So you see the situation. People always seem to figure farm value on maximum production and maximum prices, but you have to factor in one year in five as a loss.

    In my case I don’t really care much, since I have other plans for the farm next year, but had I farmed it for a year under current conditions I would have lost about US$8k to US$10k.

  30. JD, You have no concept of farming or cattle. There is no farmer/rancher in the US or most of the developed countries that would slaughter a cow or steer less that 900-1100 on the hoof. Most cattle in the US are “finished” in feed lots, not on arable land. Even in Chile and Argentina they are not slaughtered at 400 pounds or for a 400 pound “finished meat” weight. Sounds like a “economics expert” (must have a PHd.) trying to converse in the ag world. In Kansas, Oklahoma, Texas, Iowa, Indiana, Montana, Idaho, Wyoming, Colorado I can vouch that most of the ranchers would call your take “foolish” and the nicest.

    Makes me wonder about your “facts” on the rest of agriculture. You have a few grains of truth, but the beef and the amount of agricultural land is shrinking because the marginal land is played out and move on, as in Brazil.

  31. If not, then everyone should just shut the hell up about this so-called “bubble”, or at least get more specific as to what the specific commodity is and why.

    Before 2008, I called an oil bubble because (a) growth rates of demand were moderate, (b) pricing was reaching a point at which it was too high for users of the product (airlines, trucking companies, etc.) to pay for it, and (c) the volume of trading by speculators has increased several-fold. In other words, the fundamentals didn’t match the pricing, while the price setting was being done increasingly by traders who don’t have a stake in the absolute price in the product.

    It simply made little or no sense for an airline to “hedge” oil at $140/bbl, for example — if the world price of oil is sustained at levels like that, then we aren’t have any airlines to worry about, because they can’t make money when oil costs that much. The only way that this can be supported over the long run is if we had substantial wage-driven inflation in order to support the price, i.e. consumers and businesses who are dripping with enough cash that they want to keep buying airline tickets, regardless of how much they cost.

    I wouldn’t refer to the situation currently as a full-on bubble, but it’s getting frothy. If the prices of the final good are so high that they aren’t worth it to a user to hedge at those levels, then the pricing isn’t sustainable. The medium-run sustainability of $100 oil is, in my mind, questionable.

    Let me tell you what I think the biggest bubble is = ASSUMED CONFIDENCE in government debt instruments (backed by nothing except paper).

    US treasuries are backed by the world’s largest economy and a track record of zero defaults. If you can borrow funds based upon your income, why wouldn’t Uncle Sam be able to do the same?*

    *That is obviously a non-MMT answer on my part. Obviously, you and I agree that deficits are a fiscal, not a monetary, issue.

  32. NO. Bernanke is an enemy of the American people and ought to be in jail.

    Only “economists” can make the case that this idiot is “good” for our country and the world.

    There is this little thing called “Capitalism”, maybe you have heard of it. Bennie is ADDING to the “debt instruments” so you are talking out of 2 sides of your face. The banks need to fail and new ones will replace them. That is the problem, Bennie and the Politicos are picking winners and losers, and the Amreican Taxpayer is getting screwed AND Bennie and the Politicos are bankrupting us by devaluing the dollar and making Price Inflation. This ALL reduces the common man’s discretionary income and eliminates them as “consumers”.

    Period end of story.

    But you are right on the PM’s. Though SO there is something of grace in your post, but NOTHING ABOUT BENNIE IS GOOD, that man is an anachronism. Fixing today’s economic problems by fighting the economic problems of the past.

    What an idiot! (Bennie I mean)

  33. And Everyman, you have no concept of reality. At times when they are buying cattle on the hoof for 6 pesos per kilo here in Argentina (69 US cents per pound), yes they’ll slaughter things locally without trucking them to a feed lot for local use.

    That is not the norm, but it’s done. Distances are vast here, trucking is expensive, and auctions are only about twice a year in the provinces. Go figure. That’s the way they do things. From where we live, Buenos Aires is just 150 miles less than New York to Chicago.

    Next week I’m selling 80 head and will be getting about US$2.50 per kilo on the hoof (US$1.14 per pound). They’ll probably weigh out at about 180 kilos each. This year it’s a gravy train compared to losing money previously.

  34. It is rumored that shares will eventually be sold to the public, but I don’t believe it will happen.

    At the moment, I am pretty sure (90%) that dairy farmers MUST sell their milk solids to Fonterra (who exports almost all of them), and there are very few exceptions to this rule. There are ongoing stories of Chinese investors wanting to buy dairy farms, and some of them want to export directly to China and cut out Fonterra – these investments never get approved by the overseas investment office. If the public were allowed to own shares, would all of this have to change?

    Sorry, I honestly don’t know enough about how public ownership of shares will work to comment on it.

  35. Gentlemen:

    No concerns, obviously I take nothing personally. But I just get so frustrated when these random, bubble-throwing bomb throwers just say it. It’s like calling someone a communist or racist.

    It takes no intellectual effort or integrity whatsoever.

    And I am not invested at current levels, I have been in this play for at least two years and have averaged up. I hear this constantly with regard to the rare earth play.

    Rather than actually look at the situation and try to understand what’s going on, everyone just looks to capital flows and assume it’s always a bubble.

    Now of course, there is naturally overshooting, whether it’s commodities or whatever, but one has to ask if there is a fundamental reason these things are occurring.

    Ponder this, if China’s consumption and growth rate continue, they will come close to requiring ALL THE COPPER CURRENTLY PRODUCED.

    Oil is another matter.

    Finally, saying that “we have never defaulted” and thus never will is kind of like saying we’ve never had to worry about spent fuel-rod pools, until of course we do in Fukushima.

    Here’s my track record: Every government, EVERY ONE, has defaulted on its debts. Throughout history. I do not think the USA will be an exception, it will not outright default, but it will significantly debase which is the same thing.

  36. Chinese “farmers” hoarding cotton in their kitchen ?
    Housing collapse where does all this copper goes to ? China ?
    Iran big Gold buyer. hum… I hope Allah knows about this.
    Farm land will be rare ? Did yo fly over Australia or Canada recently?

    The congress and the fed have focus on helping precisely the companies that must go bankrupt if the economy was going to recover. When a company goes bankrupt, real resources are not lost capital and labor are simply reallocated to other companies in line with consumer preferences.

    BB will push until he as no choice but raise the rates and then “bang” we are back to start. It’s japan or the 30s on steroid.

  37. Here are a few reasons one owns gold.

    1) As an inflation hedge

    2) As insurance against a breakdown (gradual or quick) of the current monetary system.

    3) Speculation – you believe in neither of the above, but you can’t ignore a buying trend.

    There’s a reason Central Banks around the world have become net buyers of gold. There’s a reason the US never gave up its gold, and has the most reserves – it also has the world’s reserve currency. I believe you can not have the world’s reserve currency without having the largest reserves of gold. Not that gold is doing anything for the monetary system directly, but it’s good to have around.

    In my opinion, Central Banks are hoarding gold for reason #2.

    Just curious – what is your reason(s) for investing in gold?

  38. Not only is it correct, it’s pretty much dead-on. Look at any chart comparing world food index and oil (brent crude, WTI). The indices are pretty much dancing to the same tune.

    Oil is needed in every step of food production, processing, and transportation.

    Speculation and climate are significant factors too.

  39. I would argue the bubble is fully here – see the front page of the Des Moines Register today, Wed 23 March…the poorest quality farm ground in IA was up ~25% LAST YEAR, from an already inflated base. Having lived in a small, rural town through the late 70s and early 80’s (in high school) Carter years and subsequent land price bust. Friends graduated into ag lending in 1985-6, just in time for suicides, depression, etc, that followed the land price crash….this is way to much deja vu all over again!

  40. THE bubble is US currency (M3) as well as others. Therein lies pin to pierce the balloon. So, if you own land outright, along with gold, silver, guns, and have no debt, then YOU will win.

  41. I’ve been looking for that “farmland bubble” for 2 years now, trying to sell my 150 acres black soil farm in Quebec. So far, no luck, not even visitors. And no, I’m not too expensive. Obviously, it takes 10 years to sell a farm with good land,
    if the bubble spotters are somewhat right.

  42. All of these experts are guessing: none of them consistently correctly predict what, and when, changes will occur in commodities –or any other– market. I have researched each of the top experts’ predictions over four years. All of them made correct predictions some of the time, and all of them were wrong some of the time.

  43. In the UK there is an inheritance tax (death duty). 40% of your estate (above the personal exmption limit) goes to the government to be spent on worthy causes.
    Farmalnd is exempt from inheritance tax.
    Now I wonder why farmland in the UK is going up?

  44. There is only 15 days of wheat left in the world there is only 19 days lefts of rice in the world!!!!!!!!!

    As a licensed and educated financial adviser in Australia I would like to say What a load of rubbish, Sorry Prof.Shiller,there is no brain left in America.
    Let me state the pre school facts in pre school language about farmland.

    Farm land any where in the world ,with 365 days of production, with good water supply is rarer than any commodity.
    Land is the greatest inflation sponge in history, food is scarce and is driven by real market demand, Food will only go up in price as the world climate takes its toll and developing countries like China and India are affording more food.

    People need to eat first then invest latter.

  45. Take away all fundamentals for a second, and everyone your purely technical trading cap on, and almost every commodity market looks like past parabolic commodity moves. When it’s all said and done current commodity markets will have those same charts — nice steady run ups and a slam down to the bottom faster than your head can spin reversal. How do you predict the timing? Impossible.

  46. Right Michael. What’s your take then? Ride the trend until it hits a stop loss or some other trend reversal target?

    I tend to target these risk markets and just avoid no matter what….

  47. The inefficient, but effective, trend following way? Example, summer 08 ride up oil to 150, but don’t start to get out until after the peak, and shorts start to get on round 130, 120 on the way down. Just trying to get the middle meat from these trends. I just don’t know how any of these current moves will be different. I mean everyone with a pulse has seen gold circa 79/80. We know what it looks like, up/down, in hindsight. Why is today different? The only way these stay going up? Everything we all know about markets over the last 100 years has now changed. That doesn’t feel like a good bet!

  48. Bernanke is nobody’s enemy, not even yours.

    The fact is, after reading hundreds of blogs and thousands of comments, I have yet to run across one person who thinks that he can’t do a better job than Bernanke.

    Therefore, we live in a wonderful country where whizzbang economic experts can be found squatting under every bush and stretched out alongside every road. Darn, who knew we were all so brilliant? Should we worry about a bubble in talent?

  49. THE CAULDRON, BUBBLE &BUBBLE, TOIL & TROUBLE. THE DECLINE IN PURCHASING POWER SINCE 1971-2009 OF THE DOLLAR IS 82%. AT ONE TIME MY $25,000 HOUSE WAS WORTH $225,000, AND NOW MAYBE HALF THAT. I LEFT MY JOB IN SECURITIES BEFORE THE CRASH IN 1987, AND FELLAS THAT’S WHERE WE ARE N O W ! THE NEXT ONE IS A COM’IN F A S T! AND NO ONE CAN STOP IT OR KNOW HOW BAD—. ABOUT THE LAND, GROW ORGANIC–AND DO NOT FATTEN YOUR CATTLE WITH GRAIN OR HORMONES. CAUSE THE NEXT GENERATION AIN’T BUYING IT!”THE TREND”

  50. Someone please define what bubble is since everyone is now a expert on one…
    For those that say t-bills are safe or any other gov promises and will never default on our debt
    from my point of view every dollar the fed prints to buy our treasury debt due to the lack buyers and insuffient tax revenue is a default
    on our debt

  51. A bubble (as it pertains to markets) is an irrational psychological market environment resulting in extreme disequilibrium and ultimately some form of systemic collapse.

  52. Bubble or oracle? Food and water for this blue ball we all live on… I don’t think this is a bubble unfortunately it is just our next reality.

  53. The one big flaw I see in calling everything and commodities a ‘bubble’ is that it seems like it simply is a simple and frankly amateur description of price going up and people now being conditioned to expect every price increase to end in a dramatic crash.

    Perhaps the real bubble is in calling bubbles. I think people are sort of in bubble shock after the series of bubbles we have experienced.

    Another main issue I have with calling commodities a bubble is that it seems to ignore two important factors. First is the price of these commodities is priced in dollars. If you look at a dollar printing chart it also is a bubble. The bubble would seem to be in the dollar and debt.

    Second, anybody look at a graph of human population since 1900? Humans use commodities. I don’t see how the human population could grow exponentially without commodities doing the same, it makes perfect sense.

    No if you want to call the human population a bubble…well then, hmmm… now things get a bit more uncomfortable don’t they?

  54. Global warming is a bunch of crap it’s been proven that scientist have lied about thier data. In the place I live it snows every five years well it has snowed every year for the lasst four years and winter goes longer and longer our palm trees are dying.

  55. Rocky:

    Your analysis ignores a fundamental fact. Humans also produce dommodities. Change in population will change the production as well as the use side of the commodities equation.

  56. You guys want to know a sign of a top in farmland? In any country?

    I. E. My financial planning office in Ohio is located beside a real estate broker who has specialized in farmland for 40 years. I’ve known him very well during that time period.

    We’ve bothfirst hand the intial farmland price bubble in the 70’s and the following bust in the mid-80’s (remember the nationwide Farm-Aid concerts with Jon Cougar Mellencamp and Willie Nelson?) The song “Rain on the scarecrow” comes to mind.

    This guy owns almost zero stock investments. However, he has over 5,000 acres of “prime” farmland free and clear. Recently, I heard him speaking of whether he should start selling off some of the farmland that he’s doubled his money on over the past 5 years. That my friends is one of the signs of a top in farmland in Ohio anyway.

    Another sign of a top? According to public information on farmland sales in Ohio, it seems that most of the buying is coming from amateurs or non-farmers (also known as the general public) Who always gets into a market last? You guys know the story.

    I don’t know of any lifetime active farmers who are buying at the current price levels.

    They do however, want to cash rent the farmland on the shares method.

    My experts (in this case, actual life long farmers) are telling me that farmland per acre prices are too high to be sustained here. Like everyone else who is over the age of 50 in the midwest, they’ve seen this movie before (1972 to 1986) and they know how badly it ends.

  57. You guys want to know a sign of a top in farmland? In any country?

    I. E. My financial planning office in Ohio is located beside a real estate broker who has specialized in farmland for 40 years. I’ve known him very well during that time period.

    We’ve both seen first hand the intial farmland price bubble in the 70’s and the following bust in the mid-80’s (remember the nationwide Farm-Aid concerts with Jon Cougar Mellencamp and Willie Nelson?) The song “Rain on the scarecrow” comes to mind.

    This guy owns almost zero stock investments. However, he has over 5,000 acres of “prime” farmland free and clear. Recently, I heard him speaking of whether he should start selling off some of the farmland that he’s doubled his money on over the past 5 years. That my friends is one of the signs of a top in farmland in Ohio anyway.

    Another sign of a top? According to public information on farmland sales in Ohio, it seems that most of the buying is coming from amateurs or non-farmers (also known as the general public) Who always gets into a market last? You guys know the story.

    I don’t know of any lifetime active farmers who are buying at the current price levels.

    They do however, want to cash rent the farmland on the shares method.

    My experts (in this case, actual life long farmers) are telling me that farmland per acre prices are too high to be sustained here. Like everyone else who is over the age of 50 in the midwest, they’ve seen this movie before (1972 to 1986) and they know how badly it ends.