Jim's Captain's Log

The American economy has been called a bubble economy. We have bubbles everywhere you look—from real estate and mortgages to bonds and consumption. There are many on Wall Street who believe that commodities have become an asset bubble as well. Oil prices have risen from $20 a barrel to today's prices of close to $60. Copper prices have gone from $.60 to over $3.00. Some would argue that base metal prices don't reflect the economics of production and are due for a sharp fall. In the short term, prices may decline based on investor perceptions. However, the bubble theory for commodity prices doesn't hold up on closer scrutiny. Unlike real estate or tech stocks, there aren't large stockpiles of supply and Larry Lawnmower and John Q aren't buying commodities as they did in the late 1970s. And unlike most asset bubbles, there aren't any signs of excess supply and the public hasn't come on aboard.