The trouble with inflated asset prices

The trouble with most asset prices today is that they are quite simply inflated. The run up since March '09 means that many prices are over-shooting the reality of world demand by a significant margin at present. This chart of copper makes the point well:

Source: Bloomberg Finance L.P. via Ian Farrell
The nub of the matter is this. Even if you see some economic recovery ahead, prices have already discounted that and a good deal more. The anti-US dollar trade has been the catalyst for much of the price moves in risk assets the past several months. If the U dollar rebound continues for a bit, the threat of significant damage to stock and commodity prices should not be ignored.