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.
Cory’s Chart Corner
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