Henry Kaufman Clueless on Commodities

So-called economist Henry Kaufman said recently that commodities are in a bubble, a general statement so far from the truth it's surprising he even made, as it makes him look clueless and irrelevant.

Even more clueless, Kaufman wrongly stated that gold is in a bubble, again showing, he has no idea what a bubble is in order to define what he bases his assertions on.

A gold bubble, as with other bubbles, is when the regular guy on the street starts to buy up a certain type of investment because they heard it was making everyone else money. Normally it's identified by main street investors when the peak of the investment and why it was good is past. That drives a bubble and not a price that is high. High prices can call for a temporary correction, but a bubble has nothing to do with that, something Kaufman evidently is confused about.

Kaufman based much of what he said on people using leverage to buy commodities.

All Kaufman is referring to there is the carry trade, where low interest rates encourage investors to use that leverage to buy better returns. Based on that it's nonsense to speak of a bubble because carry trade is growing, with people using that leverage to acquire commodities.

The truth is, huge sectors of commodities are down, like agriculture in general, silver and palladium. They are far from in a commodity bubble.

Speculators, overall, aren't driving the commodity markets, but safety, a weakened U.S. dollar and inflation are part of the overall picture which is the major impetus behind the interest in commodities, although even there something like gold, which relatively few investors are actually investing in, is far from a bubble as well. All it has done is gone up in price; not what a bubble is defined by.

Kaufman is using faulty reasoning and understanding about commodities and bubbles to make his assertions, which are nonsensical at minimum. Commodities aren't in a bubble, as not only the areas I mentioned are down in price, but energy commodities are down as well. His commodity bubble statements make no sense whatsoever, as he's only taking into account carry trade, which has little bearing on the issue at all.