BlogStocks: Soros says 'commodity bubble' is still in growth stage
Posted Apr 17th 2008 5:08PM by Joseph Lazzaro Filed under: International markets, Other issues, Commodities, Oil, Agriculture
Billionaire investor George Soros said Thursday that the boom in commodities is still in a "growth phase" despite the fact that prices for oil, wheat, rice, and gold have risen to records in 2008, Bloomberg News reported Thursday.
Soros said the relative stock market slump, combined with favorable, long-commodities demand, has prompted institutions to direct money to commodities, creating a "commodity as asset class" phenomenon, Bloomberg News reported. He added that increasing institutional involvement was creating a generalized commodity bubble.
Relative shortages
Moreover, demand for selected commodities (oil, rice, wheat) is so great, it's creating relative shortages, Soros added, which is only heightening the return on equity potential of commodities, Bloomberg News reported.
Economist Glen Langan, whose second Ph.D. field was agricultural economics, told BloggingStocks Thursday he agreed with Soros' assessment that the commodity price run-up is being aided by institutional investors, but that the primary price driver remains increasing demand for commodities in emerging markets, primarily Asia and Latin America.
"China's demand itself would be enough to start an upward trend line in oil, wheat, copper, coal, fertilizer, and other commodities, but with globalization, we have, essentially, the whole world implementing capitalism, with a few exceptions, such as Cuba, North Korea, and Iran," Langan said. "And the initial growing pains are obvious enough. We have had large price increases, with selected shortages of some commodities, such as rice."
The UBS Bloomberg Constant Maturity Commodity Index of 26 commodities is up more than 20% this year and has more than tripled in the last six years.
Further, Langan expects foodstuff commodity prices -- for wheat, rice, and soybeans, among others -- to continue to rise at double-digit rates this year, then moderate to single-digit price increases in 2009, as farmers increase production to capture those high prices. In the developed world, such as the United States, food prices will increase about 8-10% in 2008 and 5-7% in 2009, he said.
I went to a garden party
Longer-term, after 2009, Langan expects both commodity and food price increases to moderate even more, as people/societies find substitutes for expensive items, and as an increased percentage of citizens in developed and developing countries grow more of the food they consume.
"Back yard vegetable gardens are going to become even more popular in the United States and in other countries in the years ahead, I can guarantee you that," Langan said. Tags: coal, commodities, copper, emerging markets, farming, food, food prices, George Soros, gold, inflation, oil, rice, Soros, soybeans, wheat
maybe he should start by investigating the SEC and their FRAUD in allowing / supporting the insider selling of ONE share of GVRP stock 138,000 times. OS=11 FLOAT=1 Insiders and friends sold 138,000 shares. SEC acts quickly to bail them out. Company praises the SEC actions so much the SEC requires them to change their PR and reword the part where they thank the SEC for bailing their asses out. Let's go after the true criminals. Oh wait, they have a vested interest in not doing that!
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