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Is it really the speculators fault for this commodities boom?

I've been hearing a new spin that the current commodities boom is the speculators fault. I couldn't disagree more. Yes, there may be some bubble effects in commodities, which is normal market behavior no matter the market.

First, let's look at the big picture of why I believe commodity prices have soared in the past six years. The answer is simply the sinking U.S. Dollar. The dollar has been free-falling since July 5th, 2001 from 121.32 to its current level 72.30. This is approximately 40% devaluation in just seven years. There are many other factors, like two wars, and a government willing to print as much money as they want (9.3+ trillion current account deficits). The U.S. Dollar is a product. Like anything else, when you flood the world with a product you devalue everyone else's. That's easy enough to understand; simple supply and demand economics. By doing this, our government has simply applied an additional tax to the every day, working citizen.

Second, we are dealing with a teetering economy compounded by a recession, and an official bear market in the DOW that started a few days ago. The government is quick to provide bail-out solutions for banks, mortgage companies, etc -- all short term solutions. All of which, neither solve the dollar issues nor acknowledge these issues. Remember, the media states that it must be the speculators and their powerful influence to our financial infrastructure as the cause for market woes, but is that possible?

Ask yourself, are we living in a safer world since 9/11? We have spent billions to accomplish this goal, with a world that really is no safer today than yesterday. I feel we need to rethink our international policies and start taking care of our own backyard before we clean up the worlds' issues. Until this happens I really don't see any end in sight to our commodities boom. 

These problems are not just a U.S. problem, it's a worldwide problem. Other governments are now emulating our fiscal policies. I just heard yesterday that the most expensive fuel is in Holland at over $10 a gallon! We are entering worldwide inflation, that's going to get worse over time.

My trade tip is to get out of U.S. Dollar. The best hedge during these economic times is gold which is what brought me into this business. Think long term, and realize gold is typically seasonal going into our summer lows (which I don't see this year), back into our winter highs. Look at any chart of gold and will see a well-defined trend straight up. Or you can simply attach your U.S. Dollars to any commodity because it's based on U.S. currency, and will continue to rise as the dollar drops. It will vary from commodity to commodity depending on supply and demand but overall they will continue to rise, & be the place to be.

We are in one of the worse credit crises in history. This will take time to recover from, until trust has been reestablished between bank & consumer. Really that's what the entire system is based on, and that trust has been violated. This is now leading to a banking crisis, in which I feel has, just began. Indymac is the first major bank casualty, and I believe there will be many more to come. Now the government is here to save the day, injecting more liquidity. They have bailed out Fanny Mae, Freddie Mac, Bear Stearns, and now Indymac, who's next?

It's very ironic how people are afraid to part from there U.S. dollar holding thinking it's the safest thing in the world. In reality this couldn't be further from the truth. You can become your own bank, by purchasing gold, which is real honest money. It's been a form of currency for over 5000+ years, and isn't going away. It has intrinsic value, and isn't based on a promise, or a printing press. I've watched it go from $250 an ounce to $1,033 an ounce, is that a speculator bubble too? I doubt, it's indicative of the falling dollar and our uncertain times we live in. Why today is no safer than seven years ago.

My approach is simply just using commonsense of what's available to me. The recession spin, is technically the government says where not in a recession? With a shrinking dollar, credit crunch, inflating food cost, energy cost, job losses, real estate devaluation, and a growing foreclosure market how does the government define a recession?

Remember this tsunami of debt, poor fiscal policy, and current trend will continue for years to come. So where do you want to invest? Listening to those advisors, which are just now coming on board to the trend, or other advisors that have been in the trend for years? It's ironic how today prices are now making headlines, when really they should have been for the last 7 years!

The Trade Center Pro Challenge

Register today for the Trade Center Pro Challenge, a complimentary on-linefantasy futures trading contest. Simply manage a $50,000 fantasyfutures trading account for two weeks and you could be eligible to winone of the weekly prizes, or the Grand Prize - 1 oz of gold! Join now! It's complimentary!