Commodity Prices Completely Contained; Gold in Full Bubble

Ben Bernanke is a student of the Depression and he isn't going to raise rates until evidence of inflation is clear. He believes strongly that raising rates too soon will derail the recovery.

That position has many gold bugs excited. They believe that we are in full inflationary mode and that the government is in denial. They reason that a complete collapse of the currency will cause gold to surge to much higher levels.

But, the reality is that we don't see any signs of inflation in the consumer inflation numbers. And, if we believe that the government is falsifying the numbers, we need to look at the real economy. We don't see any signs of inflation in the stores and supermarkets and we don't see it prices of core commodities. Corn, for example traded at $7 a bushel just before the Lehman collapse. Today it trades at $4 a bushel.

I am not going to short gold or any precious metals, but this bubble is one that I will not take part in. It may go much higher, but I fully expect to wake up and see it down 20% one day in the not-to-distant future.