This year's QE inspired run-up in commodities has been bonkers...every bit as insane as the dotcom boom in the late nineties.
It's wreaking havoc across the globe as the price of everything from fuel to beef burgers keeps cranking up.
But instead of turning off the taps this year, we are likely to see a lot more QE in 2011. And that is only going to fuel this commodity bull even more.
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Now I know a lot of readers don't like the idea of profiting from other peoples' misery. But frankly if you don't set yourself up to benefit, all it means is that some City elites take it all. Now where's the sense in that?
Everyone can see what's happening
The evidence of a mania in commodities is there for everyone to see. You've probably noticed that the price of oil is back over $90 by the price of petrol at the pump.
Ask your plumber what's going on with copper... I'm sure he'll be only too aware that the price is going through the roof. And as Merryn Somerset-Webb pointed out last week, even sheep farmers are getting fleeced as flocks get rustled.
Let's not forget the downside to all of this. It's the poor that get hit hardest. The poor in our society and the poor across the globe spend nearly all their income on day-to-day consumption - and those prices are heavily influenced by commodities. You may remember what happened in the Far East in early 2008 as rice prices soared. There were riots on the streets and social destabilisation, just wait for it to happen again...
What's incredible is that the guys in charge can see just as clearly as anyone else what's going on. But they just keep on cranking open the taps and look on indifferently as the markets go bananas.
It's clear that this inflation is coming from the Federal Reserve Bank and its printing press. The markets are literally flooded with hot money and it's running downhill into the paddy fields and open cast mines.
- Discover how to profit from oil without ever owning a single barrel
- Why NOW is the best time to put a few carefully selected oil investments into your portfolio
How this all ends
I've described my favourite bet on commodities before, it's the Close Brothers Enhanced Commodities fund. Just click here to find out why I think this fund will be one of the plays of 2011.
If you don't like the sound of the Close fund (there may be counter party risks), you may prefer to go down the ETF's route. There's an article on MoneyWeek's website which explains what ETFs are and goes on to list some commodity based ETFs.
Ultimately I'm pretty sure we all know how this is going to end. As commodities keep on inflating into bubble territory, the politicians will trot out the same old tripe "nobody could foresee this inflation", or perhaps they'll blame it on the speculators... the bogey men. Perhaps Ben Bernanke will simply say "It's not for the Fed to try to temper asset markets" as he's said with every other bubble he's pumped up.
In fact this looks very much like an action replay of how the Fed pumped up other markets over the last decade. Historically low interest rates made for crazy lending, pumping up the dotcom bubble, then the US housing bubble. This led to the inevitable (and totally foreseeable) banking crash. Now that QE money is going straight into commodities, inflation is (foreseeably) causing extreme hardship for much of the globe's poor.
Who knows when the run-up will end? Just like during the dotcom period, if you don't get exposure, your portfolio won't keep up with the index. To many, riding the commodities bull sounds like nothing more than speculation. And, well... yes, there's an element of truth in that.
If you want to sit this one out, I can understand that. As for me, I'm overweight commodities and staying that way for the foreseeable future. I'm not going to look what could be a gift horse in the mouth.
This article was first published in the free investment email The Right side. Sign up to TheRightSide here.
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