It’s becoming increasingly clear that the psychological impact of the Bernanke Put is feeding into many markets. It’s impossible to quantify this impact, however, the Put is widely acknowledged as attributing to a speculative fervor in which investors believe assets simply will not be allowed to decline. Combined with the misplaced fears over Fed “money printing” and you have the perfect environment for an irrational speculative bubble. And there’s no fever like bubble fever. Via FT Alphaville:
Oil in US dollars may be trading closer and closer to its bubbly 2007 highs — at about $86.47 a barrel on QE2-caused dollar weakness — but the commodities picture is even starker elsewhere. Take a peak at the (weekly) Diapason Commodities Index in sterling.
The whole thing just moved past its 2007 record: