Fascinating chart, via Jeff Saut:
Reuters/CRB Futures Index
Jeff notes the combined impact of Liquidity and Risk Appetite on the markets:
"Lastly, we believe liquidity certainly plays a role and currently the U.S.
monetary base is exploding. Moreover, it is not just our money supply that is
surging but Australia’s (+13% year-over-year), England’s (+13%), the Euro Zone’s
(+9.3%), Korea’s (+10.3%), China’s (+16.9%), etc.
Yet as we have suggested, while liquidity is unquestionably a driver of asset
classes, if investors are unwilling to take that liquidity and buy something
with it asset classes go nowhere. Manifestly, you can throw all the liquidity
you want at the markets and if investors have no “risk appetite” they will
merely take said liquidity and stuff it in a money market fund.
have argued that investors’ risk appetite is the ultimate driver of asset prices
and after the nearly unprecedented rally from July 2006 to February 2007,
participants’ risk appetites are currently high. When this will change is
unknowable, but change it will. Yet as Charlie concludes, “While we are in
uncharted waters in this regard, no one can foresee a financial accident, much
less know its timing.”