I am just shaking my head at this mirage of prosperity we are living in... all due to the "stock market telling us things are just dandy". You should know from October 2007 that the stock market is a lousy indicator of the coming 4-6 months but this dogma is now so ingrained. I'd say the same for commodities, especially in this era when hedge funds and banks are buying crude to store and playing the futures against it. (Jun 8: Dennis Gartman Short Term Bearish in Oil)

Recently, commodities bulls have been aided by the Federal Reserve keeping rates low and banks' short-term funding flowing. This facilitates commodities trading and stokes fears of inflation. As cash flows into oil futures, their prices rise relative to spot prices. That makes it profitable to buy physical oil, store it and sell it forward.

Energy economist Phil Verleger demonstrates how lucrative this can be. On March 1, the cash price of light, sweet crude was $40.15 a barrel, while the 12-month forward contract sold for $50.26. Assume an investor bought the physical barrel borrowing 80% of the money at a rate of 3%, sold it forward, and paid 50 cents a month for storage. The resulting profit of $3.15 a barrel equates to a 39% return on investment.

So our central bank has once again created excellent times for market participants... prices for commodities no longer need to rely on supply/demand. They can rely simply on a central bank willing to make money nearly free, and banks willing to lend to hedgies (and use that money themselves) for strategic asset exploitation. We're all winners here - and oh yes, let's use that asset exploitation as a "sign post" of the soon to be flush global economy.

*******************

Unfortunately, said exploitation of assets of the commodity type actually impacts the real economy. Look here, EZCORP (EZPW) which is one of the best operated pawn shops/cash advance companies in the country just lowered guidance saying this

Commenting on the revised earnings expectations, President and Chief Executive Officer, Joe Rotunda, stated, "As we have moved through our June quarter, we have seen lower than anticipated levels of demand in our U.S. operations for our loan products and previously owned merchandise. The continuing depressed economic environment is having an effect on our business that is not consistent with traditional or expected patterns. The revenue impact of these lower levels of demand has caused us to be more conservative in our earnings expectations for the June quarter and the balance of the year.