If the world financial system is “over-inflating” prices as he put it, then we’re in a bubble. As bubbles don’t last forever, TD Bank is wise to begin planning for lower prices in order to protect itself from future losses.

His remarks are in stark contrast to the bullish predictions by market analysts who see prices going nowhere but up. If the head of a major international bank is weary of current prices, then maybe it’s time for you to review your portfolios…. Or maybe the analysts are right….What do you think? 

Year over year, new home prices are up 6.1%, a healthy number, although the market is appearing to slow down a bit as the increase this year is slightly lower than last year’s.

Overall this is good news. Continued strong sales in new homes will encourage developers to begin new projects, employing laborers and strengthening the economy. Eventually we’ll meet a point where we’d expect to see a decrease in sale prices as inventories of new homes pass the number of people looking to purchase them. This is normal in a market economy and there is no evidence to suggest the type of collapse that happened south of the border.

The chart on the left shows that rice prices are up. WAY WAY WAY UP. That’s more than 3X the price per tonne in the past few months.

Rice is the food staple of the world. More people eat rice than anything else. So when the price moves in such a material fashion, we should definitely be taking notice.

Rice, like oil, is used as an input for many goods (and we’re not just talking about Rice Krispies). With such a dramatic move, it won’t take long before prices for many products begin to move higher in tandem.

Crude oil prices are hovering close to $120/bbl, at record highs. With the low interest rates currently being pursued in North America, it is no longer a question of if we’ll see inflation, but how soon.

If we do begin to see inflation before the economy recovers, expect to hear a whole lot about Stagflation.

Here’s the good news: It looks like a bubble.  Not a quick shock like in the 70s, but a bubble. A bubble just like Tech in the 90s. A bubble just like Real Estate from the past few years. Bubbles can last for years, but eventually will pop and bring relief to an inflated market. The only concern is how long will we have to suffer, and at what cost?

There’s nothing really new or exciting in the headlines this morning, so I thought I’d talk a little about oil.

I’m not really a big fan of technical analysis. Personally I think it’s ridiculous to believe that past prices have any indication on the future. However, sometimes charts are handy to make a point. So here we go. Are current oil prices justified, or are they silly?

Markets prices tend to become silly when things get too heated or too cool. Technical analysts will call this a Top & Bottom and will try to time when it happens in order to maximize profits. I’ve never seen concrete scientific evidence that this works, but the overall idea of silly prices is valid.

Crude oil is now trading at record prices of about $115 USD/bbl. Is this justified? Have the costs of producing this product doubled in the past two years? Has world demand doubled?

I don’t think so.

The big catch with silly prices is that they are no longer functioning in a logical sense. The price of oil could double again before the hoarde of masses begin to realize that things have gotten silly. When they do, the reversal will be quick and hard. Beware of Silly Prices.