Commodities got a big boost from the Fed cutting interest rates by 1/2 percent and the bailout in the mortgage crises this morning. Most commodities surged during the week on the news. Lowering interest rates will help put a band-aid on the housing market and stocks will benefit. The problem is that lower interest rates will likely lead to more demand for commodities – pushing prices even higher. It is likely that the Fed will lower rates even further in the coming months.

With several commodities at or near all-time highs, it is hard to believe commodities could go much higher from here. Crude is above $100; gold above $750; wheat above $9 and soybeans near $10. It is possible that these prices could move even higher in the coming years and we may see many more commodities hit record prices.

Until capacity expands and we see increases in supplies for many commodities, it is likely that the long-term commodities bull market will continue. China and India are the wildcards. I think we would need to see a significant slowdown in the world’s economies in the next year or two in order to prevent a continuation of the bull market in commodities.

Expect huge price recovery this fall unless all of the above are immediately addressed. The freddie and fannie bailout will only help the boom as the shorts will feel the squeeze.