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Craig has been trading commodities for over 20 years, and has posted long-term annual average returns of around 20 percent. Since April 2006, when he returned to the business after a brief retirement, his annual returns have averaged 23 percent. Registered Rep.: The S&P GSCI commodities index is up about 73 percent over the last 12 months. Do you think that commodities are now in a bubble? Grenville

Craig has been trading commodities for over 20 years, and has posted long-term annual average returns of around 20 percent. Since April 2006, when he returned to the business after a brief retirement, his annual returns have averaged 23 percent.

Registered Rep.: The S&P GSCI commodities index is up about 73 percent over the last 12 months. Do you think that commodities are now in a bubble?

Grenville Craig: It's not a commodities market; it's a market of commodities. So there are wonderful opportunities in some of these markets, but I think some individual commodities are quite overvalued here, like copper and aluminum, which are in surplus. In other places — like wheat — we've already had corrections; we're having a correction right now in corn and a smaller one in soybeans. It could go significantly lower, depending really on the weather conditions in the northern hemisphere in the next 30 to 60 days. In fact, I'd probably buy some on a further pullback. With energy, it's very hard to say. I mean natural gas, I think, is quite reasonably priced. Crude is perhaps a little overpriced, but with everything that's going on, you know, I don't want to say it's really overextended.

RR: So what do you think is behind some of this frothiness in certain commodities?

GC: Well, one thing is that the CFTC, the Commodity Futures Trading Commission, has put limits on the number of commodities contracts you can purchase, but the big investment banks don't have to adhere to these limits. A number of years ago, they started saying to their clients, “Look, you want to get around [these limits]? We'll write you a swap because we have the remit to put on unlimited large positions in the market.”

So, this has caused a problem. People think that the price of oil at $145 has something to do with people buying large amounts to cover against any rising rate of inflation. If you buy incredible amounts of something, you're going to have an effect on the price. And that, I think, is a problem. And I think Congress is starting to come to grips with this. There has been a lot of talk about limiting the size of trading that can be done particularly in the energy area. I'd like to see it just be across the board — in all commodities. It would make the markets a lot more efficient, and also easier to read.

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