If you say the Fed created that, at some point the Fed can also put an end to that. We’re seeing now, within the Fed itself, some hesitation and reluctance on the part of some members to continue to cut rates. How is that going to impact, in your opinion, commodities?

Barry Ritholtz, CEO, Fusion IQ (Ritholtz): Well, remember, the Fed is one factor. You have a couple of factors. The Fed is a big factor, [but] fundamental demand from the Pacific Rim, from Asia and from India … that’s driving it. World population is now 6 billion and growing, so we’re going to continue to see demand for foodstuffs and other hard assets that are going to be significant. But I keep working my way back to the Fed. We’re printing a lot of money. The dollar continues to basically be in a very, very weak position vis-à-vis the rest of the currencies. All these entities, all these commodities that are dollar-denominated—that’s having an impact.

Norman: How much money are we printing? Have you taken a look?

Ritholtz: I look at the monthly [data] from the various regional Feds.

Norman: If you look at the monetary base, which is the money aggregate that the Fed has the most control over, it is growing at the slowest rate in 20 years. As a matter of fact, it has never been growing as slowly. The only time it was growing more slowly or contracting was right after Y2K when the Fed pumped a lot of money in it and then took it out because the planes didn’t fall out of the sky, the computers didn’t crash. It’s a fallacy.

Ritholtz: But it’s more than just greenbacks. It’s the repos, it’s all these various entities. The Fed has now put a trillion dollars back into the financial economy. That’s money that’s looking for a home. Traditional mean reversion: You look at what we did over the past 10, 20 to 30 years in equities. I think a lot of big pension funds and a lot of big foundations are looking at equities. We just saw in The Wall Street Journal’s “lost decade column” and they’re starting to say, you know, we need to really be diversified with some private equity and some hard commodities and some precious metals, and so a lot of this money that’s been pumped into the system is looking for a home, and not all of it is going to flow to equities.

Norman: What percent of these institutional investors, these big large investors, do you think now have taken exposure to commodities?

Ritholtz: I think that a healthy percentage of these have small commodity exposure: 1, 2 or 3% of an overall asset allocation plan. But when you look at commodities as a traditional or nontraditional asset, the thought process is, hey, are we early in the stage of this commodity boom? Are we suckers buying in at the end? You look at the history of commodity bull and bear markets—they tend not to be like a business cycle or an equity cycle. They tend to run for 10, 12, 15 years, and I suspect that we’re going to continue to see, with a little consolidation, a little back-in filling etc., more upside in commodities. I think people and foundations are getting similar advice.

Norman: Let me ask you this: Here we sit with crude oil at all-time record highs, yet we see stockpiles, inventories of crude, at the upper end of the five-year range, and gasoline inventories at the highest level in 16 years. Distillate inventories, the same picture. Why is it that prices continue to rise when you see perhaps suggested in the fundamentals that they shouldn’t be this high?

Ritholtz: That’s a really good question. It’s pretty clear at this point that if we’re not in a recession since January/December, we’re teetering on the very edge of it. My working assumption is, as things contract, as people pull in their horns and spend a little less, we’d see commodities prices come in. That hasn’t happened yet, so that tells me one of two possibilities are out there: Either it’s going to happen sometime over the next couple of months as things get progressively worse, or there are other factors that are keeping these prices high. Some of it is speculation, some of it is fear of Mideast disruptions.

Norman: Very quickly, what about gold? How do you feel about gold?

Ritholtz: We like gold long term. We think that it hasn’t hit its all-time high on an inflation-adjusted basis, and again, most commodity bull markets will seek a new all-time high. It’s rare you see a significant rally, a significant bull market, where you fail to breach the prior inflation-adjusted high.

Norman: All right. Well, there you have it folks, and don’t forget to check Barry’s blog at thebigpicture.com. This is Mike Norman, and remember, stop by here every day for great advice on commodities and hard assets. See you next time.