The conventional wisdom seems to have swung around to the idea that higher commodities prices may end up fueling inflation at the grocery store. Or has it? Bloomberg is reporting that hedge funds have slashed their long-term bets on commodities in the past week greater than at any point in the last year.
The index of managed-money net-long positions, which are basically bets on rising prices, dropped by 14 percent over the course of last week. Net-long positions on cattle fell by 8.7 percent; corn futures and options plunged by 17 percent - after the price of corn had risen by 82 percent in the past year.
What caused all of this? The crisis in Japan is the leading culprit; some people see events in Japan as seriously slowing economic growth around the globe. The reality is that there are probably lots of factors affecting commodities prices. But the message for the future is clear: Hedge fund managers don't think we're in for a strong bout of inflation.
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