I read Matt Taibbi's excellent conspiracy theory/article about Goldman Sachs this weekend (Rolling Stone; "The Great American Bubble Machine"). He blames Goldman for every bubble since the Great Depression; from dot com to oil. While I love a good conspiracy theory I find it impossible to blame Goldman alone. One large player may be able to manufacture and hype a bubble but, as I said yesterday, it takes hundreds or thousands of players to inflate one. Other (former) investment banks are equally to blame. The new/old bubble - commodities - is currently being hyper-inflated by a weak dollar. The weak dollar is being caused by the US government printing money to pay for the prior excesses of the American pubic, which of course includes the banks. It is hard to see how this scenario can change in the medium term, which is why every retail investor, institution, bank, fund and hedge fund is going long commodities. (The plus side is that $4.00 gasoline will finally force Americans out of their SUVs - and to sell their dreaded ATVs.)
One has to worry about a double-bubble pop scenario. The credit crisis is anything but over, and there are hidden landmines within many banks' balance sheets. Why did ABN Amro's CFO go out into the woods and top himself, if there is nothing left to hide at ABN/RBS? (Apart from the Wimbledon suite, but that got out anyway.) If everyone goes long commodities and is hiding gazillions of dollars of further losses in credit derivatives, we could be facing a two-bubble pop. Ouch.