The thing is, I think the increase in demand from the mentioned countries is already priced into the commodities.
well as you wish, however, the sharks in the futures game don't wake up in the morning with the fear that you know more than they..... now more than ever, financial instuments of any kind are guided by quasi governmental agencies that have it in their best interest that the markets can be "controlled" in the event that prices get out of hand.... witness the correction in gold from 720 to 550 assisted by hawkish talk from the Fed. Iran's recent declaration that the Iran oil bourse would only trade oil for Euros seems to have been "derailed" once the nuke issue was hatched by D.C. merely as a lever to postpone or kill it.... recall that Saddam was on the verge of selling Iraq oil for Euros and look what happened to him..... the WMD issue was just a pretext...... all in all an effort to assure that the US dollar is not threatened as a reserve currency or that gold is thought of as "money" something they don't teach at Wharton
either you didn't read my post very carefully, or you're just disagreeing with me, which is fine. But what justification do you have? If you look at a 30 year graph of wheat, rice, etc - you'll see that these markets are all near historical lows. There is no future increase in demand priced in yet - but there is an anticipated future increase in demand. Relative to the historically high precious metal and oil prices. Corn and sugar have risen with demand, but all of the other softs and grains have not, despite attractive fundamentals. As for gold, that's an inflation ehdge, and given the current conditions I think it's safe to say there's more upward pressure on the gold price than downward. Just think of the upside during spikes and supply shocks. You could get rich if oil went to $90 a barrel. Yet there's a ton of downside resistance and I'm not sure there's much news that could possible make the oil price gap down. There are no more undiscovered giant onshore oil fields (easy oil). Where is the priced in demand? I see it in copper, silver, oil, but not rice, wheat, coffee, etc. "shift in the demand curve" remember? this means an uptrend in the resistence levels.
Probably because people have been eating these things (rice, wheat, soybeans, and coffee) all along, and demand has not changed considerably with respect to production. But the runup in metals and energy is pretty clearly a byproduct of modernization and rapid development of emerging markets. Just stating the obvious. So if you want a long macro view on those commodities, I'd probably look to long term climate change and isolated strange events as a source of inspiration, as well as changing world tastes. Next mad cow event would be an excellent opportunity to go long on beef.
I'm having a little bit of trouble trying to understand where you're coming from. So the sharks in the futures game aren't going to be scared of me? Ok. That's fine, I wasn't trying to scare them. All I said was that I pay attentiuon to what the smart money is saying and not what the evil pied pipers are saying on the idiot channels msnbc, cnbc, etc. A lesson on the recent gold correction and a reminder that the WMD misdirection was in fact misdirection and the US is an empire supported by the dollar hegemony. Why are you explaining this to me? It had nothing to do with what I wrote when I was trying to explain myself b/c you misundrstood me in the first place. I already knew this info, but if I didn't I'm sure I would find it very useful. "They don't teach that at Wharton." This is too easy... This is like that awkward comment at the cocktail party that does more to embarrass the speaker than the recipient. I mentioned wharton because you had congratulated me on going to OSU. I don't think there's anything particularly wrong with OSU graduates, I just didn't graduate from that school. You're right, there's alot they don't teach at wharton - like how to predict the future. Lucky for me there's these things called "work experience" and "learning". 3 years worth has allowed me to build upon my education to a point where I actually find it annoying to waste time on BS childish posturing on message boards. Last pissing contest I had was when I was 6 - it was against my cousin in the backyard... can't remember who won.
just trying to point out that there are more moving parts to the markets anyone can account for or input into any backtested model despite all the discussion by some wide minded economic types....but you knew that Market imbalances are the greatest that I've seen in 30 years of trading. Risk is being discounted or ignored and the general population is acustomed to one way markets.... let us know how you do....happy trading...
This, I believe, comes from the attitude amongst the the press, mutual fund business, brokerage houses, etc. etc. that in the long term, the markets will offer much better appreciation than anything else. (how many times have I heard that about real estate as well) The jury is out, but this sort of attitude is what gets us into trouble with everything else. Are the imbalances greater now than the tech bubble popping 6 years ago? I see housing as definitely out of whack in localities, but I'm not sure about the commodities picture. Look at natural gas, for example - right now a glut (especially reserves), and the only thing holding prices as high as they are really high relative oil prices (btu content of nat gas to oil is 1:6, so gas should cost $12/mcf not $6 right now, assuming the market believes oil will hold $72 in the long term) and weather worries (hot summer, hurricanes, and cold winter) - people remember last year, and are keeping the price bid up. So does this serve as an indicator that oil is ready to pop, or the other way around, nat. gas is ready to take off ? I'm afraid to take the short bet on oil, because one political disaster (which seems inevitable with our track record in the US) could let oil stretch even higher. So indeed, are there really imbalances, or just too many uncertainties holding the (energy) markets hostage? What about copper? Every where I read, it seems that supply is a genuine issue here, long and short term. How can there really be any downward pressure unless more supply is found? I can only assume the only way out of a commodities bubble is a worldwide economic recession which forces demand down.
Great thread so far, intelligent discussion. I have a few comments comments, specifically on grains... Don't bother wasting time on grain market fundamentals. I work for one of the big commercials, and can say that most anything you can think of (fundamentally) is already priced into those markets. You're up against 4-5 international coprorations who dominate the cash side of the business and employ some of the smartest and most experienced people in the world to execute cash and hedge those trades in the futures. Anything you read, they already know about. They're mostly fundamental traders, and the factors they're using to trade (and hedge) are so complicated/specialized beyond what's publically available, that you'll never beat them at their own game. The whole 'population shift' and 'aggregate demand curve' will not impact your day-to-day futures prices. With highly leveraged long-term futures positions on, you'll likely be shaken out by short term spikes in the markets. It sounds to me as though you're thinking more along the terms of a value-oriented equities investor. This isn't bad, it's just something different. If you want to invest in your ideas on population change or demand for refined products, why not invest in the stock of processors, etc?