Most commodities can be controlled with what represents a couple days value in actual supply..... Coupled with the fact that many many times this is available in cash demand for contracts.....this alone is responsible for the bubble in oil and food prices.... It will not be until everyone both on the trading , investment, and user sides understand this.....will commodities reflect actual demand valuations..... The US.....much less developing countries can afford the excessive multi trillion dollar excessive costs that simply reflect contract demand....not actuals.... It seems very likely something will happen to cure these ills..... or else worldwide demise is the alternative.... Obviously there are many educated way way beyond their supposed intelligence.....
sorry, doesn't work that way. there has been commodities trading for over 100 years. booms and busts are not caused by speculators, although they can at times accelerate moves, increasing volatility. Bubbles are created when nearly everyone, general public and speculators alike, expect prices to rise quickly, and act accordingly. there has to be an underlying reason other than speculation. This has been shown in everything from tulips to the current housing bubble. BTW, there is a short for every long by definition in futures trading. futures traders also provide liquidity which the markets must have to operate. crude languished below $20 for years. if speculators could have controlled prices back then, they would have.
Excellent Commentary .................................................................................................. Yeah I know what you are thinking...and you are perfectly right to do so....in terms of the best mechanism for price discovery....etc etc.... But things are really not quite the same as they were..... I have been around for a long time too....I was trading SP with Refco per phone in 1990 for almost nothing per round turn.... Relax...sit back and review the big picture back then...and now.... and note what is different.... That is all you need to do.... ................................................................................... Also it is GS, MS and the other larger firms that have effected the Oil/Dollar hedges for the oil producing states that got sick and tired of the declining dollar.....The movement is just too close for this not to be the case..... ....................................................................................... Unfortunately...people like yourself will discover these things long after the fact.... Everyone becomes intelligent after the fact..... .......................................................................................... We shall see what transpires and how the story ends..... We are all going to find out..... This is for sure....
AH, you are referring to instruments other than "commodities contracts". the massive positions held by the hedgies, etc, are changing the game. but this is in the unregulated over the counter market, many times larger than futures, with no position limits. the futures markets themselves (commodities contracts) have very little to do with creating bubbles. Also, even with these massive positions held outside gov controls, prices are still set by a combo of these actions, increase in demand, and a falling buck. my point is, don't put ridiculous controls on the exchanges and margins themselves. this will do nothing but hurt a very efficient system.
Not much time here before the bell.....will continue this later.... We will further this discussion and try a sincere effort at the best logic..... You never know where solutions come from..... Good luck today.....