OK, we all know we speculators are one of the greatest threat to the world, driving commodity prices up, provoking food riots everywhere, short-selling stocks to destroy the middle class small savings, creating CDS and other products to put people out of their houses... If you go somewhere in the third world and say publicly you trade commodities for a living, you certainly have a chance to die before the end of day... But looking at the current problem in the news, food commodities prices surge and "unprecedented volatility", what are the meat, grains and softs commodities that are at their all time high? Cotton, feeder cattle, live cattle, pork bellies...Sugar is under its 1980 price, Coffee under under its 1997 price, hogs around its 1982, 1990 and 1996 prices, Orange juice under its 1988 and 1990 prices, all the rest under its 2008 prices...I can make errors but you get the idea. So as a whole, even if things are accelerating for sure due to funds participation, when you compare prices of commodities in early 80s and now, there hasn't been much change, nowhere near inflation and F... nowhere near the increase of the stock market over the period, so my point is that the middle class average stock holder/ food end-user has profited a lot more from the whole trading activity than he had to suffer. This price increase is for sure terrible for third world people but I can't bear middle class westerners complaining constantly against "speculators" driving prices up when some of these things are at the early 80s prices... Thoughts?
Gasoline and heating oil bills are a major expenditure for most households, especially in the US. Electricity cost has skyrocketed. It is true that some commodities on an inflation adjusted basis have not made new highs but purchasing power has decreased even more. You have to look at the overall effect and it is quite bad. Take a look at the CRB chart in this blog and I agree with the author that it may be a chaotics situation again with hedge funds pushing food and energy prices to the roof: http://www.priceactionlab.com/Blog/2011/02/signs-of-2008-all-over-again/ Don't forget that current unemployment levels make things worse.
I think the traditional speculators are not to blame, the long only funds are the new speculators ruining the commodities markets and ... killing people. The SEC needs to shut down these long only funds, they have no reason to exist. But the SEC is owned by the financial industry. someone wants to speculate, go in the futures markets, give your money to a CTA, or trade CFD's if you are outside the US.
1) Third-world people don't pay excessive property taxes for mediocre municipal services and public education. Their lives are "taxed" other ways. 2) If not for the ability to speculate, the US would be similar to Egypt, only worse. :eek:
Not on an inflation adjusted basis, in raw $... On an inflation adjusted basis, food commodities are way cheaper now than in the early 80's!
Excuse my ignorance, but these long-only funds aren't allowed to short, like mutual funds on stocks? Or do they choose to be long because that's where the trend is the most identifiable? I agree it's a real concern and they should not exist... When you see the crashes they create on stock markets when they try to exit all at once, it's never good to have "handicapped" entities like them in the markets.