I don't think I will bother with the US markets anymore. I am short oil and benefit from this but the level of Government interference in the markets is not acceptable. You just don't know what these IDIOTS are going to do next. I watched a profitable position go into loss because of Bernanke and his save the banks balance sheets/rich mans portfolio rate cuts. Oil went from $100 to its high due to Bernanke bailing out the I Banks and indirectly the hedge funds withy Fed lending to them and further rate cuts. Thats right folks, oil went to $140 so that LEH would not have to close.
it's both. speculation, interest rates, AND rising demand. triple whammy. one culpit out--speculation
Rising oil demand is overstated. Oil demand is growing at roughly 4%, year-on-year. Price-in the extinguishment of a finite resource - add another 3% (maybe). Thats around 8% per year. Generous. Since the 2007 bottom, oil should be at 60$, fundamentally speaking. We're now at 125$ (150%). The same event that triggered the housing bubble is the same event that triggered the commodity bubble - too much money. Money is far too cheap and these wild swings in equity, RE and commodity markets always result. Speculation (both long and short term), is curbed through reasonable borrowing costs. Most funds can't beat the S&P. After risk premium is considered, most private wealth exit markets at 7-8% T-Bill return. What happens to all those funds responsible for this "frenzied speculation"? Gone tomorrow. This is a Monetary Problem. Speculation is just a convenient patsy Congressional Schmucks sacrifice to their frothing - yet stupefied - electorate. Its about votes and perception. Not doing something that actually works... And btw, speculation has not been curbed in any effective way (not that it should be). Funds, Pensions, Hedges and IB's will continue to trade crude off shore. That will do nothing to curb speculation. Futures is a global market. It defies control.
Add to that list the International Energy Agency. They released their assesment a few weeks ago or so - and they made the same point as nutmeg's link. Many commodities with no futures market have experienced sky rocketing price increases as well. I know this to be true empirically. Last summer I purchased some cast iron dumbbells. Cost me 40 cents/lb. This summer, I went to buy some more. The same shit is now 95 cents/lb. There is no futures market for cast iron, and I am pretty sure there is no arbing between the physical cast iron market and the copper futures market or whatever. A friend of mine who is in the shipping business just shakes his head when he reads about all of this. "What these politicians need to do is have their econ guys check out the dry bulk (i.e., non-petroleum items like grain and iron ore and etc.) shipping rates to China. They have been going nuts since 2004." http://www.bloomberg.com/apps/news?pid=newsarchive&sid=amE8k7svJClk The company mentioned in this link plans to quadruple their shipping fleet because of China's commodity demand. Guess they didn't get the memo that it is all just "an illusion" caused by "magic speculators" who can control both the prices of exchange traded commodities AND stuff that doesn't even trade on futures exchanges. Like cast iron. And onions. Oh, the power ...
According to the latest "The Sun" magazine I was perusing at my local supermarket today, Nostradamus predicted that Bush would veto any laws curtailing oil speculation, so don't worry bulls!
seems OK to jack up grain prices since Congress wouldn't dare f with farm lobby OK, oil traders, you're welcome in the gold market
Bingo! Good analysis. Now it makes more sense why this seemingly idiotic witchhunt for speculators is actually gaining traction. Might be the final nail in the coffin for the dollar. They are just doing what they were put in place to do. Most of them do not have a clue and are strung along by those who do.
So much for "Free Markets". Bail out the banks, bail out the brokerage houses, bail out the asswipe homeowners who bought a $800,000 dollar house with $45,000 a year salary, START enforcing the naked short sale rule on select financials after hedge funds have used it to put countless small companies out of business, etc, etc,. I'm going to start trading the Chinese markets. Much less government interference there.