big question is when will they shut down the game? http://www.marketwatch.com/news/sto...17D-8DD3-10C0C377F3A2}&tool=1&dist=bigcharts&
Commodity bubble is here, when it pops is anyones guess, the correction is going to be incredible.....where will all those billions go when everyone starts to sell... "Lehman Brothers just completed a study and found that the level of investment demand in commodities has soared to $215 billion from $70 billion a mere two years ago."
Don't worry. If there is a wrong decision to be made, the government will figure out what it is and make it.
When wheat futures were lock-limit at $20 bushel while the spot was less than $10, it was the most obvious tell that large specs are completely out of control. If spot prices go up 5c bushel and drive wheat-based foods up accordingly, that has an enormous trickle down effect on all of us. Any commodity which is white hot bubbled now will implode eventually... hopefully sooner than later on the back of tightened regs for large specs' modus operandi
Yes, Wheat is now $8....probably the biggest drop in history. What caused this major collapse in Whaet prices. If i were a wheat farmer, it would have been nice to spot "large specs completely out of control" and hedged my wheat 5 years out at $20 bushel
It's amazing no one can see the effect of the participants on the market. It is no coincidnence Urbana's control of the seats and the price of wheat on the mgex was the tail wagging the dog in wheat. Same thing happening everywhere. It's the Brian Hunter's with unlimited capital. Control the physical and the basis. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=am1N_.ddy5eU
Potential action that the exchanges themselves may take (from the link I cited above): "If oil and the dollar can't break the commodity bubble I see the chance of incredible prices in beans and corn followed by the exchanges forcing liquidation of front month and the second month and third month positions. I see them re-imposing positions limits on the index funds based on "beneficial position limits" and not allowing them to use swaps and over the counter structured notes or foreign purchases to fraudulently shift the reported positions to avoid Federally mandated position limits. Basically, in the end, I think the "securitization" of the commodity markets will be reversed. I think these things might happen because I have seen the commodity exchanges take these types of actions to bust INDIVIDUAL MARKET bubbles in the past. When it comes down to the survival of the exchange, they take aggressive action. I just wonder how severe the result will be when they take action against ALL commodities at the same time!"
<i>"If i were a wheat farmer, it would have been nice to spot "large specs completely out of control" and hedged my wheat 5 years out at $20 bushel"</i> At that time of the year, most physical wheat is in the hands of commercials... grain elevators or end-users. I'm sure they were all too happy to offload $20 bu wheat to the strapped spec shorts when they had about $7 - $8 bu invested. If I were Kellogg, Pillsbury, etc and had plenty of spot on hand that cost $7, why not offload excess inventory at $18 ~ $20 and lock in new crop supplies on back-month contracts? Easy way to pad the balance sheets, if demand - supply on hand permits. Large specs and commericals play vital roles in all financial markets. Letting either side get out of whack will greatly upset the apple cart, short term. Lately the large specs have been running amuck in commodities. Small specs do their best to navigate the huge waves of turbulence. Get the trades right = big gains fast. Catch it wrong and let down discipline at the worst time = blown out. There is such thing as too much volatility, and we'll see that sooner or later in grains and softs.
This isn't a bubble... commodities have been in a bull market since 1999 and will be in one for at least another decade.