Whats the story with this ? Are the banks, CB or otherwise expecting a run (larger trading volumes) in commodity markets because of a weak USD ? Fortis http://www.bloomberg.com/apps/news?pid=20601087&sid=aACObGXMNNeA JPM http://www.reuters.com/article/marketsNews/idUSSIN1118920090902 BofA http://www.bloomberg.com/apps/news?pid=20601081&sid=acSo5iF0RUEY Citi http://www.bloomberg.com/apps/news?pid=20601087&sid=aiiaL0IQXWNw SocGen http://www.bloomberg.com/apps/news?pid=20601085&sid=amj7qAg_rpbU http://dealbook.blogs.nytimes.com/2009/09/04/threadneedle-eyes-1-billion/ Something is going on here ?
They have those financial engineers that caused the meltdown predicting a commodity super spike. But the problem is, with out demand in the real economy, it's just a pipe dream. Watch the next problems for banks will be the next commodity collapse.
Is it possible that the last 'hurrah' for banks will be all of them simultaneously going long relatively long-dated energy and commodity futures? If they all do it, at the same time, they'll inflate their profits enough that the banking sector will 'seem' to be earning good money, and hence, paying out humungous bonuses. Seems to me that doing so is the one of the few ways that banks can make excess, outsized profits, since there isn't much of anything else left to milk since consumers aren't buying anything except for oil these days. If the banks kick the long-term futures on oil high enough, they'll also be able to write loans to the oil and gas industry to build out new infrastructure and new production. Whereas, in the current pricing environment, firms are basically just letting their wells go into blowdown. If they inflate the futures far enough into the future, there won't be immediate-term worries about taking delivery of the product. And there is definitely a legitimate lack of energy infrastructure and production over the long term, so they won't be stimulating the creation of assets that are destined to become worthless, unlike housing.
Very valid argument............ However something is missing....... Crude oil price, however way you spin it is very dependent on the underlying demand.......it is going to be very tough for wall street to sell any justification for any super spike...........not even with the help of their buddies in the govt. Secondly this concept of lack of infracstructure in energy ............Legitimate is the last word i will use to qualify this
As a person who is about to be a licensed commodities trader, I will tell you, commodities is where the money is. Ok, yes, Im biased
The banks and the real estate industry has no problem over-stimulating the housing market. The banks had no problem over-stimulating the tech industry in the late 1990s. Would it be impossible to over-stimulate the energy industry? Of course not. Keep in mind as well that reserve capacity throughout the whole system is stretched super thin, as are personnel, so its not like housing where a couple years of aggressive building can dramatically increase supply. So you don't believe in peak oil, or in production depletion? Look, oil was able to hit $150/barrel last year with nothing in terms of inventory builds. If $150/barrel was a manipulated, as opposed to a market-driven price -- then inventory would have been piling up everywhere (just like the US dollars and T-bills are piling up in China).
If I'm not mistaken OPEC cut 4 million barrels per day of output last september. Can you say supply glut?