Shane's response is the normal thinking about futures markets, but I was surprised by the Wall Street Journal treatment.
-----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Shane Mage Sent: Friday, May 30, 2008 7:37 PM To: Progressive Economics Subject: Re: [Pen-l] Wall Street Journal Evidence That Speculators AreResponsible for the Run Up in Oil? On May 30, 2008, at 10:17 PM, Michael Perelman wrote: > The Journal article does not discuss oil, but chocolate. Even so, > the article is of > interest because it dismisses the idea that fundamentals are > responsible for a rapid > increase in prices... > > ..."Cocoa investors acknowledge that they can affect prices but say > their influence is > strictly short term. Any increase in prices should lead to farmers > growing more > cacao trees, which produce cocoa beans, driving prices down again, > they say." > > "One of the puzzles behind the cocoa-price increase is that it > doesn.t appear to > reflect an imbalance between supply and demand. In the year ending > in September, > there will be almost enough cocoa grown to meet the world.s needs, > according to the > International Cocoa Organization, a trade group. The expected 51,000- > metric-ton > shortfall isn.t particularly large and can easily be covered by > existing stock, the > group says .... The fundamentals do not justify this price, and I > haven.t heard of > any other explanation other than [investment] funds,. says Hagen > Streichert, a German > government official and the spokesman for cocoa-buying countries on > the > International Cocoa Council." If speculators, not "fundamentals," are driving up prices then these speculators must be hoarding actual cacao beans. Not just gambling against an equal weight of other (these being bearish) speculators. If so, these hoards of a very perishable (fat becomes rancid) commodities will have to be disgorged in a much shorter amount of time than it would take to grow new cacao bushes. The short term influence of speculation, minus physical hoarding, must be very short term indeed. Unless *demand side* fundamentals justify the higher price. Shane Mage "Thunderbolt steers all things...it consents and does not consent to be called Zeus." Herakleitos of Ephesos _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
