On Sat, May 31, 2008 at 9:01 AM, Shane Mage <[EMAIL PROTECTED]> wrote: > > Only from someone just "selling cacao beans short." Both trades will have > to be unwound within the speculators' short time horizon. One side, in a > very volatile market, will make big profits, the other side will suffer > somewhat bigger losses, the difference going to intermediaries. But whether > the price soars or plummets, it can only stay there if the supply or demand > side fundamentals justify it. It is "fundamentals" that speculators > speculate about, to the extent that they aren't merely speculating about > other speculators' speculative intentions.
I sent this link to PEN-L earlier: some people are arguing very persuasively that a new breed of speculator (pension funds) is responsible for the commodities bubble. This money is trying to enter a new asset class and is therefore long-only and is completely price-insensitive. As long as more dumb money keeps pouring into these asset classes, the bubble will continue. http://hsgac.senate.gov/public/_files/052008Masters.pdf >From the Senate Testimony of hedge fund manager Michael W. Masters -----------------------------------snip Commodities prices have increased more in the aggregate over the last five years than at any other time in U.S. history.1 We have seen commodity price spikes occur in the past as a result of supply crises, such as during the 1973 Arab Oil Embargo. But today, unlike previous episodes, supply is ample: there are no lines at the gas pump and there is plenty of food on the shelves. If supply is adequate - as has been shown by others who have testified before this committee2 - and prices are still rising, then demand must be increasing. But how do you explain a continuing increase in demand when commodity prices have doubled or tripled in the last 5 years? What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors. Specifically, these are Corporate and Government Pension Funds, Sovereign Wealth Funds, University Endowments and other Institutional Investors. Collectively, these investors now account on average for a larger share of outstanding commodities futures contracts than any other market participant. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
