A new Bloomberg article summarizes the case against commodity speculators very nicely.
http://www.bloomberg.com/apps/news?pid=20601039&sid=a1lekSofYnc8 --------------------------------------------snip What, if anything, should be done to curtail the growing dominance of commodity index traders? This is a thorny issue for libertarians and other free- market advocates. If commodity markets are declared off limits to public pensions, what's next? Currency markets? Maybe it's not in the public's best interest for the dollar to weaken further. ``Commodity futures markets were designed for three things,'' said Howard Simons, a strategist at Bianco Research in Chicago. ``Price discovery, risk transfer and commerce facilitation. They were never designed to accommodate speculative inflows from one side.'' [...] ``I don't have concerns with speculation,'' said Michael Aronstein, president of Marketfield Asset Management in New York. ``It's the allocation of public funds to the ownership of something on a long-term basis that can't support the flows.'' Aha! Now that's a slightly different matter. ``No one volunteers to have his money in a public pension fund,'' he said. ``Should the New York State public employees fund be buying mountains of cotton swabs or propane? What if the Social Security System had decided to buy condos'' during the housing boom? Return on Forecast Aronstein, who describes himself as a ``19th-century liberal,'' has another issue with today's commodity index investor. ``There is no embedded expectation of return in owning a pile of inventory in a business you have no interest in,'' he said. ``The only return is from a presumed ability to forecast prices. It's not like owning a hot dog cart, where the expectation is that every day you'll make a profit.'' At some point, commodities will enter a bear market, pension funds will decide the stuff they own isn't an asset class after all, and their one-way long bets will turn to one-way sales. And who but the producers will complain about falling prices? _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
