Exploring Hydrocarbon Depletion
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halcyon wrote:Commodities also has a speculative bubble element and that has been growing since 2003 or so very strongly. I even have a book Commodities - the next boom from 2005
The next boom after that? Many are betting on green tech / alternative energy technology sector.
And taking down the names and numbers of all the parasites who have invaded the commodities markets so we can go after their windfall profits, if necessary.
"I believe that commodities are simply the new NASDAQ, and everybody from hedge funds to illiterate crackheads like yourself is jumping on the bandwagon. It's time to clean house. "
But I don't confuse my hatred for them with a false sympathy for those who are too fat and lazy to work more than 40 hours a week.
mkwin wrote:The massive rise in commodity prices since 2002 is mainly driven by the explosive Asian demand. The latest surge is largely due to the collapse in the dollar and some hedging against this.
I was watching ASPO-Houston DVD this morning and Vince Matthews discussion on minerals basically made this very point. China is the one of the top producers of a wide range of industrial resources and minerals but since 2000-2002 it has started importing vast quantities of almost all these resources despite being a top producer. China’s – and to a lesser extent India and other industrializing countries - growth is simply stretching the entire global system to its limits. Speculation is a secondary factor to this primary driver. Sure you could ban speculation, and prices might be little lower, but that could cause damage to the markets as speculators provides liquidity.
PS: Regarding speculators providing liquidity, I think all bets are off on that one for the present.
mkwin wrote:PS: Regarding speculators providing liquidity, I think all bets are off on that one for the present.
I do not see why.
I suppose we should distinguish exactly who you are referring to and what constitutes liquidity.
In the meantime, are you aware that Bear Stearns is going belly up, the stocks are going to crash, and anyone who put their "liquidity" into the housing market and other creative "investment" opportunities are going to be doing a "Trading Places" maneuver very soon? We're facing a major depression. See UK Independent story on that.
I am a speculator. I always laugh whenever anyone blames high commodity prices on speculators. I'm flattered, no really...I am!JohnDenver wrote:It's getting clearer by the day that commodities are the next bubble -- the successor of the NASDAQ and housing bubbles. All the signs are there: vertical takeoff of all commodities simultaneously, massive piling on by hedge funds and J6Ps, talk of a "New Era" where prices will never come down.
Revi wrote: The speculators will get slapped down when they drive the price too high. That's the way it works.
After falling for three consecutive years, deforestation in the Brazilian Amazon jumped during the final five months of 2007. While the Brazilian government had previously taken credit for the decline in deforestation, the recent rise in logging confirms suspicions that commodity prices — not policy measures — are the primary determinant of forest clearing. Grain and cattle prices have been surging in recent months, boosting development pressure on the Amazon — increasingly the agricultural heartland of Brazil.....Amazon forest loss dropped from Aug 2004-Jul 2007, before nearly doubling from Aug 2007 until the end of the year.
mkwin wrote:The point is, speculators, whether they are funds or private investors, increase the number of potential parties to make up the other side of the futures contract. Hence they make the market for futures contract more liquid
DantesPeak wrote:The ones who have been complaining the most about speculators and bubbles have been the same people who have been wrong and PO and oil prices.
Lynch, Peter Beutel, and many others leading the bubble charge never thought prices would rise this high and can't see PO if it jumped up and bit them in the nose.
PopeGideon wrote:I'd guess you're the kind of Marxist who doesn't like anybody making money off of any investments.
"You're seeing record prices right now because of non-traditional players all coming into the market at the same time," said Larry Goldstein, director of the Energy Policy Research Foundation. "It would be hard to believe that (sovereign funds) are on the sidelines."
The average daily trading volume in crude-oil contracts on the New York Mercantile Exchange jumped to more than 480,000 in 2007, compared with roughly 280,000 the year before.
Non-commercial trading — buying and selling by investors that neither produce nor consume oil — has also risen sharply. The proportion of contracts held by non-commercial traders increased from approximately one-sixth in 2002 to one-third in 2008, according to Robert Weiner, a professor at George Washington University.
This is the usual explanation of the utility of speculators, but IMO it doesn't really say much. Yes, speculators make the market more liquid, but why is liquidity a good thing?
Consider the classic tulip mania for example. Attracting ever larger numbers of "greater fools" into the tulip craze certainly increases the liquidity of the tulip market, in exactly the way you define.
When I go to the store to buy food, there's no liquidity at all.
mkwin wrote:Speculation has happened on a large scale for decades for almost every commodity. It normally has little impact on the price and provides the liquidity benefit I defined.
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