Commodity Pricing - What's Going On?

lilpup · May-31-11, 06:35 AM

Very interesting piece by the BBC - today's installment focuses specifically on the copper market. The cost of mining remains constant yet the cost on the world market is skyrocketing. Did you know that major investment houses [[e.g. Goldman Sachs, JP Morgan) have also bought up international warehousing facilities? An estimated 10% of the copper produced in 2009 might be stockpiled and essentially invisible to the commodities markets, creating the illusion of restricted supplies.

Copper now, food stocks and arable land in the future?

Bubble Trouble? - Part Two

[[Part One focuses on cocoa beans, grains, land, and other commodity investments being pushed by financial entities instead of stocks.)

**gazhekwe** · May-31-11, 07:34 AM

Let's hear it for SPECULATION! Wouldn't it be great to see the speculators get the Karma that is due them?

http://www.popmodal.com/video/1277/T...mp-Explanation

lilpup · May-31-11, 08:01 AM

The BBC's implication of flat out manipulation across many items is far scarier than mere speculation by ignorant investors.

**gazhekwe** · May-31-11, 08:04 AM

Speculation IS Market Manipulation.

lilpup · May-31-11, 08:10 AM

Well, yeah, but I've never heard of the actual hoarding and off-market hiding of product element of it in the way it's described here. It's one thing to pump up a price by throwing money at it, another to actually hide product or otherwise corner it and intentionally make it unavailable.

**Detroitej72** · May-31-11, 08:40 AM

Originally Posted by lilpup

Well, yeah, but I've never heard of the actual hoarding and off-market hiding of product element of it in the way it's described here. It's one thing to pump up a price by throwing money at it, another to actually hide product or otherwise corner it and intentionally make it unavailable.

After seeing what the immoral idiots on Wall Street have been doing, do you really think there is any honor among theives?

**oladub** · May-31-11, 10:55 AM

“China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline. It’s part of an overall desire to decrease its exposure to dollar assets.” -Royal Bank of Canada[[dailyreckoning.com)

This isn't to suggest that Wall Street firms aren't going along with the momentum. Investing in commodities was probably a more profitable thing to do with TARP money then lending it out to home buyers after all. But how does one measure the effect of China's warehousing of copper with that of J.P. Morgan? Should we restrain domestic 'speculative' purchases so that China can get a better deal without all the competition [[supply-demand)?

Silver prices seem to have been recently manipulated. From the end of January to the middle of April, silver prices climbed 77%. George Soros ridiculed purchasing precious metals while accumulated large amounts. Then he came out publicly in April and said he had just dumped his holdings. Immediately after his announcement, the margin silver traders could base their trade on was reduced twice. All of this caused silver to lose 33% of it's value by mid May. I suspect that Mr. Soros shorted silver when he made his announcement and that he might have been in an advantaged position to have overheard that the margin rule was going to be changed. Mr. Soros is a very smart man. Note: in the last two weeks, silver has climbed 18%.

What about airline and utility companies which regularly speculate on future prices? Sometimes, if they guess right, they save large amounts of money compared with buying at spot prices. That is speculation. Should they also be restricted from speculating?

**rb336** · May-31-11, 10:55 AM

None of this sort of BS with the commodities will end as long as we award speculation/short term looting of the market over long-term investing. bump the capital gains tax to 45% for the first two years and drop it 5% every year an investment is held until at 7 years it is back to 15%.

lilpup · May-31-11, 11:41 AM

Originally Posted by oladub

What about airline and utility companies which regularly speculate on future prices? Sometimes, if they guess right, they save large amounts of money compared with buying at spot prices. That is speculation. Should they also be restricted from speculating?

The primary difference with them is that they are actual users of the product and so their market demand is legitimate. That's not true of the pure investment speculators who create a false demand.

As far as separating China's hoarding from the others - the BBC report theorizes that the investment houses are working with China so that they can hide their off-market hoards in China.

**1KielsonDrive** · May-31-11, 02:01 PM

Speculation, manipulation, trading, hoarding, whatever you'd like to call it, and our press has many, many euphemisms for it - it is GAMBLING! There is no other way to accurately describe it - it is GAMBLING!

**1KielsonDrive** · May-31-11, 02:08 PM

I used to go to Las Vegas with a plane full of friends for weekends of fun. I was never much of a gambler, so it was about wine, women and song for me - within budget. A couple of my friends had much problems controlling their vices. We, as a group, would reign them in by holding some of their funds so they'd last the whole weekend, not blow it all or get ripped off in one fell swoop by a hooker or a scam. It worked quite well. Usually they come back with some winnings or at the very least, a bit of money left over. The moral of the story - REGULATION AND OVERSIGHT. Everyone needs and deserves it.

**3WC** · May-31-11, 09:17 PM

"Speculation IS market manipulation" Nonsense. Gibberish.

rb336: Nonsense. Gibberish. Where do you come up with these scatterbrained ideas?

If you people want to learn something about commodities, especially oil, read: "Oil's Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy" by Dan Dickler, a NYMEX floor trader for 25 years. He claims that the price of oil is artificially increased by the influx in the markets of ETF's, hedge funds, and investment banks which believe that you can securitize the price of oil in order to participate in the trading of oil futures without being an oil producer or an end user. You will see that while most of you would agree with his views it is a far more complex than you can imagine and can't be addressed by simplistic analyses with no understanding of how the oil and other commodities markets work.

**lpg** · June-01-11, 04:37 PM

Watched a program over the weekend about how Enron was able to manipulate the electical grid in California. Causing rolling brownouts by shutting down power plants till the prices skyrocketed. All of a sudden the plant would be repaired and back online and the people who depend on the power got raped again and again. .
i wonder what would happen if Detroit Water and Sewer fell under private control ?

**1KielsonDrive** · June-01-11, 07:38 PM

Originally Posted by 3WC

"Speculation IS market manipulation" Nonsense. Gibberish.

rb336: Nonsense. Gibberish. Where do you come up with these scatterbrained ideas?

If you people want to learn something about commodities, especially oil, read: "Oil's Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy" by Dan Dickler, a NYMEX floor trader for 25 years. He claims that the price of oil is artificially increased by the influx in the markets of ETF's, hedge funds, and investment banks which believe that you can securitize the price of oil in order to participate in the trading of oil futures without being an oil producer or an end user. You will see that while most of you would agree with his views it is a far more complex than you can imagine and can't be addressed by simplistic analyses with no understanding of how the oil and other commodities markets work.

Read one book, watch one teevee program, and you become an expert.

**Richard** · June-01-11, 08:01 PM

Originally Posted by 3WC

"Speculation IS market manipulation" Nonsense. Gibberish.

rb336: Nonsense. Gibberish. Where do you come up with these scatterbrained ideas?

If you people want to learn something about commodities, especially oil, read: "Oil's Endless Bid: Taming the Unreliable Price of Oil to Secure Our Economy" by Dan Dickler, a NYMEX floor trader for 25 years. He claims that the price of oil is artificially increased by the influx in the markets of ETF's, hedge funds, and investment banks which believe that you can securitize the price of oil in order to participate in the trading of oil futures without being an oil producer or an end user. You will see that while most of you would agree with his views it is a far more complex than you can imagine and can't be addressed by simplistic analyses with no understanding of how the oil and other commodities markets work.

Read Enron that was their business model .

They bought and sold projected energy use and not actual.

I was looking at a large piece of property in Detroit 1000000 sqft of it was going to be used solely for ingot metal storage at this time it was aluminum which is bought while the price is down when the price of copper maxes out or peaks out then copper will drop and aluminum will skyrocket,these warehouses are all over the world and when combined that is a massive amount of material,metals have pretty much always been a solid market pump something up until just before it reaches that unsustainable point then switch back and forth.

On the local level it is easier to understand when it comes to scrap metal prices,for instance when the ship comes into port the price will drop but as the ship begins to fill up and the port charges begin to add up the price will jump up to finish filling the ship in the least amount of time,it is kinda neat in a way the whole local scrap economy is based on filling a export ship in some port,and has really little to do with the actual going price.