David Lukken, the acting chief of the CFTC, said today that while his agency is set up to detect market manipulation, it is less well equipped to gauge the impact of a flood of new speculative money into the commodities markets. However, he said the agency intends to get to the bottom of the question. […]
Read more...A reader forwarded me a Morgan Stanley fixed income research report wrap, which included a discussion of the role of gasoline and oil price subsidies in certain developing countries. The price gives an good overview of the role these defacto consumer price discounts have played, and argues that they will have to be cut back […]
Read more...A quick recap of Soros’s prepared remarks at the Senate hearings on energy market manipulation, which I watched just now. The billionaire said that he had a view of bubbles that departed from conventional wisdom about financial markets. They start with a trend but the dymamic becomes self reinforcing and increasingly disconnected from reality. For […]
Read more...Gideon Rachman in “We cannot go on eating like this” in the Financial Times, points out the increasing heated discussion between advanced and emerging economies over resource issues, particularly food. The positions of the two camps are fairly easy to set forth: the West says, “You can’t have what we have, it’ll ruin the planet,” […]
Read more...Bloomberg reports that the Commodity Futures Trading Commission, which has opened an investigation into whether market manipulation may be influencing oil prices, is taking a hard look at physical delivery and storage. A particular focus is the role of Cushing in the trading of West Texas Intermediate Crude, one of the two most important contracts […]
Read more...It’s a bit premature to say that the price correction in oil and commodities generally is a harbinger of a reversion of much of the runup of this year; they were so overbought that some profit-taking was inevitable. But now that the bulls have finally met some strong headwinds, cautionary views are suddenly getting more […]
Read more...The dollar rose today, and gold has fallen below $900 as f this writing due to revisions in the first quarter GDP release that increased growth from “anemic” to “slightly less anemic”. Note that there was considerable skepticism about the initial 0.6% GDP growth figure (the revised level is 0.9%) because the total was entirely […]
Read more...It’s remarkable how certain words elicit knee-jerk reactions. Take “speculation”. I’ve questioned the prevailing view that an price increase of nearly 50% in six months in crude oil prices is entirely a function of demand (meaning immediate consumption, the kind most economists think of when they draw demand curves) and supply. That is partly because […]
Read more...Veteran investor George Soros, in an interview with the Telegraph, describes speculation as a significant factor in the recent spike in oil prices. However, he doesn’t expect prices to break until there are signs of economic weakening. Later in the post, I’ll provide some information that suggests how traditional supply/demand forces could have been swamped […]
Read more...Here I wanted a light weekend and what does Jim Hamilton do but go and put up a link to a very interesting new paper of his. This is from the introduction: How would one go about explaining what oil prices have been doing and predicting where they might be headed next? This paper explores […]
Read more...Steve Waldman, in a colorful post, “A run on central banks?” contends that the rapid rise of commodities prices isn’t the result of mundane factors like negative real interest rates, but a more fundamental cause: loss of faith in the monetary authorities: Just as the fear of a bank’s insolvency can precipitate a run that […]
Read more...You gotta love how the reporting follows the tape. While oil prices were shooting up, the Goldman forecast and supporting views were getting the prime real estate in news coverage. Now with a reversion, the contrary and cautionary views are getting airtime. From Bloomberg: Crude oil fell more than $2 a barrel on signs that […]
Read more...Not only do recent trading patterns suggest short covering played a role in the recent oil price spike, but declining open interest also says new money is holding off entering after such a fast runup. From Bloomberg: Oil’s rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets […]
Read more...The headline above is perhaps the most important message contained in the front page Wall Street Journal article, “Energy Watchdog Warns Of Oil-Production Crunch.” Well, in fairness, it may rank as important as the thrust of the article, which is that the IEA, which recently had predicted that oil supplies would be able to more […]
Read more...Let me make a wee confession: I tend not to follow money supply figures closely, in part because I am not a fund manager (there are only so many things you can watch on the side) and in part because we are missing some key underpinnings that might help make it a useful metric. In […]
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