If heggies & investments banks are the reason for the run up...

Quote from ProgrammerGuy:

If heggies & investments banks are the reason for the run up in commodities prices can someone PLEASE PLEASE answer this.


If you say that the hedge funds and Investment banks keep on driving prices higher, they do that by buying. Well if they are buying then you MUST take delivery of the commodity. In a you tube video http://www.youtube.com/watch?v=PNp0y0SjOkY it says that Morgan Stanley is the #1 holder of heating oil in UK.

What are they doing with all that heating oil? If Investment banks & hedge funds are NOT using heating oil, crude oil, sugar, corn... etc and they are in fact hoarding it, then wouldn't they eventually have to sell it? causing the price to go back down to where it originally was?
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Oil drillers/exporters short sell the contracts to 'create' them. A speculator buys the contract.

Near expiration the speculator sells his contract to a exporter, which sends his oil.

The exporter 'missed' this profit from the price increase, but remember that:

A. The next month oil price is higher, so the exporter only missed one month profit (his profits increse, altough delayed one month).

B. Most oil is traded spot, so exporters only 'miss' a small part of the profits.
 
i didn't read the whole thread so pardon me if this has been mentioned,the people with the money,hedge funds,insurance,oil companies,... they have to park it somewhere to protect it,against inflation at worst,but to make a profit,the big money has gone to all commodities,corn gold oil,sugar oj coal,,if they all go the same way the price keeps rising,the fact thay they are leaving equitys alone to fall is very negative,the banks have to find a floor before this investment plan changes,it's unusual that so much money would be tied up in such a finite basket,does not bode well fo rthe spus,dow and naz
 
Quote from walter4:

Platts review bars Lehman from key oil trade window

Mon Jul 7, 2008 8:21pm IST


SINGAPORE, July 7 (Reuters) - Energy pricing agency Platts has put Lehman Brothers (LEH.N: Quote, Profile, Research) under a temporary review that effectively excludes it from trading benchmark-setting oil contracts, four sources close to the matter said on Monday.


http://in.reuters.com/article/oilRpt/idINSP18502220080707?pageNumber=2&virtualBrandChannel=0
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Guess they fear Lehman could not cover a margin call.
 
It seems that specs (but that includes long only funds and all the shadow long-side transactions ) are responsible for the runup.
Let's see, if you buy a contract, you take an offer, lifting prices or reducing supply at a given price level. Before the last trading day you close out that contract, therefore it's a zero sum transaction in the physical . Agreed. However your initial buying has lifted prices, lots of similar buying by other speculators has lifted prices even more. A TREND is created, which attracts other specs. Which attracts the long only funds, then the public at large (the sheeps).
Since you roll out the position, your selling to close before expiration does not send prices back lower, a trend has been created by all that buying and you merely closed the contract you opened reducing OI. The buyer at expiration is also closing out his short position; again no impact on the physical, but prices have gone up. ARTIFICIALLY.


Since the price of the physical is affected by the futures market, prices of the physical have gone up although no REAL demand ever existed. This shows how the commodity investing craze promoted by people like Mr Rogers (probably responsible for an increase in world hunger) has turned the futures market into a sham.
 
Day to day fundamental news used by TV analysts to rationalize price action should be taken with a grain of salt... trust me I'm one of them.
 
Quote from Kicking:

It seems that specs (but that includes long only funds and all the shadow long-side transactions ) are responsible for the runup.
Let's see, if you buy a contract, you take an offer, lifting prices or reducing supply at a given price level. Before the last trading day you close out that contract, therefore it's a zero sum transaction in the physical . Agreed. However your initial buying has lifted prices, lots of similar buying by other speculators has lifted prices even more. A TREND is created, which attracts other specs. Which attracts the long only funds, then the public at large (the sheeps).
Since you roll out the position, your selling to close before expiration does not send prices back lower, a trend has been created by all that buying and you merely closed the contract you opened reducing OI. The buyer at expiration is also closing out his short position; again no impact on the physical, but prices have gone up. ARTIFICIALLY.


Since the price of the physical is affected by the futures market, prices of the physical have gone up although no REAL demand ever existed. This shows how the commodity investing craze promoted by people like Mr Rogers (probably responsible for an increase in world hunger) has turned the futures market into a sham.
More...

incredible. 1st you had the posters on ET,guilty of the sin of envy, who made a mockery of Rodger's track record. now you have someone who says rogers was correct because he took action which fulfilled his prophesy. roger's actions consisted of a buy and hold strategy and were usually unlevered or slightly levered.
 
You missed something here. If you are selling to roll close to expiration, why is the other side buying from you? In your trend story, the trend has to attract speculative shorts as well as longs for it to work like you say, and I don't see why this would happen.

If there are more speculative longs than speculative shorts and you are in the last group to roll, you are either selling to somebody who will take delivery or getting a short who could deliver to buy back a contract. If it is a new long on the other side of the trade, he will only pay what he is willing to pay for physical oil, so the price will drop if it is artificially high. If you are getting a short with oil to cover, the price has to drop to the point where he is indifferent between sending you oil and buying back the contract to let you roll. Otherwise there is a shipment of oil with your name on it and a big bill in the mail.

Quote from Kicking:

It seems that specs (but that includes long only funds and all the shadow long-side transactions ) are responsible for the runup.
Let's see, if you buy a contract, you take an offer, lifting prices or reducing supply at a given price level. Before the last trading day you close out that contract, therefore it's a zero sum transaction in the physical . Agreed. However your initial buying has lifted prices, lots of similar buying by other speculators has lifted prices even more. A TREND is created, which attracts other specs. Which attracts the long only funds, then the public at large (the sheeps).
Since you roll out the position, your selling to close before expiration does not send prices back lower, a trend has been created by all that buying and you merely closed the contract you opened reducing OI. The buyer at expiration is also closing out his short position; again no impact on the physical, but prices have gone up. ARTIFICIALLY.


Since the price of the physical is affected by the futures market, prices of the physical have gone up although no REAL demand ever existed. This shows how the commodity investing craze promoted by people like Mr Rogers (probably responsible for an increase in world hunger) has turned the futures market into a sham.
More...
 
Quote from zdreg:

incredible. 1st you had the posters on ET,guilty of the sin of envy, who made a mockery of Rodger's track record. now you have someone who says rogers was correct because he took action which fulfilled his prophesy. roger's actions consisted of a buy and hold strategy and were usually unlevered or slightly levered.
More...

I think Rogers is certainly one of the responsible for the runup.
Yes he's been right on the money on commodities and FNM, pretty incredible. As I understand he has been calling for the demise of the US stockmarket for ages though (since back in 1987).
He's also spent most of his time talking his book and almost singlehandedly started this craze with his 2006 book. Why does he have to go around the globe pounding the table like mad on commodities when every commodity investor takes away resources from people, often those who need it the most ? What you should know is that Mr Rogers in addition to pumping his own positions makes money every time a fund licenses his RICI index . Doesn't he have enough money yet ?
Why does he shamelessly keep promoting the commodity investing craze despite the horrific consequences around the globe ?
 
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