I don't think too many people realize the extent that hot leveraged speculative money has come to dominate trading. It's especially true of commodities, indeed you have a situation where one precious metal, silver, has been literally short cornered (by so called commercials in this instance).
These specs move in sink, like a herd, and that's why you see such volatility. So you always have to temper their activities in terms of estimating what your beta risk might be in any trade. If they get extremely lopsided, that could be trouble. Add the ingredient of even higher beta in the PM stocks many of us use, and this is what happens. I call it "live by the gun, die by the gun", something I'm willing to do it. I really got the impression last fall, when the sector was hot, that a lot of people forgot about "the die" factor. Just go read the posts on my PM thread, it was like some kind of Billy Graham religious spectacle.
Clearly, and perhaps unfortunately this spec factor makes a straight long precious/base metal/energy buy and hold strategy problematic. However, right now (at least in metals) the specs have already done most of their damage. If the USD weakens (which is what I expect), they will be back like "The Terminator". I just don't think 25-50 bps rate increase kills the general commodity bull market. |
