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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (14678)5/29/2004 9:41:13 AM
From: TheSlowLane  Read Replies (1) of 110194
 
Yeah, Coxe commented briefly on the soybean story on the call this week. Here's an excerpt from the May issue of Basic Points in regard to commodities:

"As leverage is unwound, some commodity prices sink. Yet almost all remain in backwardation, which means that most of the betting is to the bearish side, despite the reams 0f copy dispensed by the Street decrying the "runaway speculation in commodities." When US corporations are carrying three months' supply of oil, copper and nickel in their inventories, it will be time to worry about commodity speculation. Instead, inventories of those key industrial commodities are so lean they are mean to stockholders of commodity-consuming companies. Those who look only at the speculation by investors in commodity futures ignore the obvious fact that producers' forward selling—called hedging, but really a form of speculation—has meant that all that buying by the investing public has been offset as producers bet their company's future production against the financial bets made by speculators. The bearish producers have more demonstrated muscle than the levered speculators, so, on a net basis all that "frenzied commodity speculation" wasn't creating a bubble."
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