2011-10-19

Råvaruspekulation


Chicago Board of Trade


Bubblornas ”all time high”, tulpanmanin, IT-bubblan?

Nej dessa var rena kindergarten, råvarububblan 2004 - 2008 har varit den största. För de 25 mest handlade råvarorna fördubblades priset, för de 8 mest handlade var det betydligt mer spektakulära prisökningar.

Under 1900-talet fanns det 13 tillfällen när en enskild råvara steg 500 % eller mer. T.ex. 1920 steg priset på socker 648 % , bomull 538 %. 1947 steg priset på sidfläsk med 1053 %, sojabönsolja med 797 %, sojabönor 558 %. När bröderna Hunt spekulerade i silver 1980 steg priset med 3818 %.

Under bubblan 2004-2008 steg 8 olika råvaror mer än 500 %:
eldningsolja (1,313 %), nickel (1,273 %), råolja (1,205 %), bly (870 %), koppar (606 %), zink (616 %), tenn (510 %), och vete (500 %). Många andra råvaror hade kraftiga prisökningar men under 500 %.


Randy Wray:
The Biggest Bubble of All Time – Commodities Market Speculation

The staff of Senator Joe Lieberman and Representative Bart Stupak wanted to know whether the bubble was just due to “supply and demand”. Relying on the expertise of Frank Veneroso and Mike Masters (two experts on the commodities market), I was able to conclude beyond any doubt that it was a speculative bubble driven by a “buy and hold” strategy adopted by managers of pension funds.

The pension funds panicked, realizing that their members would hold them responsible for exploding prices of gasoline at the pump. Pension funds withdrew one-third of their funds and oil prices fell from about $150 per barrel to $50. … it has to do with commodities indexes, strategies pushed by your favorite blood sucking vampire squid (Goldman Sachs), and futures contracts.

But then the crisis wiped out real estate markets and the economy. Managed money needed another bubble. They whipped up irrational fears of hyperinflation that supposedly would be caused by Helicopter Ben’s QE1, QE2, and the newly announced QE3. Better run to good “inflation hedges” like gold and other commodities. That did the trick. The commodities speculative bubble resumed.

And boy, oh boy, what a boom. … Take the top 33 commodities that are globally traded—everything from gold and oil to to rubber, flaxseed, jute, plywood, and something called diammonium phosphate. Over the past 110 years, an index price of these 33 commodities has declined at an annual rate of 1.2% per year. (Sure there are variations across the commodities—this is the average. And so much for inflation hedges. Commodities prices fell—they did not keep up with inflation. If you liked negative returns, commodities were a good bet.) Although demand for these 33 commodities has increased a lot over the century, new production techniques plus successful exploration has resulted in a declining price trend.

Further—and this is a bit surprising—deviations from the trend follow a normal distribution (you learned about this in high school; … about 95% fall within two standard deviations (once a generation); and you’ve got just about a snowball’s chance in hell of finding outcomes that are three or four standard deviations from the mean.

But what is more surprising is that over the past decade, the price rises you find for these 33 commodities are just about beyond the realm of possibility—2, 3, and 4 standard deviations away from trend. It is a boom without any precedent. Quite simply, nothing even close has ever happened before, in any market, including hi tech bubbles and real estate bubbles.

By now you’ve all read about black swans with fat tails—a reference to supposedly “unexpected” and highly improbable default rates on subprime mortgages and other toxic waste assets. (Way out the normal distribution’s “tail”.) As an insider quipped, you had once in 100,000 year events happening every day. But that is misleading. These were junk assets that from the get-go had nearly 100% probabilities of default—NINJA loans and so on. The models were flawed, indeed, fraudulent. That was all a scam. Those weren’t black swans with fat tails—they were Hindenburg blimps filled with explosive hydrogen just waiting for someone to light a cigarette.

By contrast, in the case of commodities, this is real stuff (not IOUs of deadbeats with no prospects). Barrels of oil that someone really wants. Corn to turn into pig and steer fat, or fuel for Midwest automobiles. Or gold to be hoarded by the University of Texas. There really is a demand for it; and someone produces it.

But wait a minute. The standard deviation of price rises for iron (5), coal, copper, corn and silver (4), sorghum, palladium, and rubber (3.5), flaxseed, palm oil, soybeans, coconut oil, and nickel (3), and so on down through jute, cotton, uranium, tin, zinc, potosh and wool (2) are so unlikely that they quite simply could not have happened. Individually. Together, the likelihood that we’ve got an unlikely boom in almost all of the 33 commodities? All at the same time? Impossible. Cannot happen. Not in the lifetime of our sun, let alone our planet.

But it did.

Why? China. Peak oil. Supply disruptions. Some markets cornered by speculators. Market manipulation by oligopolistic suppliers.

Yes, OK, those have played some small role. But remember, we are in the worst global slowdown since the 1930s. I will not go through all the data, but demand for most commodities is actually slumping. For many there is substantial excess supply. And China wants to slow. China is still largely a socialist society. China basically does what it wants to do. China will slow.

And yet the prices rise far beyond anything that has ever happened before. Beyond anything that can happen.

Why? Financialization. Just as homes became financialized (in many ways, including serving as the collateral for “ATM” cash-out home equity loans), commodities became thoroughly financialized. (So did healthcare and death, with peasant insurance and death settlements—topics for another day.)

Here’s the reason. Believe it or not, commodities markets are tiny; except for soy, oil, and corn they are smaller than tiny. Managed money is huge—tens of trillions of dollars floating around the world looking for high returns. US pension funds alone are three-fourths of US GDP–$10 trillion give or take. If you put even a fraction of managed money into commodities index funds, you blow up the prices.
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“Exporting -Energy Security: Keystone XL Exposed,” recently issued by Oil Change International (OCI), a “clean energy” advocate. The explosive sentences (underpinned by the latest figures from the government’s Energy Information Administration) come on pages 3 and 4:

“For the last two years, and for the foreseeable future …demand [for oil in the United States] is in decline, while domestic supply is rising.… Gasoline demand is declining due to increasing vehicle efficiency and slow economic growth”; meanwhile, “as a result of stagnant demand and the rise in both domestic [notably North Dakota] and Canadian oil production, there is a glut of oil in the US market. Refiners have therefore identified the export market as their primary hope for growth and maximum profits.”

the big crisis for the US oil companies can be summed up in a single word that drives an oil executive to panic like a lightning bolt striking a herd of snoozing Longhorns: glut.
Counterpunch – Goodbye Peak Oil
Exporting -Energy Security: Keystone XL Exposed

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