Storm Clouds Brewing

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doberman's picture
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Joined: 2005-02-22

There's a lot of talk in Congress about limiting "speculation" in commodities. The supposed purpose of this is to reduce inflation of the underlying commodity, by limiting "speculation". The price of gas is the driver behind all this talk; however, the proposed legislation would cover all commodities.
 
The ability of institutions and individuals to reduce risk by investing in commodities could be a thing of the past, soon.
 
Our Congress at work!

stokwiz's picture
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Joined: 2004-12-04

Sounds similar to 1994 when the fed raised rates aggressively and derivatives really took the blame for the meltdown in the bond market.
 
I think the run up in commodity prices is mostly due to all the new commodity based funds chasing market performance, similar to the way tech stocks were all the rage until March 2000. When these new commodity investors see that the run up has ended and the momentum shifts, they want to take profits and the selling begins, I don't want to be long  oil. Of course, I've been waiting for that to happen $30 a barrel ago.
 
The last time congress acted on this was right after the democrat majority took over and eliminated many tax breaks for big oil. Wonder where the oil companies recovered that money? Prices have gone straight up since then, but I'm sure it's only a coincidence. Just like ethanol legislation that has ultimately caused prices of many food items to skyrocket as well. Oh well, at least the polar bears are happy.
 
Stok
 

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