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The next time you drive to the gas station, only to find prices are still sky high compared to just a few years ago, take notice of the rows of foreclosed houses you'll pass along the way. They may seem like two parts of a spell of economic bad luck, but high gas prices and home foreclosures are actually very much interrelated. Before most people were even aware there was an economic crisis, investment managers abandoned failing mortgage-backed securities and looked for other lucrative investments. What they settled on was oil futures. An oil future is simply a contract between...

Eric Burroughs Warning signs on market liquidity risks May 15, 2011 07:28 EDT If the great commodity selloff of 2011 shows nothing else, it is that markets are undergoing serious structural changes that need to be followed closely. Our commodities analyst John Kemp has compared the oil plunge with the May 2010 flash crash in U.S. shares, and rightfully so. Four standard deviation moves in oil futures are not normal, even if Gaussian distributions underestimate the chance of such a move. The rise of high-speed electronic trading appears to be creating imbalances between buyers and sellers in nanoseconds that lead...

Rising food and energy prices could deal a $70 billion blow to the economy, but the recovery is likely to limp along anyway. If the recent run-up in energy and agricultural commodities persists, U.S. consumers will have to shell out $20 billion more for energy and $50 billion more for food this year, Capital Economics estimates. Among other things, that squeeze on consumer budgets will eat up most of the payroll tax holiday bonus that Americans were supposed to get out of the deal in Congress that extended the Bush tax cuts, at some cost to the deficit. So much...

Is Federal Reserve Chairman Ben Bernanke stoking inflation? Of course he is. Anyone with common sense knows that if you give $600 billion cash to the banks with no qualifications -- as he did with the second round of quantitative easing -- they will use it to speculate in the markets. JPMorgan Chase (JPM) just bought $1 billion of copper. Bernanke's fatal mistake was that he placed no restrictions on what the banks would do with his $600 billion. If you opened the banks' books, you can bet that they've invested in commodities, currencies and foreign equities and bonds. What...

Precious metals outperformed most asset classes over a 3, 5 and 10 year period. Silver was a little late to the party. Silver is a business cycle sensitive investment against gold, which is a fear / value / wealth trade. Silver fell to its lowest level relative to gold in early 2009 as the silver price went as low as $8.92, which was 84th of an ounce of gold. However, as the business cycle turned, it became one of the best performing assets in 2010. This outperformance looks set to continue in 2011 due to the very bullish fundamentals. Many...

Let me say that again. ALL MONEY COMES FROM DEBT (for those of us who suffered the most indoctrination by attending schools like Harvard, let's pause here for a moment so we can catch up to the rest of the class). This means in order for governments, businesses, and people to have the liquidity necessary to live, they must agree to sign over a claim on their assets to banks. As the banking system inflates over time passing out credit, which makes everyone feel good with more digits in their accounts, it gathers claims on all the assets in the...

Everything from gold to rubber is reaching new highs. And that's just one of many landmines the stock market bulls are ignoring. If Chuck Prince were in the game today, he would be dancing. In 2007, the former Citigroup CEO famously addressed a question about the bank's push into the booming mortgage market by saying: "As long as the music is playing, you've got to get up and dance. We're still dancing." As we well know, that music eventually stopped and many of the revelers were crushed. But memories are short. Today, plenty of investors are dancing as the S&P...

On March 17th of 2010 the self regulatory organization for commodities trading and retail foreign currency transactions in the United States, National Futures Association (“NFA”), announced a major change to the way Hedge, Commodity, and Forex funds operate. The change, titled “Compliance Rule 2-46” is NFA’s latest effort to work towards detecting and eliminating Madoff Style investment frauds within the industries they regulate. In order to comply with any set of new regulatory standards one has to first understand the intentions and implications of the adjusted policy. So what then does this adjustment mean for the commodity and forex industries?...

In the bank's latest edition of its Monday Mining Minutes, Citi lays out a scenario which it calls the "Nightmare on Commodity Street." (via FT Energy Source) So here’s the nightmare scenario, which we hope will not happen: Thousands of very smart speculators have accumulated the biggest ever speculative physical raw material positions ever witnessed in the belief that either the dollar will collapse or an ongoing global ‘Supercycle’ will shake off the effects of the credit crunch and resume business as usual. They are funded in this venture by some of the lowest interest rates on record. What are...

Crops Headed For A Tough Harvest by: Jim Delaney November 03, 2009 Although it appears the prospects for the producers of porcine products have prettied, yes, lipstick included, that cannot be said for all of the ‘ole MacDonald’s in the country. The U.S. Department of Agriculture reported recently that due to a late planting season and a cooler and wetter fall than normal, only 20% of the corn crop is out of the fields vs. an average of 58% during the years of 2004-2008. “It’s getting scarier. The longer we go, the more mold keeps growing and the more ears...

The Agri-Food investment story has been unfolding for more than three years, and has another ten or so years to go. For that reason, investors still have plenty of time to uncover the opportunities for profits in a world soon to be far more hungry. Agri-Food cannot be produced in factories with lower marginal costs for new production. Unlike consumer electronics, marginal production will have a higher cost. For centuries mankind has sought to satisfy hunger. Only in the second half of the 19th century did food become more plentiful with improved availability. Yet even after that period food was...

At a time when the trade is questioning USDA’s 2009/10 prospective demand for US corn, especially in the feed use column, it is refreshing to note the continued upward demand for corn for ethanol. According to the Energy Independence and Security Act of 2007, the United States is expected to manufacture 12 billion gallons of ethanol for calendar year 2010, or 14.3% more than a year earlier requirement of 10.5 billion gallons in calendar year 2009. As you are able to view the trend increase for corn use for ethanol continues to be impressive vs feed use and equally important...

China confirms Rio Tinto staff arrests By Rob Taylor and Benjamin Kang Lim 1 hr 22 mins ago SYDNEY/BEIJING (Reuters) – China confirmed on Thursday the arrest of an Australian mining executive and three others on spying allegations, in a case that has rattled currency markets and raised questions about China-Australia relations. The four employees of miner Rio Tinto were arrested on charges of stealing state secrets, the official Xinhua news agency said, citing Shanghai state security authorities. "The case was being investigated according to law," Xinhua said. It gave no further details. Reports of the detentions had already emerged...

Rio Tinto executives arrested in China Anne Barrowclough in Sydney Rio Tinto's iron ore sales team has been arrested in Shanghai, threatening a diplomatic rift between Australia and China. Officers from China's Public Security Bureau are reported to have raided the Anglo-Australian mining group's Shanghai offices and removed computers used by each of the four executives, who have been detained since Sunday. The Australian Government is today seeking urgent consular access to Stern Hu, an Australian passport holder among the arrested men. The other three men are Chinese passport holders. The company and Australian diplomats have been given no reason...

In 2007, a standoff unfolded between China and several American companies, including W.R. Grace, a major supplier of oil refining products. China was threatening to withhold supplies that keep refiners in business.

Russian boom ends as resource wealth vanishes Economy, stocks and currencies tumble, threatening Putin's political legacy By Polya Lesova, MarketWatch Last update: 6:42 p.m. EST Feb. 20, 2009 NEW YORK (MarketWatch) -- The reversal of Russia's fortunes is nothing short of a Chekhov drama. A seven-year economic boom fueled by cheap credit and soaring commodity prices has come to an abrupt end, plunging the country into the worst financial crisis since its 1998 debt default. Russia's economy is expected to contract by at least 2% in 2009 after growing at an average rate of 7% in recent years. Stocks have...

Recovery Delayed Until the Looting Stops By John Helmer in Moscow In theory, Russia's economic performance is correlated with global supply and demand for raw materials and commodities, and thus with the rate of global economic growth, especially China. In the Russian market, 80% of earnings come from commodity stocks. Before the collapse, the enormous gains in market capitalization of Russian producers and exporters of gas, oil, nickel, copper, aluminium, iron-ore, coal, steel, potash, nitrogen fertilizers, and precious metals showed how dependent Russian asset value was on the belief that global demand was in an unstoppable super-cycle, sustained by China....

Russia and Brazil crumble as commodity prices crash The entire complex of commodities and emerging market stocks, bonds, and currencies is now in free-fall as the economic crisis spreads like brushfire, threatening to draw every corner of the globe into the vortex of recession. By Ambrose Evans-Pritchard Last Updated: 7:00AM BST 07 Oct 2008 Oil, grains, and industrial metals all crumbled as the week began despite the passage of the Paulson bail-out plan in Washington and dramatic moves by European governments to shore up their banking systems, compounding the steepest commodity crash in over half a century. The big exception...

Bailing Out The Oil Market William Pentland, 09.23.08, 11:35 AM ET While everyone knows the U.S. government is looking to bail Wall Street banks, few people realize that it's also bailing out speculative oil and commodities traders in the process, fueling a sharp rise in energy prices. Lehman Brothers and AIG held enormous trading positions in commodities markets. If those positions had been liquidated suddenly, the price of everything from wheat to oil would have collapsed. The Commodity Futures Trading Commission, the main regulator of U.S. commodity markets, allowed Wall Street's investment banks and trading companies to take control of...

Rush for Natural Gas Enriches Corner of the South By ADAM NOSSITER MANSFIELD, La. — They had to repeat the amazing number, $28.7 million, over and over, to make sure it was real and would not go away. Even then, the members of the De Soto Parish Police Jury — the county commission — could hardly believe it. They laughed, rocked back in their chairs, shook their heads, stared at the ceiling and muttered oaths to each other. “We have — $28.7 million,” said the president, Bryant Yopp, to settle the matter, definitively if still incredulously. It was nearly one...

Libya's dictatoship of Kadhafi has decided to suspend its oil selling toward Switzerland after Swiss authorities arrested and briefly detained Kadhafi's son in Geneva, last week, under the charges of having beaten two employees. Khadafi's son, Hannibal, seeks revenge. The Libya National Oil Company announced Libya will cancel its oil sells to Switzerland. Libyan oil represents 48% of Switzerland's needs.

NEW YORK -- Phillip R. Bennett, Refco Inc.'s former chief executive officer, was sentenced to 16 years in prison Thursday for his role in a scheme to hide the commodities broker's financial troubles. At a hearing, U.S. District Judge Naomi Reice Buchwald in Manhattan said white-collar defendants such as Mr. Bennett often "just don't think they'll get caught." "You and others like you play a truly high-stakes poker game," the judge said. The judge didn't impose a fine and said restitution will be discussed at a later date. Mr. Bennett has agreed to forfeit essentially all of his assets. The...

Supplier price rises force industry rethink Carl Mortished: World business briefing Suddenly, it is not the customer who matters; it is the supplier. The stuff that arrives at the factory loading bay is now expensive; shortages and logistical logjams are playing havoc and the company that sells you a vital commodity is digging in its heels, refusing to renew a long-term contract without a big price increase. It is time to start thinking about vertical integration. Owning every segment of the production process from metal mine to packaging plant is an unfashionable idea, but in some industries it is coming...

Commodities analysts leaving Wall Street By Francesco Guerrera and Deborah Brewster in New York Published: June 18 2008 02:10 | Last updated: June 18 2008 02:10 Wall Street is witnessing an exodus of analysts covering oil, gas and other commodities as the credit crunch and lucrative offers from hedge funds drive research experts away from investment banks. Over the past few months, highly regarded oil analysts such as Citigroup’s Doug Leggate and Geoff Kieburtz, Morgan Stanley’s Douglas Terreson and Bank of America’s Robert Morris have left. Recruitment experts say the moves are prompted partly by investment banks’ need to slash...

WASHINGTON (AP) -- As spiking fuel and food prices rattle markets and consumers worldwide, the U.S. government on Tuesday formed an interagency task force to assess developments in oil and other commodity markets. The task force is comprised of staff from the Commodity Futures Trading Commission, the Federal Reserve, the Securities and Exchange Commission, and the departments of Treasury, Energy and Agriculture. It will examine oil supply and demand factors, investor practices and the role of new players in the markets, such as speculators and index traders, according to a CFTC release. With gasoline prices exceeding $4 a gallon, government...

More on the possible contribution of index fund investment to recent commodity price moves. We and many others have been discussing whether the surge in investment fund purchases of long positions in commodity futures contracts may have been a factor contributing to the spot prices of those commodities beyond what would be warranted by considerations of physical supply and demand. John Mauldin shares an interesting graphic from Deutsche Bank researchers, showing that the prices of a number of commodities in which no futures market exists have increased even more dramatically than those traded on major exchanges.

A turning point in managing the world’s economy By Martin WolfPublished: April 22 2008 19:24 | Last updated: April 22 2008 19:24 As the latest World Economic Outlook from the International Monetary Fund remarks, “the world economy has entered new and precarious territory”. What are perhaps most remarkable are the contrasts between booming commodity prices and credit-market collapses and between buoyant growth in emerging economies and incipient recession in the US. So where are we? How did we get here? And what should we be doing?The WEO’s answer to the first question is that the US economy may shrink...

If the Fed thinks that recent commodity price moves have nothing to do with their own actions, perhaps they should think again. The yield on the 2-year Treasury fell yesterday to 1.5%. It's impossible to imagine that the average inflation rate over the next two years could be less than 2%, meaning that the real interest rate-- the nominal rate minus expected inflation-- has become unambiguously negative. Greg Mankiw is impressed that when you plot the implied real yield on the Treasury inflation indexed security maturing in 2010, you indeed get a graph of the real interest rate that has...

Gold and dollar to gain in a financial meltdown This Wednesday arguably the most pessimistic economist in the world, Professor Nouriel Roubini, Chairman of Roubini Global Economics, will address the Hedge Funds World Middle East 2008 conference in Dubai. He says the global economy is heading for a $1 trillion financial meltdown. Sunday, March 02 - 2008 In an article last month entitled 'The Rising Risk of a Systemic Financial Meltdown', he claimed that there is now 'a rising probability of a catastrophic financial and economic outcome'. This he sums up as: 'A vicious circle where a deep recession makes...

The man who turns wheat into gold Resources guru Christopher Wyke tips coffee as a hot prospect for investors David Budworth SURGING demand from China, a craze for biofuels and difficult weather conditions have made agricultural commodities one of the hottest investments of the past year. Everything from wheat to soyabeans is at or near record highs with gains of up to 100%, but the question is, can the boom last? One man who ought to know is Christopher Wyke, one of Schroders’ commodities team, the investment brains behind its Alternative Solutions Agricultural Commodities fund. While many of its rivals...

The pending global food crisis is due, in part, to a rich twist of irony: One of the factors driving up the price of T-bone steak, a dozen eggs and a carton of milk is a perfectly edible vegetable, a staple of many diets --corn. Adding to the irony, we're growing more corn than ever before. We're just not eating it. Corn is being diverted from human consumption, kicking off a domino effect of problems tied to food prices. It starts with ethanol produced from corn, which optimists hope will help solve the U.S. reliance on foreign oil, as well...

Investing in stuff develops into a fine art Carl Mortished Stuff you can burn, stuff you can eat and stuff you can hoard. The world is going back to basics. We knew about oil in three digits and gold beating its record and now silver is getting a polish. In Britain, we had forgotten about coal - and the price of the ugly, polluting fuel is riding the up escalator. Banks that invest in whizzy things such as credit card receivables and mortgage securities are yesterday's cold turkey. Instead, the moneymen are buying something to stave off the chill, to...

Peak oil, peak metals, and this year peak food. Every bookshop has a corner warning that mankind will soon outrun the basic resources of the globe. A combine harvester works its way through a field of barley in the chalk downlands south of Salisbury, England. Digging out the truth behind mining mergers Come a cropper: grain stocks are at their lowest in 60 years and wheat prices have risen by 145 per cent since April It was ever thus. Variants of the theme emerge at the top of each commodity super-cycle, only to be deferred for another 20 years or...

...Nancy Pelosi, D-Calif., and Senate Environment and Public Works Committee chairman Sen. Barbara Boxer, D-Calif., support Kyoto Protocol-like plans to limit greenhouse gas emissions and to trade permits to emit greenhouse gases – a.k.a “cap-and-trade.” ...investment banking firms, such as Morgan Stanley and Goldman Sachs, that plan on profiting from trading so-called “carbon credits.” (snip) Anda starts out by saying that, “Whether you believe the science [of global warming] or not is beside the point. Policy should be more about risk than proof.” (snip) Although he doesn’t mention this in his Financial Times article, one big future winner may be...

SACRAMENTO – Like gold and pork bellies, California's carbon dioxide emissions credits may someday emerge as the big thing on commodity markets. Brokers who specialize in the art of the deal are closely following developments here as California steers toward a controversial, yet common, market-based course to reduce pollution many scientists link to global warming. Under the proposal, California would reward low-polluting companies with emissions credits that they can then sell on an open market to industries that cannot readily curb greenhouse gas discharges. Companies are already forming a line, said Josh Margolis, a manager with Cantor Fitzgerald Brokerage. “We...

Keynote Address to the Cornerstone Research Conference Market Manipulation in the Energy Markets Commissioner Sharon Brown-Hruska October 2, 2003 Thank you for the opportunity to share with you my thoughts on market manipulation in the energy markets. Let me just say from the outset -- I know this notable audience of economic and legal scholars and practitioners will appreciate this -- that the views I express are my own and, therefore, do not necessarily represent the official position of the Commodity Futures Trading Commission (CFTC), the views of other Commissioners, or the staff. The observations I make today are those...

Rosen: Our silly little 'addiction' Sometimes you get great life lessons in unexpected places. Kudos to Scott Adams, the cartoonist who writes the Dilbert comic strip. Adams cut through the fog and gave his readers a valuable insight into the real-world international politics and economics of the energy conundrum. In a recent strip, Dilbert readers were treated to the following exchange: Dilbert: I'm thinking about buying a more fuel-efficient car. Dogbert: Why? Dilbert: It's my patriotic duty to reduce this country's dependence on foreign sources of oil. Dogbert: Why? Dilbert: Because then the countries that hate us will have less...

THE DOW REPORTCommodity Boom or BustIt's been a while since I talked about commodities, and given the price action seen this week, I thought that we would revisit this subject today. In early December 2004 it looked as if the commodity boom was over. At that time many of the technical pieces had fallen in place indicating a major top had occurred. But, there happened to have been one last gasp into the parabolic advance that ended in March.But what about now? Is the commodity boom really over? Has the recent decline really been another buying opportunity? Why have gold...

Commodities euphoria may signal bubble April 26, 2005 Goldman Sachs analysts sent crude oil prices soaring when they said March 30 that the price could eventually reach US$105 (HK$819) a barrel. To Larry Berman, chief technical strategist at CIBC World Markets, it had the whiff of late 1998, when analyst Henry Blodget forecast Amazon.com shares would hit US$400 a share. They did - and then tumbled 80 percent over two years, signaling the end of the technology bubble. A forecast like Goldman's ``does typically mark the euphoria that's seen at market extremes,'' Berman said. After a two-year surge in commodities...

A Castroite state-controlled media organ reports that El Barbudo is incensed about Cuba not having enough doctors in Cuba in this news item here. Oh really? It's enough to make me wonder if he's almost as oblivious to economics as El Supremo. Of course there aren't enough Cuban doctors, Castro! You sent them off to be spies in Venezuela! Cubans have noticed this. And so have Venezuelans! Daniel researched that Misión Barrio Adentro program and found quite a bit of evidence of such shenanigans here. You've got plenty of Cuban doctors, Castro. It's just that when you send them to...

BANGOR - Mainers could be paying as much for electricity starting March 1 as they did five years ago when policy-makers promised lower prices once the state's electricity industry was restructured. Today, the Maine Public Utilities Commission likely will increase the standard-offer electricity rate by as much as 50 percent, from roughly 5 cents per kilowatt-hour to 7.5 cents. It could mean paying about $16 more per month for the average homeowner.  Stephen Ward, the state's public advocate, expects this magnitude of price increase. It's a vote that wasn't supposed to take place. Standard offer, or the default rate consumers...

Twenty years from now, what might the world’s most precious, depleting, natural resource be? Oil? Steel? Lumber? How about working-age adults who are still contributing to a nation’s entitlement programs rather than receiving benefits from them? Want to know how short the future supply of such people is? Well, across the globe, nations like Japan, Australia, and Singapore are actually begging their child rearing-age population to procreate. For instance, according to the Tokyo correspondent for the BBC: Japan currently has one of the lowest birth rates in the world. [And] the government says that unless the trend is reversed quickly,...

Typically, whenever you hear bold predictions of how high prices can reach, we think it is in your better interest to ignore these. Nonetheless, one cannot help but conjure up projections of where corn and soybean prices could go this year in a weather market. Specifically, we wanted to look back historically at some of the gigantic upward price moves, and then try and correlate those with today's market. How about $30.00 beans and $10.00 corn? Obviously, we run the risk of sounding wildly optimistic, even eccentric, but we want to put in context just how we derived these figures...