Bring back common sense rules to commodity markets
Dozens of national and internationally based religious, development, farmer , business and consumer groups recently sent a letter to the Senate (ltr to Senate Mar10 – final) urging the strongest derivatives reforms possible in the financial reform bill.
Call your Senators to let them know that you also want to avoid future food and energy bubbles.
The Catholic News Service released a short video containing interviews with a Catholic priest and brother about the problem of commodity speculation. Check out the video with a picture of two children eating.
As things heat up around financial reform, administration officials are stepping up their rhetoric against Wall Street. Today, Treasury Deputy Secretary Neal Wolin gave a strong speech to the U.S. Chamber of Commerce during a lunch inside the Chamber of Commerce’s headquarters. According to the Wall Street Journal, Wolin “repeatedly pounded the Chamber’s lobbying and advertising blitz against the White House’s financial regulatory overhaul, accusing them of being misleading, dishonest, and ‘backward.’”
“’Despite the urgent [Read More...]
The UN Conference on Trade and Development (UNCTAD) recently released a report titled, “Recent developments in key commodity markets: trends and challenges” in which the Secretariat describes the influence of financial speculation on global food prices. From the report:
“…the explanation for the price volatility in 2008 goes beyond market fundamentals (i.e. supply and demand factors), as there were neither sudden major changes in supply and demand, nor significant changes in stock levels in the [Read More...]
Two recent pieces by Adam White at Seeking Alpha, a financial website, show the problems caused by investing in commodity indexes, both for individual investors and for the functioning of commodity markets.
In “Imagine Investing in Commodities from 2004-2008, and Losing Money,” White shows that, contrary to the famous Yale research paper that convinced many institutional investors to include commodities in their portfolios, investing in commodity index funds is not nearly as beneficial as the [Read More...]
Market analysts are beginning to show that commodities may not be the boon for investor portfolios as originally thought. In addition to throwing off commodity markets and increasing the volatility of world food and energy prices, they do not offer investors a good return or serve as a way to counterbalance stock investments.
Morningstar ETF strategist Paul Justice recently wrote an article titled, ‘The Case Against Commodities’ questioning the mythology of commodities as acting contrary [Read More...]
Geert Rouwenhorst, the Yale professor who in 2004 co-wrote the original paper touting the benefits of commodity index funds (“Facts and Fantasies about Commodity Futures”), has a new idea. In that founding paper, Rouwenhorst helped created the passive, long-only commodity index funds that have been so detrimental to the functioning of the commodity futures markets (see “Dangers of Commodity Indexes“).
Now he is proposing a new financial instrument that could be even worse for food [Read More...]
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