Re: Commodities liquidation
Posted by WARREN MOSLER on January 14th, 2009
Thanks!
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> On Tue, Jan 13, 2009 at 3:51 PM, Joshua wrote:
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Commodities Liquidation
No Exit From Commodities as Hedge Funds Return: Chart of Day
by Chanyaporn Chanjaroen
Jan 13 (Bloomberg) — Hedge funds are proving there was no complete exit from bets on higher commodities prices during the worst slump in a half-century and are now starting to return.
The CHART OF THE DAY shows hedge funds and other large speculators increasing their net long positions, or bets prices will rise, in an index of 20 commodities monitored by the U.S.
Commodity Futures Trading Commission. The gauge fell 97 percent from its peak in February to its low last month.
“The massive de-leveraging and exit from indexes appeared to have stopped,” John Reade, a strategist at UBS AG in London, said by phone yesterday. “It could well be about value — prices are very, very low from what they were before.”
The Reuters/Jefferies CRB Index retreated 36 percent last year, the worst performance since it started in 1956, and has fallen a further 3.9 percent this year. Fifteen of the 19 raw materials tracked by the gauge declined last year, led by a 59 percent plunge in gasoline.
Net purchases of agricultural futures for index products have been positive for three weeks, Reade said. Disinvestment peaked at $2.3 billion in the week ended Oct. 7, he said.
“It is a broad indication of what is going in commodity index investment in general,” Reade said.
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January 18th, 2009 at 11:06 am
I remember reading about commodity indexation and how it would be an inflation hedge back in the late 90′s early 2000′s and thinking, “this cannot end well”
Commodities are so small in total value relative to total global assets that widely using this as part of institutional portfolios must drive the price of commodities to levels higher than pure user demand would dictate.
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