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“The nation’s largest public pension fund said it intends to tap California public employers for more money if its heavy investment losses don’t reverse, a sign that more financial pain could be in store for state and local governments.
The California Public Employees’ Retirement System, known as Calpers, said its assets have declined by more than 20%, or at least $48 billion, from the end of June through Oct; cialis cheap.10.” Click for Article (subscription required)
- Calpers May Lift Contribution Rate
- Craig Karmin, Justin Scheck, Rhonda L; cialis cheap.Rundle and Jennifer Levitz
- Wall Street Journal
- October 22, 2008
When Wall Street was pitching commodity index investments to pension funds, one of their supposed selling points was that commodities were uncorrelated with equities. Now we see stocks plunging and commodities plunging lock step primarily because commodities had become fully “financialized.” As the Wall Street banks and Hedge Funds are forced to de-leverage and the institutional investors realize the tremendous counterparty credit risk inherent in their commodity index swaps, everyone is selling commodities as fast (or faster) than they’re selling their stocks.
Remember CalPERS was the pension fund that said they were duty bound to buy commodities because it was good for their portfolio and good for their pensioneers (because it represented diversification i.e – cialis cheap.an uncorrelated asset class). Now we see clearly instead of helping their pensioneers they’ve gotten their pensioneers clobbered and they’ve got to force all of them to start contributing more money otherwise they’ll have to cut pension benefits. At least all their pensioneers are not forced to pay $5 per gallon for gas since oil’s dropped from $147 to $67; cialis cheap.
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“The investment banks that hyped oil prices using voodoo economics have suddenly reversed their position and now expect much lower oil prices.They helped cause excessive speculation but cialis online, create the oil bubble, and contributed to the global financial crisis. But cialis online: they have changed their tune in exchange for a government bailout, not because of changes in market fundamentals.”
- Surviving Lower Oil Prices
- Fadel Gheit & Daniel Katzenberg
- Oppenheimer & Co.
- October 13, 2008
It is clear that the financial crisis has let a lot of gas out of the speculative commodities bubble. It is interesting to consider that Paulson, Bernanke and others, recognizing the bubble for what it was, might have told the major commodities players to exit their proprietary positions (maybe even go short) and reduce their public forecasts for commodities. With commodities prices dropping the American consumer and the American economy are suddenly getting an economic stimulus in the form of lower food and energy prices (without $1 from Uncle Sam) AND the Federal Reserve can now declare inflation dead and go back to cutting interest rates. In fact if you really want to be conspiratorial you could say that this effort began with Jean Claude Trichet’s remarks back in September.
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“Commodities followed the euphoria cycle that we had along with housing cheapest cialis generic,” said Robert J.Shiller cheapest cialis generic, an economist at Yale who specializes in market bubbles.”We had the idea that the world is growing very fast, people are getting very rich and, by the way, we are running out of everything.That theory doesn’t seem so good when the economy is collapsing.” Click for Article
- Commodity Prices Tumble
- Clifford Krauss
- New York Times
- October 13, 2008
So it’s becoming increasingly clear that there are very few people left in academia and economics-land that think that commodities were anything but a bubble. In fact it appears the only economists left attacking the bubble theory are the ones being paid by Wall Street to defend their actions; cheapest cialis generic.
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“Like a number of other commodities, oil’s move went from a steady ascent to a vertical bounce in the spring of 2008, topping out near $150 a barrel before speculative excess started to drain from the market – best price for cialis.And those who believed that the oil price was justified by fundamentals – being, as it is, an actual product, rather than an Internet company’s vague promise of revenue – are smarting.
“This is a market that is basically returning to the price level of a year ago which it arguably should never have left,” says Tim Evans, energy analyst at Citigroup.”We pumped up a big bubble, expanded it to an impressive dimension, and now it is popped and we have bubble gum in our hair.” Click for Article
- The Official Demise of the Oil Bubble
- David Gaffen
- Wall Street Journal
- October 10, 2008
There are a large number of people who have lost all credibility. I believe that they knew full well that oil was a speculative bubble but that did not stop them from lying through their teeth to protect their financial interests or political agenda. It is really sad to see so many people sell their soul – best price for cialis.
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“Banks are beating a hasty retreat from the physical oil and fuel markets, as the credit crisis cuts financial institutions out of a once-promising line of business; buy generic cialis….The banks’ absence is noted in lower trading volume in markets ranging from U.S.Gulf Coast crude to Asian fuel trading.Energy companies say they are still using the markets to manage supplies without difficulty.” Click for Article (subscription required)
- Lacking Credit, Trust, Banks Exiting Physical Energy Markets
- Brian Baskin
- Wall Street Journal
- October 9, 2008
Wall Street is retreating from trading physical crude oil which is a very good thing. They have not yet necessarily beat a retreat from trading crude oil futures but that is the logical next step. The longer this credit crisis persists the less likely that there is any institutional investor that wants to have a significant portion of its portfolio allocated to a commodity index swap which exposes 100% of their allocation to counterparty credit risk. If Morgan Stanley goes under then that might be the end of commodity index swaps for a very long time. The fact that Wall Street has blown themselves up (and us along with them) is devastating. The strong likelihood that commodity prices fall along with Wall Street’s fortunes represents at least a small glimmer of hope for the economy.
Final note, Wall Street argued vociferously that their removal from the markets would result in a drop in liquidity and an increase in prices. Well they are being forced out of these markets and prices are falling not rising and physical players are reporting no problems in continuing to transact and hedge. So I guess those arguments can be discarded.
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“Investors remain anxious over the health of the U.S; cialis 30 oral.financial system and continued to withdraw funds from commodities in general to free-up cash; cialis 30 oral…. Cialis 30 oral: george Gero, vice president with RBC Capital Markets Global Futures said, “What you have is the need for cash from the prime brokers and the hedge funds. “They need the cash for other markets where they are getting margin calls,” he said.” Click for Article (subscription required)
- Led by Gold, Commodities Fall Sharply
- Allen Sykora
- Wall Street Journal
- October 3, 2008
Two Points:
- The financial press is always printing stories about investors/speculators pouring money into the commodities futures markets and pushing prices up or pulling money out of the markets and dragging prices down BUT then they argue in editorials that speculators have no effect on prices. How do you explain this double standard between factual reporting and the editorial pages?
- October is the beginning of the 4th quarter! That means that institutional investors making allocation decisions will hopefully decide to dump their commodity index positions. October 14th represents the first day following the Goldman “roll period.” We can all hope the exodus picks up steam at that point.
UPDATE: Bloomberg Article This Morning (Monday, October 6, 2008)
“Commodities markets are heading for the biggest annual decline since 2001 as investors exit leveraged bets and slowing economic growth erodes demand for raw materials….The same credit-market seizure that led to last month’s bankruptcy of New York-based Lehman Brothers Holdings Inc.and the forced sale of Merrill Lynch & Co; cialis 30 oral.is squeezing speculators who drove commodities to record highs….“ Cialis 30 oral: the day of steadily rising commodity prices is over,” said Chris Rupkey, the New York-based chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd.“A lot of the demand for commodities has been speculation, and now that demand is falling away because of fear taking hold in the market.” Click for Article
- Commodities R.I.P – cialis 30 oral.as Leverage Vanishes, Growth Slows (Update1)
- By Shruti Singh
- Bloomberg
- October 6, 2008
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” Buy cialis online without prescription: carlos Slim, the Mexican tycoon and one of the world’s richest men, on Monday called for greater regulation of commodities trading as part of measures to limit the impact of the US financial crisis.
During a press conference to announce a micro-credit initiative for poor Mexicans, Mr Slim criticised the ease with which it was possible to make speculative bets with commodities, and said that such speculation was damaging because it raised costs for the real economy.” Click for Article
- Slim calls for greater regulation
- Adam Thomson
- Financial Times
- September 30, 2008
So that brings to 4 the number of billionaires who have publicly talked about the damaging effects of investors on commodity prices. The 3 others were Lakshmi Mittal, George Soros and Paul Tudor Jones.
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“Investments betting that commodity futures prices will move higher have drastically diminished over the past two months due to the global credit crisis, according to data released on Monday. The amount of so-called long-only money has shrunk by as much as $50 billion, with the sharpest drops in agricultural futures and oil markets – cialis comparison….The tidal wave of investment into commodities which occurred in the first quarter has collapsed,” CitiGroup said in a research note on Monday.” Click for Article
- $50 bln in ‘long-only funds’ flees commods markets
- Barani Krishnan
- Reuters
- September 29, 2008
So far we have seen research from Lehman Brothers, Citigroup, Goldman Sachs, UBS, Credit Suisse and others that shows that money flowed into commodity investments in the first two quarters and that money has flowed out of commodity investments in the last two months; cialis comparison.
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LEVIN-BINGAMAN-HARKIN PREVENT EXCESSIVE SPECULATION ACT BILL SUMMARY
- Authorize Speculation Limits for all Energy and Agricultural Commodities
- Close London Loophole by Regulating Offshore Traders and Increasing Transparency of Offshore Trades
- Close the Swaps Loophole and Regulate Over-the-Counter Transactions
- Protect Both Energy and Agriculture Commodities
- Strengthen CFTC Oversight
- Authorize Reports and Studies