• Knave Dave
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    This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve...

A Contrarian View On Commodity "Speculation"

Tyler Durden's picture

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Thu, 04/21/2011 - 21:38 | 1194968 zen0
zen0's picture

Hog cycle?

Thu, 04/21/2011 - 22:08 | 1195033 spiral_eyes
spiral_eyes's picture

lean hogs, bitchez

Thu, 04/21/2011 - 22:27 | 1195077 bonddude
bonddude's picture

"Mr. Valentine has set the price." - from Trading Places- 1983

Thu, 04/21/2011 - 23:43 | 1195222 SparkyvonBellagio
SparkyvonBellagio's picture

Though I love the movie, and even if you're 18 and trading you should know every line from trading places. No need to give up the quotes origin. We know.

Bacon, like you'd have in a bacon, lettuce, and tomato sandwich.


Whiskey, all you want!




Fri, 04/22/2011 - 00:10 | 1195262 SilverRhino
SilverRhino's picture

You know? This kind of shit happens to me EVERY WEEK!!

Fri, 04/22/2011 - 05:00 | 1195529 Sudden Debt
Sudden Debt's picture

open whiskey bar?



Fri, 04/22/2011 - 08:43 | 1195686 SheepDog-One
SheepDog-One's picture

Yes Mr Valentine has set the price.

Mon, 04/25/2011 - 18:57 | 1205639 tomster0126
tomster0126's picture

Count me in for some J.D. and coke...we do need speculators, and they play such an interesting role in this equation.  All i know is that I'm prepared for gas prices never to fall again; i've accepted that as our reality.



Fri, 04/22/2011 - 07:37 | 1195613 bonddude
bonddude's picture

Yeah thanks. Spelling corrections in ...3...2...1...

Fri, 04/22/2011 - 08:23 | 1195666 spelledwrong
spelledwrong's picture

Cause I'm a karate man! And a karate man bruises on the inside! They don't show their weakness. But you don't know that because you're a big Barry White looking motherfucker!

Fri, 04/22/2011 - 08:44 | 1195688 SheepDog-One
SheepDog-One's picture

Drop a quart technique, hit ya and a quart of blood just drop outta you.

Fri, 04/22/2011 - 07:39 | 1195604 BrobamaReds
BrobamaReds's picture

I personally know traders at Sempra Energy in CT that made (and continue to make) a killing on the california blackouts while Enron was the only firm looked at.  These sempra guys have it made:  they are not a bank, no one from the mainstream knows who they are and they practically run the speculation game for all commodities and cry if they don't earn $25MM in a year.  One friend of mine has made $20MM+ per year for 10 years+ makes Derek Jeter look like a joke...will make even more now that he runs an area and he can still fly commercial because no one know who the fuck he is!   He was long when oil ran to $147, made a killing on corn and copper, blah blah blah. This guy still lives in a small greenwich condo and drives an older A6....for 10 years.....totally under the radar, just killin it, 100MM+ liquid...farmers?  he could give two shits, lol.....good luck america.

Fri, 04/22/2011 - 08:38 | 1195674 Ray1968
Ray1968's picture

Dammit. Your friend is living MY dream.

M-Fer. I'm jealous. I bet the SOB has gold bars stashed under his apartment floorboards as well.

Fri, 04/22/2011 - 08:44 | 1195690 tgatliff
tgatliff's picture

Yes I agree this is a problem... But you dont solve it by limiting activities of traders.  You do it by raising the cost of money.   (aka Raise Interest Rates ASAHP)   Yes, this will make all of the banks collapse, and yes this is a good thing because it is inevitable.

Fri, 04/22/2011 - 12:32 | 1196460 glenlloyd
glenlloyd's picture

half of what you've written is unreadable.

Fri, 04/22/2011 - 15:28 | 1197172 flattrader
flattrader's picture

I though it was just me.  Poorly written.  Poorly reasoned.

I guess this Tyler isn't aware that the speculative Vampire Squid drove people to hunger and killed them just a few years ago.


They don't care if you die.

And it's happening again.

Fri, 04/22/2011 - 08:17 | 1195657 Twindrives
Twindrives's picture

Kenyan national Barry Soetoro has his head in a dark spot, as usual.

Fri, 04/22/2011 - 08:45 | 1195693 SheepDog-One
SheepDog-One's picture

'When prices are 10X higher, it wont be a problem because everyone will be farmers'? 

Wow pie in the sky economics...first of all does everyone already own 50 acres to farm? And can the avg american even keep a fern alive, much less grow a corn or wheat crop? I suppose when beef shoots up to $40 a pound, suddenly everyone will just become a cattle rancher as well? Silly economics.

Fri, 04/22/2011 - 14:39 | 1196920 AnAnonymous
AnAnonymous's picture

That is the story of the US nineteenth century: the 50 acres were provided generously by the Indian sponsors.

It has to be this way all day long if you believe US citizens.

Higher prices will bring more farmers and they will not be limited by arable land availability. No, no, because there will be generous sponsors to support the US exceptional project.

Sat, 04/23/2011 - 01:12 | 1198472 Tail Dogging The Wag
Tail Dogging The Wag's picture

"Investors need to diversify, they need to own some real estate, they need to own some farmland, they need to own some equities, some cash, and some precious metals..."   Marc Faber —Investment analyst

Got real estate and farmland outside your home country yet?


Thu, 04/21/2011 - 21:41 | 1194975 Misean
Misean's picture

You mean prices transmit information to the rest of humanity imparting an incentive to engage in activities most highly prized by their fellows?!?! Wow!

The next thing someone will say is that this is why centrally planned ebubblemies CAN'T work...

Thu, 04/21/2011 - 22:34 | 1195095 Doña K
Doña K's picture

Maybe, Obummer should take the 5 minute university.


Old but basic. Min. 1.47 on economics

Fri, 04/22/2011 - 06:01 | 1195550 Ricky Bobby
Ricky Bobby's picture


Long Marxism, short classical liberalism.

Fri, 04/22/2011 - 06:26 | 1195573 Al Gorerhythm
Al Gorerhythm's picture

Does Obaminable write his own speeches? If so he has a mop for a brain. It's like the whole political class has been dumbed down, and he's the President!

Thu, 04/21/2011 - 21:47 | 1194987 buzzsaw99
buzzsaw99's picture

Another apologist piece. :sigh:


Speculators use free leveraged money to drive up prices. Then, just about the time the farmer goes to sell the price drops. Everyone loses except the damn speculators, they get bailed out. The days of trading places where the little guy wipes out the big guy once in awhile are over. Everything is rigged and dollar debauchery always goes to the maggots first.

Thu, 04/21/2011 - 22:10 | 1195043 KinorSensase
KinorSensase's picture

agreed.  speculators are parasites that contribute nothing to economic production beyond the illusion of their own grandeur and self-importance. the day speculators trade places with farmers, put their hands in the dirt, and actually produce something....then I'll believe in their good intentions.  otherwise this is complete, ahem, hogwash.

Fri, 04/22/2011 - 06:02 | 1195552 Ricky Bobby
Ricky Bobby's picture

You just made the authors point.

Thu, 04/21/2011 - 22:16 | 1195051 CrashisOptimistic
CrashisOptimistic's picture

Maybe speculators are holding the price down and oil scarcity should truly be priced much higher.

Thu, 04/21/2011 - 22:20 | 1195059 Yancey Ward
Yancey Ward's picture

Indeed.  People always forget there are two sides to this trade.

Fri, 04/22/2011 - 07:43 | 1195617 DonnieD
DonnieD's picture

Maybe there shouldn't be either side of the trade for those who are only involved for gambling purposes. Maybe bankers need to go back to what they started out as instead of inventing an endless array of bullshit securities to gamble on.

A firm pushing prices up or down just because their bank roll and influence is bigger than everyone else's doesn't seem to accomplish anything for society and I somehow doubt that was the original intention of a futures contract of corn for a farmer in Illinois.

We laugh at algo's pushing the price of Netflix into the stratosphere but if you needed that stock to feed your family or put gas in your car we might view it differently. 


Fri, 04/22/2011 - 08:02 | 1195640 Paul E. Math
Paul E. Math's picture

You have identified the real problem.  There is nothing wrong with speculators and speculation per se.

The problem is when speculators are able to deliberately push prices in one direction or the other. 

This is wrong in the same way that it is wrong when government pushes prices in one direction or the other.  It leads to resource misallocation and either we starve for lack of food or farmers starve for lack of income.

So how about we go about addressing the problem of price manipulation rather than just blaming speculation itself?


Fri, 04/22/2011 - 08:34 | 1195672 Thomas
Thomas's picture

The proximate cause is unteathered access to capital at no cost. If these guys had to borrow my money I sure as hell would exact a little more interest out of them. They do not, however, need to compensate the savers when there is a central bank to preempt the free market. The rampant speculation is a symptom, not a cause.

Fri, 04/22/2011 - 09:30 | 1195782 DaddyO
DaddyO's picture




Fri, 04/22/2011 - 11:18 | 1196184 buzzsaw99
buzzsaw99's picture

excellent point.

Fri, 04/22/2011 - 11:45 | 1196297 nevadan
nevadan's picture

Exactly right and the root of the problem.

Sat, 04/23/2011 - 06:13 | 1198627 Hexus
Hexus's picture

The speculators weren't having fed money thrown at them back when oil was at $150. Why do you HAVE to blame the fed all the time? What's wrong with giving the vampires a share of the blame?

Fri, 04/22/2011 - 14:42 | 1196929 AnAnonymous
AnAnonymous's picture

You define a new kind of speculators, the ones who dont expect that their actions give them grip on the price in one direction or another.

Thu, 04/21/2011 - 23:37 | 1195212 tmosley
tmosley's picture

lol, it's funny that you think the world is conspiring against you.  Most people don't want to hold things short.  There might be a few large institutions that are short, but such institutions aren't large enough to suppress the gargantuan oil market.

You want peak oil so BAD, don't you?

Fri, 04/22/2011 - 02:47 | 1195458 AnAnonymous
AnAnonymous's picture

Another apologist piece. :sigh:


Speculators use free leveraged money to drive up prices.


Free leveraged money is catalysis, nothing more. It helps but is not the root.

The author forgot what abundance or mass production is. Curious for a US citizen as abundance was key in their so called exceptional project.

There is no equilibrium, only the pursue of imbalance. The author once again touts the possibility of infinite collection/extraction and all. It is so stupid.

Mass production is dying and the world is reaching an age of levelled production.

US citizens are really confused by their own history, built on theft that has mechanically increased the input to their economy, favouring more activity.


Okay, 90 pc more farmers and so what? Where are the lands to farm? 90pc more farmers would drive the costs of labour down but would not solve the scarcity of land. As arable lands are located in countries like the US whose general environment is extremelly expensive due to decades of wealth accumulation, farmers would not be able to make the living required to support themselves in this kind of environment. It is already what is happening as crops are subsidized to match the imbalance between the general environment and the valuation of the activity.


The article is so stupid. US citizens have better to understand that globalization is nearing its end, that expansionism will never be the same as the good old glorious nineteen century. Lacking land? Just take from the Indians. More land, more farmers, more food. This scheme is ending.

Only one thing is known to be able to cope with speculation: mass production. It is not surprised that oil can be manipulated by speculators as oil extraction has reached a plateau. The supply side can barely grow, that is the lever of speculators who are once again able to capture a meaningful enough share to drive up prices.

High prices of oil, more oil extractors, prices down. Who could believe that drivel? Doesnt make sense as the oil extraction is all absorbed by the consumption actors. You can barely extract more oil. So where is the growth in supply needed to compensate the speculators?


It has never been about equilibrium but imbalance. Chasing and creating imbalance to extract as much wealth as it is possible. A gradient story. 

Fri, 04/22/2011 - 08:34 | 1195671 Hexus
Hexus's picture


But what should we expect from a site run by the very same egomaniacal parasites ZH pretends to critisize. Or maybe we are just blind to the subtlety of the great markets, really it's a good thing when food prices double and children starve, it's the markets way of telling us those children were inferior specimins of humanity.

Fri, 04/22/2011 - 11:00 | 1196114 chunkylover42
chunkylover42's picture

yes, by all means let's ban speculators and speculation, which is what you are implying with your comment.  That way, legitimate hedgers like an airline can just hedge with.... other hedgers?  That should work out great, don't you think?

Fri, 04/22/2011 - 11:25 | 1196207 buzzsaw99
buzzsaw99's picture

I don't have a problem with those who hedge and intend to take delivery. The average WTI contract trades like five hundred times before it is finally taken by the (much) poor(er) end user.

Fri, 04/22/2011 - 14:44 | 1196939 AnAnonymous
AnAnonymous's picture

yes, by all means let's ban speculators and speculation, which is what you are implying with your comment.  That way, legitimate hedgers like an airline can just hedge with.... other hedgers?  That should work out great, don't you think?


Useless. Only one thing is known to be efficient against speculation: abundancy or mass production.

Levelled production means that speculation can no longer be diluted as it used to.

Banning, non banning, it is irrelevant.

Fri, 04/22/2011 - 21:19 | 1198057 mkkby
mkkby's picture

Smart farmers look at the futures price at harvest time before they even buy their first seed.  If they can make a profit at that price, they buy the inputs they need and lock in the price. Very little risk if done correctly.  Only sell forward 80% in case the weather doesn't cooperate.  The rest can be gambled on at harvest time.

Thu, 04/21/2011 - 21:53 | 1194996 gordengeko
gordengeko's picture

 "Which is why it is always easiest to blame the nameless, faceless "speculator" scapegoat."

Are we seriously going to let them continue this fucking bullshit???  Did they not say the same god damn thing with terrorists to get the patriot act in place and start molesting 6 year olds for chirst sake?!  I hope to God people start putting two and two together, they are trying to take complete control and it's more than obvious.  Call me a conspiracy theroist whatever the fuck that means, I don't care.  We let them continue and there will be no where else to go and the end game is the reduction of the population.  Use your brain, think, this is all propaganda bullshit to keep you locked in the game.  In your mind!  Has nothing to do with anything that is outside yourself.  Whenever they come out and start making public threats against phantom fake boogiemen to start making new rules taking more "freedoms" away we need to step up the alternative news calling them out with logic, reasoning and information to get the power players to start making some moves.  Cause at the end of the day you can have all the money in the world but if the world is gone up in flames what are you left with and most importantly, what are you going to take with you when you leave this earth?  You can say you actually tried to doing something good with your life or you spent your whole life trying to make a ton of worthless fiat shit paper!

Thu, 04/21/2011 - 23:17 | 1195182 Sock Puppet
Sock Puppet's picture

Gorden, how is your credit rating doing?

Fri, 04/22/2011 - 00:17 | 1195295 bobert
bobert's picture

lol, thanks!

Fri, 04/22/2011 - 06:24 | 1195571 gordengeko
gordengeko's picture

You say it like it matters. Words still get read.lol

Fri, 04/22/2011 - 03:34 | 1195480 Pondmaster
Pondmaster's picture

"Are we seriously going to let them continue this f...ing bullshit???"

Until the demise of "American Idol"," Dancing with the Stars" and the NFL  and beer , the answer is YES!!!!!!!!!!! . Dumbed down America will do NOTHING . Absolutely nothing . Thank God there are still those who think for themselves, and haven't eaten the porpaganda. We need a new 60's generation. F... the establishment. But, alas , if groups organize they will be zapped in public gatherings by Gov't produced Raytheon crowd control microwave weapons . Can you alone stand against the corruption?  

Fri, 04/22/2011 - 06:07 | 1195558 gordengeko
gordengeko's picture

Not talking about getting some crayons and some cardboard to do some yelling. The masses will be reduced, nothing to do about that was thinking more along the lines of getting people with a lot of money to take delivery of the silver and crash the party early. Protesting is for sheep unless the majority of the herd gathers which is doubtful.

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