Commodities

Gold is a better buy than oil

4 Mar 2008

Both gold and oil recently made price history. But while oil is close to its alltime high in real terms, gold is less than half its 1980 real level. Gold is a superior investment for another reason also whereas oil s price elasticity is low, gold s appears to be negative.

Markets and politics clash in rice price explosion

4 Mar 2008

Less than 10% of the world s rice is sold on anything like an open market. The price of the rest is government controlled. So there s something artificial in the neardoubling of the traded price in the last year. But the potential political implications are all too real.

What separates a rogue trader from a superstar?

28 Feb 2008

Maybe only timing. MF Global is the latest to admit to big losses. An employee s oversized bet on wheat will cost it $141m. It s no coincidence that volatile markets bring rogues out of the woodwork. In calmer, rising markets, they might have been lauded as superstars.

Environmentalists can’t stop the coal boom

26 Feb 2008

With prices double their yearago level, producers are enjoying a bonanza. It won t stop soon. India and China are both major coal users with few alternatives. Environmentalists may bleat, but the World Coal Institute s 2030 production target may be very conservative.

Commodity inflation will strain cheap money policies

19 Feb 2008

Price rises of 65% in iron ore and 90% in wheat can t be absorbed in costs and will tend to entrench inflationary expectations. That suggests much higher consumer inflation is in store. The Greenspan/Bernanke cheap money vessel is heading for the rocks.

Gold shines as inflation fears mount

9 Jan 2008

Asian growth can t explain the alltime high price of gold. Noninvestment demand for the metal has dropped since 2005. But gold is still the ultimate inflation hedge; a 33% price rise since August indicates investors are afraid central banks have lost monetary control.

Job cuts underline how Big Oil doesn’t love big oil prices

2 Jan 2008

Shell s costcutting is getting into gear as the black stuff touches a record $100 a barrel. High prices don t boost the majors profits that much. Instead, they squeeze margins and force up costs. Shell s cuts may not be enough to counter rampant cost inflation.

Opec could come to regret a production hike

28 Nov 2007

The oil cartel is under pressure to push up production quotas by 2%. But this highly speculative market is already wellstocked. Additional supply could push the price down sharply, as happened a decade ago. A repeat would cripple some Opec members oildependent economies.

Amaranth’s lawsuit against JP Morgan reveals two botched bets

14 Nov 2007

The defunct hedge fund lost a bundle on a huge natural gas wager. It now alleges that JP Morgan exploited its role as its broker to block white knights. The suit s merits are debatable. But the debacle illustrates a second bad bet: leaving a fund at the mercy of a single broker.

Crude benchmark distorts economic reality

17 Oct 2007

Oil market bulls say $90 oil is due to tight supplies. But the only place that has seen a big drop lately is the futures market s delivery point. This has driven the price of oil futures to record levels. But oil tanks worldwide are overflowing. The price of oil should be a lot lower.

Why are commodities bucking the credit squeeze?

16 Oct 2007

The price of oil briefly hit a record $89 on Wednesday. Mining shares and wheat are flying high. One reason is that there's still a lot of liquidity in Asia and the Middle East. Another is that last month's sharp cut in interest rates has given speculators new life.

China should be bold in revaluation

18 May 2005

The expected 510% would only attract more hot money. If the government loses control of the renminbi, it could easily rise by over 30%. A 20% move would calm both speculators and US critics.