Commodities prices are rising, as the media concentrates on the new mobile phones that are coming to market and the high prices of precious metals.
With no where near the volume there once was in the stock market, hedge funds are looking to other places where they can get high performance with the private equity they control.
The commodities and futures market seem to be the perfect place for these funds to be traded. The commodities and futures market allows the hedge fund managers to leverage their investments in a range from 10-20 to 1, with no where near the scrutiny they get in the stock market.
Farmers buy metal, and they communicate with their metals traders as to what they see going on. We keep hearing more and more that prices are up, while their supply is abundant. The word in the farmers community is that hedge fund money is being brought in to the commodities market and causing the price increases.
A tale of two farmers, one cotton, one corn. Both say they are not sure what’s going on, but they will take the price. The corn farmers silos are filled with corn, and half his crop is unpicked as a margin call came for him to cover. “I got plenty of corn” responded the farmer. The cotton farmer says the same thing. Not sure why prices are so high, but “I’ll take it, just find me a buyer”, as his vats are full of cotton, with a good portion of his crop unpicked as well.
You can stay in an extended overbought market for some time, but for every bull market there is a correction that follows. And just as when oil flew up to $150 a barrell and everyone was sure that oil was going to $200/barrell, the correction to $30 happen.
It seems like it’s always the small person that chases trends gets hurt, after they buy at a high due to all the hype for any specific investment provided by the mainstream media.