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Sunday, September 07, 2008

 

speculation drives commodity prices? never!


but someone tell the ECB.

The oil price shock that has hit global growth could have been exaggerated by financial speculation, Jean-Claude Trichet, European Central Bank president, suggested for the first time yesterday.


well of course. i didn't understand how it was deniable when it was happening.

efficient market economics called for the visibility of storage, and many adherents refused to acknowledge a speculative bubble without seeing it. that misses the point, however, that the storage cannot be obvious for the bubble to be ongoing -- that it would only become obvious in hindsight. now the CFTC is investigating traders for lying about inventory levels. what a shock.

while i profited initially, i've lately taken a sizeable hit on oil prices underperforming as speculative positions have unwound and driven the oil price to $105. i do however expect a temporary rebound of the kind seen in all collapsing bubbles after the initial break. oil is off nearly 40% from its high.

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