Why are the prices of so many commodities rising in an economy that seems to remain quite weak?

% change butter35 coffee21.8 cocoa20.2 copper89.1 corn-8.3 cotton38.6 gold32.1 hogs2.7 oats13.4 oil63.2 lead81.9 palladium75.9 platinum61.7 silver59.1 steel-0.9 sugar73.6 tin22.5 wheat-26.6 zinc55.4 average37.4 euro12

The table at the right summarizes the percent change between January 6 and November 11 in the cash prices of 19 commodities reported in the Wall Street Journal (downloaded via Webstract). The average commodity in this list has appreciated 37% since the start of the year.

A recent paper by Ke Tang and Wei Xiong documents an increasing tendency for commodity prices to move together over the last few years. A decade ago, what happened to oil prices was largely unrelated to movements in most other commodity prices. The graphs below show how the correlations between oil prices and

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How To Play the Oil Conspiracy Theories

Tony Daltorio, Investment U Research

Despite the world’s economic growth woes this year and consequent decreased energy demand in the U.S., the price of oil has held up pretty well this year ($77 as of November 3) when you’d actually think that it would be lower.

What gives?

Fundamentalists will point to two factors…

Continued strong demand for oil from emerging markets. Decreasing oil output from non-OPEC producing nations such as Russia and Mexico.

Conspiracy theorists on the other hand, scoff at that notion. They blame it on the huge quantities that greedy oil companies hold offshore for no better reason than to increase their profits.

While I largely consider myself a fundamentalist, I decided to check it out, just in case there were any facts to support the complaints. And it first means asking a simple question…

Why would anyone

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As commodity prices start rising again -- at least some -- the question of whether futures are useful indicators seems relevant. Figure 1 shows the IMF commodity price indices, as reported in the October World Economic Outlook:

Figure 1: Commodity price indices for energy (blue), food (red), agricultural raw materials (green), metals (black) and beverages (teal). NBER defined recession shaded gray, assuming recession ends in 2009M06. Source: IMF, World Economic Outlook (October 2009), data for Chart 1.16.

In a previous set of papers, Oli Coibion, Michael LeBlanc and I examined the predictive power of energy futures post and paper.

In a new paper, Oli Coibion and I update our results regarding energy futures, and metal and agricultural commodities as well, through the end of August 2008, just before the financial crisis broke out in full force. From the paper:

This paper examines

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Total (TOT) and GdF-Suez recently signed a Heads of Agreement (HOA) partnering with KazMunaiGas (KMG), Kazakhstan’s state oil company, for the development of the Khvalynskoye field. Following the agreement, Total and GdF-Suez are holders of 25% interest (Total 17%, GdF-Suez 8%) in the field, from the initial 50% stake held by KazMunaiGas. Lukoil (operator) is the owner of the remaining 50% interest in the project.   Khvalynskoye is a conventional gas condensate field located offshore in the Caspian Sea on the border between Kazakhstan and Russia. The gas produced from this field will be transported to Russia.   Through this agreement Total increased its presence in Kazakhstan (especially Caspian Sea) – a region that is expected to play an important role in counterbalancing Organization of Petroleum Exporting Countries’ (OPEC’s) dominance of world oil markets in the coming two decades. The company is already a partner of KMG developing ...

This post is a guest contribution by Niels Jensen*, chief executive partner of London-based Absolute Return Partners.

It is not universally appreciated, but the last 25-30 years have, in general, been staggeringly good to most investors. Technology induced productivity enhancements combined with favourable demographic trends, minimal government involvement, accommodating labour unions and the globalisation of international trade have all contributed to a benign inflation environment and strong economic growth, leading to arguably the biggest bull market of all times in both bonds and equities.

So much for the good news. The long lasting tail winds have finally turned around, and we now face, and will most likely continue to face, head winds for years to come. The list is long, but some of the most important factors contributing to this change include:

The demise of the Anglo-Saxon consumer driven growth model:

The Anglo-Saxon consumer is exhausted; he

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Oil prices fell nearly 4 percent to below $70 a barrel on Monday as fear of a curb in Chinese bank lending dented optimism about the pace of economic recovery and a potential rebound in global energy demand.

U.S. crude for October delivery settled down $2.78, or 3.8 percent, at $69.96 a barrel, having fallen as low as $69.13 in intraday trade. In London, Brent crude settled down $3.14 at $69.65 a barrel.

China’s key stock index dived 6.74 percent on Monday to a three-month low, prompted by concern that China’s government is trying to moderate economic growth and choke off some speculation in its stock market by tightening bank lending.

European equities closed lower and U.S. stocks fell after China’s index fall.

“The oil markets have been strongly affected by what’s going on in China, where the fear is that authorities will rein in on lending and in the process curtail growth,” said Phil Flynn,

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Playing the oil game is not for the faint of heart. Hope is generally the name of the game. In a general sense, covering bases is the way to go considering all the variables that can come into the game. If an investor can find an experienced company that is playing all sides to cover bases, a profit is sure to be made.

China North East Petroleum Holdings Ltd., a petroleum exploration and development company, works to develop and exploit oil resources primarily in the Northern Parts of China. Currently, the company controls 247 wells with all being in production.

Although this particular circumstance may not seem all that unique in most Chinese Petro situations, China North East has an interesting position; it has developed a relationship with PetroChina for a particular portion of its reserves. In-of -itself this might sound advantageous , and it would be, past others having the

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In late January, Exxon Mobil Corp. (NYSE: XOM), the world’s most ubiquitous oil giant, capped off a whipsaw year in the global oil markets by reporting net income of $45.2 billion, an all-time record for corporate profits that shattered the former record it had set a year before.

The number was so big and the results beat Wall Street estimates by so much at a time when the credit crisis was wreaking havoc on so many other sectors that Oppenheimer & Sons (NYSE: OPY) oil analyst Fadel Gheit couldn’t help but quip that he didn’t think Exxon “will be lining up for any TARP money or government handout anytime soon.”

Exxon wasn’t the only heavyweight reaping the benefit of a zooming energy market that had seen crude oil climb to an all-time record of $147 a barrel in July. The combined revenue for

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The cat let out of the bag last week — a frazzled, flaming, rabid, death-dealing cat — was the news that Goldman Sachs announced impressive second-quarter profits, and set aside $18 billion or so for employee bonuses averaging $600,000 per head (though, of course, not evenly distributed among them). There probably are not fifty-three people in the USA who can explain how this development figures in with last fall’s bailout gift from the US treasury, or the $13 billion GS received on the backside of US gift payments to the failed AIG insurance company, plus the reams of necrotic securitized debt paper rotting in the back of the GS vaults. This is a company playing with the fire of world history.

It brings back the question, which has loomed dimly at the margins of America’s collective consciousness, as to whether we can get through the long emergency ahead without

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Seasoned EquityTrader

July 28, 2009

Dow 9,096.72 -11.79 -0.13% Nasdaq 1,975.51 +7.62 +0.39% S&P 500 979.62 -2.56 -0.26%

Financial News:

A two-week rally in oil markets sputtered Tuesday and crude prices fell along with the stock market.

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