The charge-sheet.pptxVIP

The charge-sheet The charge-sheet 1 Which are the problem areas? The charge-sheet 2 What is the extent of the speculative involvement? The charge-sheet 3 Where is the demand coming from? The charge-sheet 4 Is speculation doing any good? The charge-sheet 5 ‘In fact there is little empirical evidence that investors cause more than fleeting distortions to commodity prices. The most persuasive explanation for the rises and falls of commodities is demand and supply.’ Does this make sense? The charge-sheet 6 ‘…the idea that speculators swamp every other price signal is odd.’ What are we to make of that statement? The charge-sheet – Oil price The charge-sheet 7 ‘…the OECD found a “consistent tendency” for greater volumes of index-fund trading to sit alongside declining volatility.’ Really? The charge-sheet – Corn 2010 The charge-sheet 8 What is the argument? The charge-sheet 9 The argument is? The charge-sheet 10 Doesn’t the herd effect have its place in speculation? The charge-sheet 11 What is meant by this? The charge-sheet 12 Do futures markets affect price? Absolutely, positively futures prices can affect spot prices...without a doubt. Here is an example: Right now it is late May. Lets say September (put anything you want in here- hogs, gold, oil, wheat, bicycles, whatever) are trading at $5 per unit. Lets say the spot market is $3 per unit...and money costs me 5% per annum to borrow. Lets also say I have access to storage that costs me 25c per unit stored, and that I can deliver these units anywhere for 50c a unit. So, my cost is $3 + 25c + 50c + borrowing cost....for a net of just over $3.75. I will buy every single unit I can, store it, contract to deliver it, and go into the futures market and sell contracts until price equilibrium (or my clearing firm) stops me from making any more trades. As I do this, I am BUYING the spot market (making it rise) and SELLING the futures market (making it fall). This happens every day, all day long, in pr