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houston
Experience: Intermediate
Platform: xtrader
Trading: bean oil
Posts: 5 since Aug 2011
Thanks Given: 0
Thanks Received: 2
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just for the sake of intellectual honesty.... i believe quite a lot of the political interest in commodities relates to index funds (ie. beta interest in the asset class), which, in fairness, are passive and long-only in nature. pension fund X decides to allocate 5% to commodities and decides that the best way to do this is through the DJUBS index, goes to swap dealer Y to put trade on, index is decomposed into futures which they turn around and buy in the market. clearly, this would artificially inflate prices for the sake of asset allocation. the effect would be temporary, but it would be felt, and the opposite would happen upon liquidation. i work for a major commodity index fund and see this happen frequently, although i should point out right away that the effect is FAR more noticeable in the smaller contracts (think deferred meats, bean oil, lumber etc) where we are a huge proportion of open interest.
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