Commodities vs. Index Funds
Dec 07, 2009
Though I wasn't around at the time, I can imagine that the ag commodity exchange markets were originally created to give producers and end users a mechanism to determine the fair market value of a given commodity at a given point of time in the future. This would then enable these parties to make intelligent decisions regarding their production or usage by having locked in a selling price or purchasing price and thereby reducing their risks.
Wouldn't it be great if we had such a mechanism around today. Instead we get to guess what index fund managers on wall street might have been thinking about this morning when they got to the office. What did they read in the paper? See on news? Who were they talking to that influenced their thinking? They'll tell us when the markets open at 10:00 a.m.
Even the guest market analysts on your show have been made to look like a ship of fools. While trying to determine when I should buy my corn for my livestock operation, I kept hearing even through late October that corn could break well below $3.00. It never even got close. Not because the late harvest affected things that much but because of what the funds thought about it; whatever "it" is.
Let's get non- producers and non-end users out of the commodities markets by re-vamping the whole thing and requiring verification of actual involvement in commodity production, usage, or dealing. This way we will once again have a mechanism to determine an actual market value for commodities and I could finally get some sleep at night once again.
Would't it be great if index managers' salaries were a commodity that could be traded on the exchange? Boy, would I ever have some fun with that! Essentially, that's what their doing with mine. Let the index funds set up their own virtual commodity exhange. And how about having it located in Las Vegas?