Sunday, November 14, 2010

Commodities: Slaughtered (Watch those moving averages) MOO; DBA; EUD

The trade was crowded, with the last CoT reports showing record or near record speculative interests in many commodities.

A quick note on nomenclature, in commodities speculators perform a societal good by taking the other side of a commercial participant's desire to hedge, whether long or short.
The scamsters are the swap dealers and their long-only "investors" who are allowed to exceed reportable position limits by trading the futures and then selling to the union pension funds (read CalPERS), university endowments etc. OTC swaps on the positions.

It was even nastier when the swaps dealers (read Goldman) were allowed to classify themselves and all their trades as Commercial. Now at least they have to break out the positions that they write swaps against.
We covered a lot of this during the 2008 oil run-up to $147.
It ended badly for the "investors" when Goldman et al were threatened with investigations into their activities.
Alaron Trading is the crown jewel in the Goldman empire, When presented with the choice of a hard look at AT or throwing their customers under the bus and costing them hundreds of millions the decision was easy.

Our June, 2010 post ""Bread and Derivatives: Goldman’s control of market structure might just starve us, strand us, and leave us in the dark. Literally." (GS)" is a good read and has quite a few of the links.

See also "Amber Waves of Pain" Pitfalls in Commodity ETF's (DBA; MOO; RJA)" on why the ETF's put money in Goldman's pocket before the holders of the funds.

Here are some of Bloomberg's Friday afternoon and evening headline stories:

Commodities Tumble Most in 18 Months on Chinese-Rate Concerns
Sugar Prices Fall the Most in 22 Years in N.Y
Copper Tumbles From Record in London on Concern Chinese Demand Will Slump

Here are some of the commodity ETF's:
Charts via ETFTrends:
  • PowerShares DB Agriculture (NYSEArca: DBA): down 0.6% year-to-date.
  • Market Vectors Agribusiness ETF (NYSEArca: MOO)
  • E-Tracs UBS Bloomberg CMCI Food ETN (NYSEArca: FUD)