Friday, January 8, 2010

Charge of the Bubble Brigade

I haven't paid much attention to the commodities markets over the past few months. The prices were high-ish but range bound for the most part, and China was slowly stockpiling all the stuff it might need to survive a nuclear holocaust. But something struck me when listening to Bloomberg on the radio last week. A pundit was talking about peak oil and said that this might be the least of our problems if the emerging nations keep growing. We could reach peak copper, peak iron, peak uranium, peak gold - all of the earth's natural resources could be tapped out. It is clear that investors think they will - at the very least - be more expensive. The buying spree of late signals another bubble, which can only be burst if another recession strikes or if China implodes. James Chanos, the prophetic hedge fund manager and president of Kynikos Associates, predicts that it will. Jim Rogers, the commodities perma-bull, scoffed at Chanos' logic and expertise, inferring that Chanos couldn't even spell China 10 years ago. Ouch. But wasn't it Chanos who shorted Enron all the way down from $90 to $1.00? I am not an analyst, but I can spell Bubble. And my spelling got a little better after hearing that the CFTC would set "generous" limits on energy speculation.
A trader friend wrote the following poem (crediting Lord Tennyson) to explain to management why prices of oil and commodities were rising after Jan.1:

Half a league, half a league,
Half a league onward,
All into the valley of oil
Rode the world's funds
Forward the fund Brigade
Load your guns ! he said.
Into the valley of oil
Theirs not to make reply,
Theirs but to buy and buy
Into the valley of oil.

He said to remind everyone that the Light Brigade got slaughtered.

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