Barron's Misses the Other Side of the Commodities Story

I’m sure many of you have seen the Barron’s cover story this week [$], claiming that the commodities upside is driven mostly by speculators. On a basic level, this is true — all investors are basically “speculating.” But we know that’s not what the author meant.

I don’t mind if someone presents a bearish case on an investment possibility. Regular readers may have noticed that my research reports dwell heavily on the risks to our investments — I spend a lot of time trying to discern and even dreaming up risks to any investment.

What amuses me in this particular case is the article’s lopsidedness. It doesn’t once address the possibility of being wrong. Fine, if you write a newsletter but pretty lame for financial “journalist.” I’ll probably post later about the importance of filters but in the meantime, here is a link to another story by the Financial Times last week that presents another side of this argument:

Non-exchange Traded Commodities Outpacing Exchange Traded Brethren

According to this article, many commodities like iron ore, coal, steel and other obscure minerals you never think of are rising in price despite the absence of speculators (due to lack of accessibility). Anyone following negotiations between Vale, Rio Tinto, BHP w/ Asian countries re: iron ore or following the coal companies can attest to the demand for those goods.

Of course, the Barron’s article does not address this issue but there it is. Speculation or demand? I leave it to the reader to determine which scenario is more reflective of reality.

Disclosure: None

Comments

[Wez:]

I think its common knowledge that Barron's has a tough time presenting all sides to an arguement. They are compensated for eyeballs on their stories, not balance, so they write in a way to gather eyeballs.

2008 Apr 01 12:24 PM

[E.D. Hart:]

According to the FTarticle: " Its new index of non-exchange traded metals rose by 598 per cent from January 2002 to early this year. During the same time, an index of exchange traded metals rose by 246 per cent." Non exchange traded metals are still hitting highs.
Looks like more than speculation to me.

2008 Apr 01 01:26 PM

[E.D. Hart:]

SEE: www.financialpost.com/...

2008 Apr 01 10:05 PM