Jack Walker

Commodity Investors: Speculators or Hedgers?

Tim,

The term “Commodity Investor” is an oxymoron since commodity price discovery is incongruous with investing.

This goes beyond the well-known comparison of apples and oranges to something more like oranges and basketballs. They have completely different purposes and functions.

Commodity markets are for short-term price discovery not for long-term capital investment. Is there any wonder why futures contracts have a limited life span?

How could the trustees of long-term pension assets be hoodwinked by Commodity Trading Advisers and Commodity Pool Operators that their participation was consistent with their fiduciary responsibilities for long-term capital growth? What seemed to be a good asset diversification strategy for one pension fund is a disaster when they all do the same as it distorts the short-term supply and demand relationship and sends inappropriate price signals to both commodity producers and users.

Jack