sammyg123

Why Commodities Are Likely to Struggle in 2008

Correction: In order to stimulate demand more supply is required. Oops. In order to meet rising demand - more supply is required to keep prices stable. My bad.

Why Commodities Are Likely to Struggle in 2008

Part of the Fed's job is to fight inflation, which should register in costs of production. The rise in commodities prices, including oil, which is like oxygen to industrial production, will contribute recessionary pressure. Decreased consumer demand due to higher prices is additional recessionary pressure. In order to stimulate demand, more commodity supply is required. The oil situation, when it comes to supply, looks pretty bleak. OPEC is a monopoly with little interest in lower prices, by definition. While the price of oil will fluctuate, it's not really a free market. Higher oil price is with us, and that stifles growth. Further, the price of oil affects prices throughout most supply chains, including the production of soft commodities, such as wheat, corn and soy, etc. This supports higher prices in these markets. I think the price of oil is of the primary oil here, and we are heading into summer. I expect commodities will fluctuate, but the overall trend seems fundamentally supported. I think bulls and bears will fight it out over an overall rising trend.

Greenspan's Latest: Oil Boom Will Likely 'Go on Forever'

I think the main point is to understand the positive and negative ramifications of fed policies, and use them to your advantage. The ethics of the issue, as to whether it is right or wrong to raise or lower interest rates at a given time, who will benefit and how.....well, I am afraid that our access to that type of information is limited. Supposedly, everybody looks at the same data, but it is the analysis of the data and one's actions that are the to trading profits and right economic behavior. Whatever anybody may think of Alan Greenspan, he was at the Fed's helm for a very long time, and there have been worse Fed chiefs. He is one of the world's most talented economic forecasters - it's how he got the job as Fed chief in the first place. If he says that the oil boom will go on forever, you can go right ahead and cut down his choice of words and their meanings, or you can understand the idea that he is trying to get across and why he said it. I am not a defender of the man, I don't know him, and he doesn't feed my family. I am very sure that he isn't the biggest fan of the Saudis, though, and I am sure that it's not something he said to make friends. Perhaps he just wanted to spur them to increasing output by making them feel confident in the current and future price of oil? Now, what does increased supply do the price of oil?