Dave P's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/243923/comments http://seekingalpha.com/article/129894-one-way-to-invest-in-social-unrest?source=feed#comment-499043 499043 Mon, 11 May 2009 12:06:21 -0400 http://seekingalpha.com/article/115390-what-s-behind-slim-s-times-bailout?source=feed#comment-361407 361407 Tue, 20 Jan 2009 20:57:50 -0500 http://seekingalpha.com/article/108125-wednesday-market-outlook-what-is-the-fed-hoping-to-achieve?source=feed#comment-315504 315504 Wed, 26 Nov 2008 10:54:33 -0500 http://seekingalpha.com/article/103672-ethanol-farm-industries-split-over-which-candidate-is-best?source=feed#comment-297868 297868 Tue, 04 Nov 2008 08:30:03 -0500 http://seekingalpha.com/article/102922-supply-and-demand-have-little-relevance-in-commodities-prices?source=feed#comment-294405 294405
Speculative demand is part of the demand for a commodity. Similarly, when a speculator decides to hold onto his inventory of a commodity because he thinks the price might go higher, that has an impact on supply. I will grant you that speculative demand is very volatile compared to other parts of the demand, but it is still part of the demand.

I thought your argument was going to be somewhat different when I saw the title. What a lot of folks find perplexing is that the price of a commodity might go up even though INVENTORIES are higher. I've heard a lot of pundits claim that proves that supply and demand do not work in the oil industry, for example. Bill O'Reilly is one.

What they are ignoring is that inventories are not the same thing as supply. If you have an econ degree, then you know that mathematically, supply is a CURVE, while inventories are not. Inventories is simply a number.

Supply is a relationship between the price of a product and the quantity that suppliers are willing to supply. The higher the price, the more they are willing to supply. The folks who erroneously equate inventory to supply, however, are effectively assuming that all of the inventories are available for sale at any given time at the market price, whatever it might be. And that is simply not the case. People who hold inventories look for the best price they can get, and they are willing to continue holding them if they are not satisfied with the price that is available. In order to determine what the supply is, you can't just look at the inventories. You've got to get inside the inventory holder's head to find out what his price is. The market system is what does that.]]> Thu, 30 Oct 2008 12:41:33 -0400
Speculative demand is part of the demand for a commodity. Similarly, when a speculator decides to hold onto his inventory of a commodity because he thinks the price might go higher, that has an impact on supply. I will grant you that speculative demand is very volatile compared to other parts of the demand, but it is still part of the demand.

I thought your argument was going to be somewhat different when I saw the title. What a lot of folks find perplexing is that the price of a commodity might go up even though INVENTORIES are higher. I've heard a lot of pundits claim that proves that supply and demand do not work in the oil industry, for example. Bill O'Reilly is one.

What they are ignoring is that inventories are not the same thing as supply. If you have an econ degree, then you know that mathematically, supply is a CURVE, while inventories are not. Inventories is simply a number.

Supply is a relationship between the price of a product and the quantity that suppliers are willing to supply. The higher the price, the more they are willing to supply. The folks who erroneously equate inventory to supply, however, are effectively assuming that all of the inventories are available for sale at any given time at the market price, whatever it might be. And that is simply not the case. People who hold inventories look for the best price they can get, and they are willing to continue holding them if they are not satisfied with the price that is available. In order to determine what the supply is, you can't just look at the inventories. You've got to get inside the inventory holder's head to find out what his price is. The market system is what does that.]]> http://seekingalpha.com/article/100891-new-economic-world-order-u-s-no-longer-on-top?source=feed#comment-287684 287684 Wed, 22 Oct 2008 09:19:26 -0400 http://seekingalpha.com/article/96608-natural-gas-bargain-justifies-obama-s-stance?source=feed#comment-287178 287178 Tue, 21 Oct 2008 13:08:14 -0400 http://seekingalpha.com/article/96059-wachovia-stanley-really?source=feed#comment-257878 257878 Thu, 18 Sep 2008 09:30:08 -0400 http://seekingalpha.com/article/91137-don-t-believe-the-lies-ride-the-bank-stocks-bull?source=feed#comment-231220 231220
The proof of that is to look at how far the banks have already fallen. Wachovia, for example, was a company with a $120 billion capitalization a year ago. Now it's at $32 billion. They haven't lost $88 billion since then. Not even close. Less than $10 billion. The reason the capitalization has fallen by $88 billion is that the market is assuming that they will ultimately lose that much. If they can beat that number, then it is gravy for investors at these prices.]]> Fri, 15 Aug 2008 11:43:36 -0400
The proof of that is to look at how far the banks have already fallen. Wachovia, for example, was a company with a $120 billion capitalization a year ago. Now it's at $32 billion. They haven't lost $88 billion since then. Not even close. Less than $10 billion. The reason the capitalization has fallen by $88 billion is that the market is assuming that they will ultimately lose that much. If they can beat that number, then it is gravy for investors at these prices.]]>