ardano

Sovereign Wealth Funds - Energy Futures Speculators?

As Masters said at this hearing...and I saw the whole hearing...commodities/... are NOT capital markets. Therefore, the large commercial interests, global interests in this case, always exert undue influence on trading and therefore price. Beyond that the hearing itself dealt with institutional speculators, but not what those of us who read alpha would consider speculators. Any institution, (pension fund, etc.) who uses the Goldman Sachs Commodity Index, for exposure to commodities does the entire system a dis-service. I say this because the Goldman Sachs Commodity Index, (GSCI,) is a LONG ONLY index. This makes no sense in commodities. Being "long" the CSCI is the ultimate in dumb money, since the GSCI does not expose an institution to the short side of a transaction. Many management options "replicate" the GSCI and charge a management fee to track it.

IF pension funds/institutional investors had to speculate the way alpha readers speculate, there would be no problem. I say this because the allocation would itself be hedged and the bias towards high price would be limited due to risk calculations.

The best way to deal with the manipulation debate is to force ALL investors to assume the same risk...long and short...then devise strategies to limit the inherent risk. The very same institutional investors, defined as index fund speculators, would then use their capital to provide liquidity on both sides of the market.

The commodities markets do not suffer from too much speculation. Instead they suffer from too much speculation on one side of the trade. Make the speculators play long and short and the problem goes away.

Why is it that Masters, Soros, and all the other so-called experts never mentioned this concept.

I call on alpha readers to tell me if I'm right.

best to all during these difficult times,

rr