Dr. No

Not All Commodity ETFs Are Created Equal

"Either oil is overpriced or natural gas is undervalued." This assumes a somewhat fixed offering and demand of oil to gas. Could be that all of a sudden more gas (or expectation thereof) is available (and gas got cheaper by more supply and same demand) and you now move from a 8.6 to 18.1 ratio.

Speculation and the Price of Oil

Banks was careful to cite himself several times in his lengthy and wordy piece of self-appreciation, pointing to other sources he likes. But why skirting around the testimonies of Masters and Greenberg, which in detail lay out the isssues in the factually uncontrolled commodity markets refuted all his theory? ICE/IPE and DME use the same legal loophole created in 2000 to allow Enron energy trading without FTC/CFTC/SEC supervision. A market without supervision is certainly trustworthy?

World assets under management increased by 50% since 2000, this money has to go some place and creates demand for new asset classes as old ones (stocks, bonds) are perceived as tainted. With GS & MS setting up commodity exchanges they kindly marketed those to their clients and demand for investable assets first created the CDO bubble and then the commodity and energy bubble.

If please someone would look at actual numbers of physical and financial/index speculators and their demand and supply, you would realize what is going on. You can overlay the dot.com, housing and CDO and commodity bubbles and will see the not so strange similarities.

That said, long-term, i.e. over the next 10-15 years we may see real issues covering the global demand. But if the increase in oil demand from China is roughly that of financial speculators trading on ICE/IPE/NYMEX etc., and as long as Morgan Stanley holds two entire annual wheat harvest, we are likely seeing other phenomena at play.