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Hedge Funds Are Trading Commodities Markets Beyond All Recognition

|Includes: DBA, The United States Natural Gas ETF, LP (UNG)

The Wall Street Journal made some prescient comments yesterday about how the flood of hedge fund capital into commodities is fundamentally changing the nature of those markets, confounding the old timers. The Northeast is experiencing the coldest summer in 27 years, and you would expect Natural Gas to crater (see But chart buying by the proliferation of new NG ETF’s out there has been holding it up. Excessive rain has delayed wheat plantings, normally a very positive development for wheat prices. But traders are obsessing over weather Chinese stockpiling of food is leveling off, knocking prices for a loop (see I avoided trading the soft commodities for most of my life, because, basically, making a bet on the weather always seemed like a loser to me. Better to bet on two flies crawling up a wall.  The pros relied on Cray supercomputers processing complex algorithms and historical data to come up with forecasts that were wrong half the time. I actually prefer the new order. I rather place bets on what the Chinese are up to than Mother Nature any day.