Leading up to the Federal Reserve’s announcement on interest rates in about 20 minutes, commodity markets are doing their best to give the central bank some cover if it wants to ease credit.
Every one of the 19 commodities in the Reuters/Jefferies CRB index is down today. The index overall was off 2.2% to 340.56 at about 10:45 a.m. PDT, its lowest since early December.
Nickel prices have plunged 6%, corn was down 5.3%, wheat was off 4.8% and silver was down 4.5%.
Crude oil has fallen $4.88, or 5.1%, to $90.83 a barrel, the 11th decline in 13 sessions.
The selling appears tied in large part to investors’ and traders’ mad worldwide rush to raise cash, amid fears that things could get much worse in the financial system.
"The run to cash is really hurting commodities as much as anything," Darrell Holaday, president of Advanced Market Concepts in Manhattan, Kan., told Bloomberg News. "Everybody wants cash and bonds. Anything else carries way too much risk and you can’t blame them. Their investments have turned completely sour."
From the Fed’s perspective, investors’ deepening aversion to risk is an ugly thing for the financial system.
But if commodity prices keep falling, or just stabilize, the inflation worries that have gripped central bankers worldwide since the start of this year are going to fade.
And if they can stop freaking about inflation, the Fed and its peer banks will have much more leeway to pump money into the system and keep it functioning until this crisis of confidence passes.
Photo: In the commodity pits. Gino Domenico / Bloomberg News
source: http://www.typepad.com/t/trackback/816965/33522664
And so many tried to convince it was not speculators moving the price of oil so fast. I guess this means the speculators, stuck now with $140 contracts are leaving tens of billions of dollars on the table.
The principal problem: 4 out of 100 borrowers who should not have gotten mortgages and who have defaulted. The liberal policies of the Clinton administration are the root of this evil.
Liberal policies that made Banks (forced by LAW ) banks to lend to people who would not even been allowed into a bank due to their bad credit, lack of assets and low/no income. Who ran Freddie/Fannie Mac? Are these people now helping run/advising the Obama campaign? (YES!). Wake up America; liberals and the Obama campaign want you (uninformed masses) to believe that it was the Bush policies of under regulation when it really was over-regulation that caused this problem. Before Bill Clinton and Rep. Barney Frank forced through these new rules, banks had set and logical criteria to lend to people. This crisis is due to typical liberal (feel good) policies of Democrats and a few ignorant republican pols. Liberals are great at feelings and hope and change that bankrupts America. Good job liberals! Now abmit your mistakes & lets fix this mess with sound fiscal banking regulations that reward good credit, steady income and financial responsibilty.
Dan:
For your information, speculators of the stripe you refer to, sophisticated traders utilizing complex algorithms that trigger thousands of trades in a nano-second involving billions of dollars might have $140 (oil?) contracts... sold short. Further, I assure you that traditional speculators, floor traders, scalpers, chartists, fundamentalists, seat of the pants types, doctors, bricklayers, et al...are not still long oil contracts at $140..and perhaps they lag the moves of hedge funds, pools, CTAs, etc. but, for the most part, they too are short, unless they have spreads, straddles, butterflys or other relationship trades involving $140 long side trades.
Alex Ploud:
I take great exception to your comments.
For openers, what "law" are you referring to that forced banks to lend to borrowers who had no incomes, no assets and no credit? Frankly, I don't think such a law has ever existed. But if you can evidence the source of this law, I'd like to read it. The delusion of a law aside, who CREATED the loan products that apparently are the "root of this evil"? Was it the Clinton administration, the banks and mortgage companies or the average slob that wanted to buy a 3 BR split level? I can't recall during the boom Clinton years, a real estate bubble forming on the basis of the administration devising esoteric lending instruments. If you have evidence of this, I'd like to know your source. Perhaps Jack and Jill walked into their local bank and TOLD the loan officer, "we want to give you a mortgage for a $400,000 loan, secured by property worth $300,00, we want the dough to come from Fannie Mae, neither my wife and I work..we're on welfare. We have no money to put down and we want a 3 month teaser rate of 3.5%, adjusting to, say, 5% for 9 months then adjusting thereafter to the 3 month LIBOR rate, plus a margin spread of 350 points or to the 12 month constant rate of the 5 yr Treasury Note, or the 11th District Cost of Funds plus a 200 point spread, whichever is greater, with a cap of 14% and a max boost of 4 points and a 2 point floor in any one adjustment period, assumable and no pre-pay penalty, we agree to negative amortization, a 30 year ammo term with a 7 year call. And shake it up, we're late for our dart game at the bar." Of course, no upstanding, Sunday-go-to-church Christian, conservative, Rotarian, Elk, Moose, Chamber of Commerce (in good standing) member, REPUBLICAN BANKER would ever agree to such an outlandish proposition, would they Mr. Ploud? You are aware, aren't you, of Gramm's $750,000 lobbying fee from UBS and his efforts to get the anti-predatory lending laws modified?
Freddie and Fannie did not make loans to individual borrowers...and I doubt 'those people' (who are "these people"?) are advising the Obama campaign. Incidentally, Obama wrote Bernanke and Paulson over 18 months ago, 18 months ago..warning them, in essence, of the financial pitfalls that have come to beset us. I know of no Republican that did ANYTHING of an alarmist nature regarding an impending financial melt down.
Bill Clinton and Barney Frank did NOT force through any legislation formulating "new rules". In fact, it was Phill Gramm, and his economic theories and philosophy of the imperialistic 18th century, that changed the rules of the "logical criteria" to lend to people via his ramrodding the Gramm-Leach-Bliley Act through their Republican Congress in 1999. That act repealed a great many of the set rules and "logical criteria" that had been in place since FDR..the greatest Liberal of them all...who just happened to save what we erroneously call 'capitalism' today..it is, of course, Billionaire Socialism. You do know, don't you Mr. Ploud, what Gramm's efforts accomplished, yes? And I'm sure you are familiar with the provisions of Gramm's other legislative, "evil" opus...the CFMA, Commodity Futures Modernization Act. That's the beauty that gave free rein to upstanding, stellar, Republican firms of the Enron ilk to rape and plunder at will. I don't suppose there's any need to mention Gramm's wife's connections to the CFTC..you do know he is McCain's economics mentor and will probably be Treasurer of the US should Dr. Strangelove, perish the thought, get elected.
I look forward to reading your reply and learning of your sources for your liberal bashing.
