As you may have noticed the investment banking industry is currently going through a financial meltdown. This includes the Chapter 11 filing of Lehman Brothers (the 4th largest U. S. investment banking firm), Merrill Lunch which is merging into The Bank of America, AIG which is looking for a buyer (I can't imagine the size of the purchaser), and Bear Sterns the owner of a large commodity investment arm. Incidentally, Lehman Brothers owned 25% of Omni Fund the billion dollar index fund which liquidated last week.
Granted, all of the above were large players in the housing sub-prime mortgage debacle, which also includes Freddie Mac and Fanny Mae, and a large part of their problems is the fallout surrounding the underwriting of sub-par mortgages. However, this activity was in part responsible for the billions of dollars flowing into the index fund investment world, which was in part responsible for the competitive write-up and driving-up of the commodity markets; including corn, soybeans, cattle, hogs, oil and other futures. As you know several index funds heavy in the commodity futures markets have already liquidated and there are more to come.
We may not see a dramatic shift over night, but its my opinion that we should be very cautious about the future direction of the commodity industry. It isn't that there won't be a buyer for 100 hog contracts or 500 corn contracts, because there will be. However, we may very well have seen the end of a new plateau for $100 hogs, $8 corn and $15 soybeans. We've talked before about the volatility of the hog industry and now we can add the financial investment industry. The next 12 to 24 months are going to be very challenging to those trying to manage risk, and it's a time to be very prudent about our goals and objectives.
http://www.agricontrol.net/
Granted, all of the above were large players in the housing sub-prime mortgage debacle, which also includes Freddie Mac and Fanny Mae, and a large part of their problems is the fallout surrounding the underwriting of sub-par mortgages. However, this activity was in part responsible for the billions of dollars flowing into the index fund investment world, which was in part responsible for the competitive write-up and driving-up of the commodity markets; including corn, soybeans, cattle, hogs, oil and other futures. As you know several index funds heavy in the commodity futures markets have already liquidated and there are more to come.
We may not see a dramatic shift over night, but its my opinion that we should be very cautious about the future direction of the commodity industry. It isn't that there won't be a buyer for 100 hog contracts or 500 corn contracts, because there will be. However, we may very well have seen the end of a new plateau for $100 hogs, $8 corn and $15 soybeans. We've talked before about the volatility of the hog industry and now we can add the financial investment industry. The next 12 to 24 months are going to be very challenging to those trying to manage risk, and it's a time to be very prudent about our goals and objectives.
http://www.agricontrol.net/
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