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Hey so do you know how many commodity hedge funds own storage assets? Did you know those storage assets are highly specialized for each commodity? Just trying t

by HiLo 11y ago

Hey so do you know how many commodity hedge funds own storage assets? Did you know those storage assets are highly specialized for each commodity? Just trying to politely point out that it's not the hedge funds that would be doing that :)

datashovel 11y ago
I wouldn't necessarily reduce my claim to "high inflation environments", but this link might prove helpful: http://www.investopedia.com/ask/answers/05/051905.asp http://www.investopedia.com/ask/answers/05/051905.asp Here's another: http://www.investopedia.com/ask/answers/102915/do-hedge-funds-invest-commodities.asp http://www.investopedia.com/ask/answers/102915/do-hedge-fund... Or perhaps they'll just buy all the companies that store commodities of a certain type. I've heard horror stories (from a family member in finance) about hedge funds who will buy up all of a certain type of commodity (in this specific example all of the farms that produce a specific type of egg) and just wait until the manufactured "scarcity" causes prices to go up, and then they'll start selling. So even if it's not necessarily part of their "plan", I know of at least the one case above. My relative assured me there are plenty of other examples out there. I'd say at the very least Hedge Funds have proven to be a very opportunistic bunch who would probably salivate at the idea of a scarce commodity that was the primary component in all batteries manufactured in the world.
- HiLo 11y ago
  The reason I ask is because I worked for one of the largest traders of physical commodities in the world, and was involved in that trade. What you're talking about is called cornering the market, and when it happens, the people go to jail. You're using anecdotal evidence to support your claim about a large swathe of people. Also, if their buying activities meant to create artificial scarcity was the only factor driving the prices up, why did their selling not have an equal effect pushing the price back down?
  - datashovel 11y ago
    I'm certainly not a professional trader, but it seems intuitive to me that as long as demand is greater than supply for an extended period of time a trader could "unwind" the position over that entire time frame. I think it would be silly to assume these kinds of schemes would be opened and closed overnight.

by HiLo 11y ago

datashovel 11y ago

I wouldn't necessarily reduce my claim to "high inflation environments", but this link might prove helpful: http://www.investopedia.com/ask/answers/05/051905.asp http://www.investopedia.com/ask/answers/05/051905.asp Here's another: http://www.investopedia.com/ask/answers/102915/do-hedge-funds-invest-commodities.asp http://www.investopedia.com/ask/answers/102915/do-hedge-fund... Or perhaps they'll just buy all the companies that store commodities of a certain type. I've heard horror stories (from a family member in finance) about hedge funds who will buy up all of a certain type of commodity (in this specific example all of the farms that produce a specific type of egg) and just wait until the manufactured "scarcity" causes prices to go up, and then they'll start selling. So even if it's not necessarily part of their "plan", I know of at least the one case above. My relative assured me there are plenty of other examples out there. I'd say at the very least Hedge Funds have proven to be a very opportunistic bunch who would probably salivate at the idea of a scarce commodity that was the primary component in all batteries manufactured in the world.

HiLo 11y ago
The reason I ask is because I worked for one of the largest traders of physical commodities in the world, and was involved in that trade. What you're talking about is called cornering the market, and when it happens, the people go to jail. You're using anecdotal evidence to support your claim about a large swathe of people. Also, if their buying activities meant to create artificial scarcity was the only factor driving the prices up, why did their selling not have an equal effect pushing the price back down?
- datashovel 11y ago
  I'm certainly not a professional trader, but it seems intuitive to me that as long as demand is greater than supply for an extended period of time a trader could "unwind" the position over that entire time frame. I think it would be silly to assume these kinds of schemes would be opened and closed overnight.