Materials Mayhem or Making Money

There are several things you have left out that have had a large effect on the current prices of raw materials.

First is the rise of the Chinese and Indian economies, these Asian nations are fast becoming top world consumers just like the USA and Europe. Both of these nations are buying up world commodities at an alarming rate, thus putting the price up of nearly everything.

The recent rise in food prices has been caused by two things, first is the poor weather conditions that have devastated harvests, and second is that too much agicultural land has gone over to producing bio-fuel crops!

The current trend of managing the ecosystem ie, global warming has prompted the OPEC countries to increase the price of crude oil, and then again the Asian nations are buying up oil like never before, they are doing the same with steel, so it should come as no surprise that commodity prices are rising fast!

Then there is the so-called credit crunch, the banks themselves are too blame for this! They have lost vast amounts of money by entering into the Sub-prime mortgage business, now they are expecting the taxpayer to bail them out!

Here in the UK most people expect it will get worse before things settle down, but this can only happen if Western governments put the brakes on national spending.

Spencer.

I do not feel sorry for either the lenders or the borrowers who have been caught in the sub prime mess. People were buying houses they had no business buying. Lenders were taking a greater risk and they new it. Typically a buyer would get into a house with an adjustable rate mortgage. They were getting into an adjustable mortgage when interest rates were at all time lows. Where did they think the interest rates were going to go from there? So in the end many people were allowed to live in a house for a year or two which they otherwise never would have gotten in the front door. I don't feel sorry for someone who is loosing a house they never should have had.

The lenders are a bit more complicated issue. Congress put legislation in place that compelled the lenders to make the sub prime loans. It was another leftest notion of leveling the playing field so more people could buy a house, afterall it's not fair that someone can't afford a house (uggg). The lenders complied with the legislation and created the sub prime loan to accomodate the broke buyers. Other gimmicks like the 80/20 loan where the buyer would get two loans - one for 80% of the house and one for 20% of the loan thus avoiding paying PMI and also getting in for zero down. Now it's come full circle and is biting both parties.

Another segment of the sub prime buyers who are now upside down are the people who were flipping houses. Many of the sub prime homes in forclosure are not primary residences but rather failed flipped houses where someone was speculating they could turn the house around quickly. When the market softened they were caught short.

People wrongly lay blame at the feet of what they call speculators in the futures market (mostly talking about oil traders). There is no manipulation of the market. The traders buy and sell contracts for delivery of oil (and all other commodoties) at market prices. The traders do not drive the price up or down. If a trader tries to sell a contract for oil at $110/bbl when the market is at $100/bbl nobody will buy his $110 contract. The trader really does not care if the price goes from $100/bbl to $103/bbl or from $70/bbl to $73/bbl - it is the same $3/bbl spread. The same goes for the price going down. A trader can make money if the price goes up or down so long as they are on the right side of the trade. For every seller there is a buyer.... for every buyer there is a seller. What seperates one from the other is they each have a different interpretation of the fundamental information as well as the technical indicators. Only one can be right at a time. Price either goes up or down (sometimes sideways).

The prices of corn and other agriculturals are going up because of the increased demand for corn feed stock to produce ethenol - another place where government has put it's finger where it does not belong. People (the greenies) were demanding we "get off oil" and the politicians jumped on the idea of ethanol because it is "green" and they could also give money away to the farmers (which translates into votes). Again, the unintended consequences of pushing not only the cost of corn up but also that of all other grains that are competing for acreage. This has also impacted the cost of cattle and hogs both on the hoof and hanging because of higher feed and transportation prices.

What will turn the tide of increasing prices? Stopping the insanity of pushing ethanol and get the grain markets stabalized. Open up Anwar and areas in the continental and coastal US for drilling. We could increase our oil supplies if it were not for congress bowing to the pressure of the green lobby. There is oil in the gulf that the Chinese are drilling for and using Cuba for a staging area. The US companies are prevented from drilling in the same areas because of governmental regulations. The same goes for ANWAR and other places in the continental US.

Energy independence is a good thing, but it will only happen as a result of the market taking control. When the effort is driven by government regulations, polocies and regulation it will not work.

At every turn when the government puts it's finger in a problem it only makes it worse. Government really has only a few limited functions. The biggest and most important is national security and running the military. Beyond that there are few things government should be doing but sadly far too many things it is doing and almost in every instance government intervention makes the problem worse and creates other problems along the way.

As Regan said, "Government is not the answer, government is the problem."

Travis

I like your style of writing and contents therein. Not bad!

Those in government know very little about anything. That is why they rely on others who they now knock outside of government. Then they sit around and for years try to figure out something that does not need figuring but, action. Back to the Clubs and Lunch at those "watering holes" in Washington. By the way I think that they should eliminate drinks (alcohol) at their inner places in that at their old age (all of them) they can't hold their alcohol and waste another afternoon after wasting the morning thinking about how to waste the day.

When are you going to run for President? I'll be your "fund" raiser in that I am running short on cash.

This upcoming election so far is empty of anything other than "I like your hair cut where did you have that done?" We all know for "free" in the White House.

Good Luck!

DK

http://mbfusa.com

I agree to most of your points except the Oil. Why not conserve your oil for tomorrow and buy from those who have no option but to sell, like the mid-east and South America. They will starve if they do not.

There was one thing US should have done a long time back. Reduce the consumption of oil (and that was easily possible because you were consuming far far more than you required but it is an American's ego to flaunt his wealth and show that he can throw money around as there is plenty more coming). Those unworthies would have had no choice but to sell low and would not be so obscenely and undeservedly wealthy today.

All your other points are logical. GA for you

The problem of Global prices , interest rates and a weak dollar is one that will never end,unless we act now. Due to the fact that manufacturing companies have to pass on the cost of what they pay for their goods and services in order to make a profit. My take is, if all nations would look at whats happening to the world at large, and try to keep prices to a minimum then there wouldnot be a need to increase goods and services. The end users would be able to afford and have a better way of life. Why do we pay so much for fuel? I believe if the oil sellers were not so greedy , then we all could have cheaper fuel. To fix this problem, the entire world should roll back prices on all raw materials, then people would not have to kill themselves working for the dollar. It is important for the future of the human race to survive. Can we continue to to live like this ?