People blaming illusions rather than owning up to commodity losses!
I quote a large chunk of Marcd77's post. I don't mean to pick on him in particular, a lot of people are confused on this. It figures that the people blaming the government or "PPT" for killing commodities have ratings under 20 while those of us who didn't buy into this nonsense have ratings over 99... but I digress.
"To understand why commodities are plunging now – the S&P/TSX plummeted another 488 points yesterday – you have to go back to mid-July, when the U.S. Federal Reserve and Treasury first announced steps to support mortgage giants Fannie Mae and Freddie Mac.
The move, which ultimately led to the Treasury taking control of Fannie and Freddie this week, touched off a chain-reaction of market events that culminated with the wrenching decline in commodities.
According to Mr. Coxe, the Fed's ultimate goal was to trigger a rally in financial stocks, which would, in theory, help banks hammered by the credit crisis raise fresh capital and repair their balance sheets. To accomplish this, the decision to support Fannie and Freddie was deliberately announced on a Sunday, which had the effect of maximizing the reaction from thinly traded financial stocks on overseas markets.
Because many hedge funds were using massive leverage to short financials and go long on commodities, when North American markets opened and banks initially rallied, the funds were forced to cover their short positions.
At the same time, the U.S. dollar was rallying because the risk of holding Fannie and Freddie paper had diminished. The rising dollar, in turn, made commodities less attractive, giving funds that were already scrambling to cover their financial shorts another reason to dump oil, grains and other commodities."
Well no duh, the financials were as oversold as they've been in many years. The commodities were in a bubble unlike any seen since 1980. Does it take rocket science to realize that if hedge funds (i.e. momentum-chasing hot money) are chasing stocks, you may want to get out? Momentum chasing is doomed to fail once the tide turns causing a viscious crash. Yet you, the now-poorer commodity investor, kept pouring your money into the hedge-fund manipulated stocks. No one complains when they go up... but you all come out whining when the inevitable happens. The hedge funds dumped, they had to dump, cause they took a moronic position in masse, like lemmings off a cliff. Now people go around whining... it isn't my fault... the tulips really are worth what I paid for them... some shadowy group destoyed the market... even though garbage like JRCC was up 1000% this year... it wasn't overvalued. Oh NO! Of course not! You failed in your due diligence, and got what you earned for chasing a hot trade rather than a smart investment.
I love how the article Marcd77 quoted ends... The globe and mail article cited above said, "Mr. Coxe has no proof that the Fed and Treasury acted in concert to boost financials and sink commodities." However, Mr. Coxe said “There's no doubt whatever in my mind” about what happened, he says.
No proof, no doubt. That's faith not logic. He has no proof for his "argument" yet he has "no doubt." Bwahahaha... it's different this time... until it isn't. See you at $600 gold. When you are reduced to blaming the gremlins over at the imaginary PPT or bilderbergers or CFR or what not, you need to dump your positions and re-evaluate your sanity.
Let's trade stocks on earnings and growth, not dreams, illusions, and fantasy, ok?