Thursday, May 29, 2008

"Production Trumps Speculation"

Every once in a while someone lays one on me good. A brief, succinct, lucid and usually in retrospect obvious, explanation for the simple truth that your own eyes are seeing.

Our resident mad scientist, Dr. Lalani, hit me with that one last night as I was trying hard to remain awake (it was a long day). "Production trumps speculation"! WHAT a concept!
In other words, not matter HOW MUCH MONEY SPECULATORS poor into a commodity, if production exceeds demand the speculators are toast. Perfect examples, for those who follow commodity markets would be Sugar and Meat (pork bellies, feeder calfs, etc...). What could be hotter than sugar? Sugar is, at the moment THE energy efficient way to produce ethanol. So why is the price sooooo low? Using Lalani's law #234 1/2, too much sugar production overwhelmed the speculator's money.

Next time someone tells you Oil is a speculative bubble remember:

"Production Trumps Speculation".

Yours for a better world,

Mentatt (at) yahoo (d0t) com

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