This is a thread about the Arctic. If you want to discuss Antarctic ice coverage, why don't you start a new thread.

You could call it "Antarctic sea ice coverage back to 'normal' levels". Then you'd be wrong about that one too, which would introduce a nice symmetry.

antarctic ice coverage has more relevance to arctic ice coverage than commodity prices - which you have been discussing on the previous page - bit hypocritical therefore for you to try and make the antarctic off limits

Um, I think you will find that it was Bimbo and zzz discussing commodity prices. But then you never let facts get in the way of a post anyway.

oi! this is a thread about the Arctic

Hooray!

fudge me you really do read one opinion and stick with it Ika style. I clearly referred to Physical traders and there use of futures (as you point out for there original intended function).

Growers and physical merchant use futures to hedge there expected deliveries or supplies, there are generally 2 reasons for this, 1; Price risk.
2: Quality differential management.

If you can accept these quite obvious premises you can see that already the seller of the future (or possibly buyer with regard to quality, but in much smaller amounts)

in a perfect Krugman example only food companies would be the other side of these transactions.

Add speculators :

They indeed can narrow a spread above by buying AND selling into the above interest ...... now let imagine they just buy....

prices rise, and rise and rise..... growers forward sell, food producers HAVE to start buying aswell.

Hedge funds buy more ....

Growers are now done at a fwd price. (nice and high) - except they don't get the cash for their physical for 9 months or so... in the mean time they have had to post MARGIN to the futures exchange (around 15% of the trading price), pay brokerage fees, exchange fees etc all a % of the underlying futures price. IE IT COSTS THEM MONEY. As prices keep on rising they have to find more and more money.

Food manufacturers are now the buyer of these futures at a a high price (bad and high passed on to us the consumer), they don't have to pay for 9 months and they recieve the above margin MINUS Initial margin, Trade spread, exchange fee's and that they have to bank the positive margin they are left with at a lower interest rate than the farmer has borrowed at IE HIGH PRICES COST THEM MONEY.....

The hedge funds however only have futures positions as the fee's and margin above rise to high for there trade profit they SELL. hedge funds generally finance at much lower rates than farmers and food producers (spread lost) they are investors in the exchange who is making more profit in fees (spread lost), they trade many millions more futures than the growers and farmers recieving lower margin and exchange fees payable by them (spread lost).

So before you blankly say zero sum game understand that playing the game costs at every stage, the costs are correlated directly to the price of the underlying future, the higher that price the higher the costs.

Also accept that there isn't a natural long/short in the equation, the grower is long and food producer short at the start but the hedge funds are able to re weight this equation at will.

I haven't the fudge what you dirty hippies are talking about, Bimbo.

You're ruining Bill's thread.

I was still reeling from the realisation that zzzz makes me look like Marx.... Bills thread is moot, the science is settled but so is the growth of co2, so now we are looking at mitigating the doom. I intend to do more of the above with money that I have borrowed from your pension and get addled till the end of time drinking Krug... you ?

zzzz makes Ron Paul look like a big government interventionist, everything he posts is poisoned by his instinctive distrust of anything that smells of state intervention including the Theory of Climate Change.

I am also planning on lending Bill more buy to let money until I can reposse the lot , I will make his Greek paradise a prize holiday for the bordies Worse Irish winner....

One opinion? You do realise that the idea that futures trading is driving up commodities prices is utterly hetrodox? I used Krugman as a source because of his impeachable leftie credentials but you will struggle to find a serious economist who will disagree with him on this point. This idea begins and ends with the WDC loons.



For the umpteenth time no one is talking about physical trades - the whole criticsm raised by the WDC loons is that purely speculative trading (i.e. where there is no intention to ever make a physical delivery) is driving up price.

Of course physical trading can move market prices - it's a fuckin market and that's what markets do! And of course hedging costs are a cost for producers. And of course those costs can increase or decrease as the price of the underlying changes - including when margin calls are made (which is why you want deep and liquid markets (i.e. more speculation) to reduce those costs). The point is whether increased speculation of itself causes prices to rise. .

If your point is that because hedge funds have lower financing and transactions costs than producers, they have cheaper hedging, so what? The cost of hedging may be higher for producers than their counter-parts but that hedging is still lowering costs for producers and consumers by transferring risk to speculators.




This is where your analysis falls apart. You can't have a speculative market comprised only of buyers! For every position, there has to be a counter party.




Why? Of course a rising market causes producers with open positions to have to post more margin, but that is irrelevant to the debate unless you can show that it is the volume of trading that is causing the price rise - which is where we came in.




That is the polar opposite of what Krugan (and pretty much every other economist) assumes when analysing this point.



Who said it doesn't? Of course changes in price impact costs but, for the umpteenth time, the volume of trading is not changing prices because the effect on pricing of increased trading volume is zero sum.

To repeat. It is not in contention that a changes in market price can impact the hedging costs of producers with an open position. What is in contention is that increased speculation causes those changes in market price.

"This is where your analysis falls apart. You can't have a speculative market comprised only of buyers! For every position, there has to be a counter party. "

I CLEARLY EXPLAINED THAT THE MARKET HAS TO HAVE SELLERS IN THE FACT THAT PRODUCERS SELL FORWARD AS A HEDGE, SPECULATORS CAN OF COURSE BE ALL ONE WAY IT IS CALLED A BUBBLE.

IN MODERN FUTURES MARKETS THE SPECUALTION IS 100 TIMES FOR MORE THE SIZE OF THE UNDERLYING TO DENY THAT THAT CHANGES THE PRICE OF SAID UNDERLYING IS PLAINLY f**king STUPID.


YOU CAN HAVE THE MARKET IS ALWAYS RIGHT MANTRA RUNNING AROUND YOUR HEAD IF YOU LIKE BUT IN SOME CASES IT REALLY REALLY ISN'T. MARKETS ARE GAMED, RIGGED, THE COSTS FOR FUNDS BEING LOWER THAN THE REAL USERS OF FUTURES IS SOMETIMES ENOUGH TO TIP THE REALITY OF A PRICE AWAY FROM IT'S TRUE VALUE. THIS IS OF COURSE DISCOUNTING THAT THE FUNDS ARE AIMING TO SCREW THE MARKET IN EXACTLY THAT WAY.

THE BOOM IN COMMODITY PRICING IS AS MUCH A BOOM CAUSED BY LOW INTEREST RATES AS ANY OTHER ECONOMIC FACTOR. LOOK AT THE ROLE OF LOW INTEREST RATES IN CARRY TRADES THEN THINK AGAIN ABOUT WHETHER FUTURES TRADING AFFECT THE PRICE OF AN UNDERLYING ASSET.

Don't do that - you'll give Billbo Ballbaggins an idea

This is heart of the debate.

I think you are talking complete crap. Food is a physical commodity, and plays in the financial markets can only move the price to the extent that they affect physical flows and stocks. Fortunately, the guys with Noble prizes who study this shit for a living agree with me. As far as I am aware this is one of the few points on which you could get polar opposites like Krugman and Manikw into a room and expect them to be in agreement. Now you can play the shouty phone monkey all you like but it just makes you another trader who can't see the woods for the leaf.



As for the rest...



What the hell are you talking about? Nothing I have said can be equated to that position.



Leaving aside the elephant in the room about what a "true value" is, this point is utterly irrelevant to this debate. No where have I argued that commodities prices are a true price or that the availability of leverage can't affect asset prices. This is purely a debate about the extent to which speculative trading is pushing food prices up.



For the last time: food is a physical commodity etc. Why are you crapping on about the carry trade?


I give up.

Or just more of them. Do keep up chappy, there's a good lad.

Oh look, a meltdown.

Bimboman's going the full goo goo gaa gaa at last, eh?

I have no idea about such things, but I licked my finger and thrust it up in to the air. The resulting data is irrefutable, ZZZZZZZZZZZZ is clearly wrong.

That's it? It was that easy all along? All I had to do was go Sun Tsu instead of all that reasoning...

I always knew that extreme free market capitalism would consume itself eventually.

Now that it has come to pass, let us concentrate on building a strong One World Government.
There shall be jelly, ice-cream and carbon offsets for all.

And don't forget the doughnuts.

The evidence is in fact the other way, that an active derivatives market dampens volatility and therefore lowers prices in a rising market... which is an effect, just not the one of current mythology.

None of which has anything to do with the left or right of politics. There's a view held by economists based on measurements of markets, and a view held by politicians who require the appearance of actions they can be seen to be taking.

"Fortunately, the guys with Noble prizes who study this shit for a living agree with me"


But not about climate change eh zzzz. Blimey good scientist/bad scientist ....

Groucho




- Would def agree with that. The whole point of the futures markets is to lower volatility by bringing forward pricing adjustments.

I do think speculation is helping avoid large scale market adjustment, and those large adjustments could have driven commodities prices much higher but its a tough to prove counter-factual.

Bimbo



I think my position on climate change is a little more nuanced than you give it credit for - and I think the views amongst climate scientists about key issues like attribution and forcing are a bit more varied than some would have you believe.

Get your hand off your dick you twat.

rents are holding up very well - plus adhering to the old adage 'out of debt out of danger' makes one bomb proof regarding repossession, recession, divorce etc a nuclear war involving the uk is about the only thing that could upset the apple cart

Antarctic ice coverage looking decidedly healthy btw - record breaking healthy, has no relevance at all apparently though

The longer this thread drags on the more convinced I become that Bill is a bot of some kind. In fact I think I could write his algorithm in about 100 lines of code, it wouldn't be complicated as it ignores almost everything that it doesn't understand.

well,well,well......................unprecedented melt hey?

Yes Bill, the current melt is far beyond those levels.

Pointless I suppose explaining to you that the Arctic has been ice free all year round before?

When?

during inter glacials - bit like the one we are in now

The Arctic hasn't been ice free all year round since the world started having ice and winters.

Edit: that was ~45m years ago when the Arctic ice cap first formed.

Arctic sea ice volume reconstruction for August is out...





It's a record low, of course. It's shocking to compare the current value (red line) with the black line from 2007. The ice volume has fallen to less than half of what was then the record low in 2007. And 2007 was supposed to have been the really alarming year, where ice extent and area hit record lows by a large margin.