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The Food Bubble (2010)

theglobalrealm.com

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Re: The Food Bubble (2010)

#31

Post by forensic »

BrainScraps wrote: post #22

It is a bit disconcerting to me that commenters here are fascinated by the technical analysis of this system and appear quite oblivious to the problem of starving human beings. Perhaps I am not intellectual enough to appreciate the empathy hiding behind this analytical ruminating about the problem - but I wish that I got the impression that there was more reaction happening than "Wow, what an interesting phenomenon i…

This community is exactly the type of testosterone-driven money-obsessed community that would create a Goldman Sachs Commodity Index that will cause starvation, and then absolve themselves of responsibility due to some free market arms-length ideology.

It's not a coincidence that you're disturbed by the comments. Wall Street entrepreneurs and Silicon Valley entrepreneurs are fundamentally very similar in mindset and outlook.

Entrepreneurs are trained to have a laser focus on their own issues and to look at everything in terms of dollar value.

Recently, it is becoming more clear to Silicon Valley entrepreneurs that short-term windfalls are preferable, so they try to pump up the speculative value of their companies and dump them before anything bad happens. Pumping and dumping your own Silicon Valley start up is surely one of the easiest ways to get very rich right now.

Re: The Food Bubble (2010)

#32

Post by rcthompson »

thaumaturgy wrote: post #21
rcthompson wrote: post #5

The article totally glossed over how the long orders were "rolled over" from one trading period to the next. This seems like a critical detail. What happens when all the orders come due and you're holding a bunch of long orders? Also, wasn't this on HN a while ago? Or did I see it somewhere else?

Frustratingly, the post you are probably thinking of was here: http://www.cpeterson.org/2011/03/10/why-gas-is-so-expensive-... (Aside: this is one reason why I have so little trust in the web as a long-term historical medium.) Although that article focused primarily on oil futures, it also discussed commodities futures, and specifically addressed the rollovers. Unfortunately, I neither understood it well enough at th…

I think that's the one I was thinking of. I guess I followed the link from that one to this one, and therefore I remembered reading this article.

Re: The Food Bubble (2010)

#33

Post by jQueryIsAwesome »

BrainScraps wrote: post #22

It is a bit disconcerting to me that commenters here are fascinated by the technical analysis of this system and appear quite oblivious to the problem of starving human beings. Perhaps I am not intellectual enough to appreciate the empathy hiding behind this analytical ruminating about the problem - but I wish that I got the impression that there was more reaction happening than "Wow, what an interesting phenomenon i…

I am currently drunk; but i think that if every newcaster drop a tear for everyone who dies in the news they read, they would eventually die of dehydration (so to speak).

Re: The Food Bubble (2010)

#34

Post by rcthompson »

wanorris wrote: post #20
rcthompson wrote: post #6

Earlier quoted context omitted.

The key seems to be the way in which the accumulated long positions were periodically rolled over, but the article doesn't seem to explain how this was done.

capnrefsmmat covered the bursting of the bubble, but the positions were rolled over simply by converting the futures to their equivalent holdings in actual wheat, selling the rights to that wheat for the actual spot price, and using the proceeds to buy more futures for the next term. This doesn't actually protect the buyer. Rather, the buyer was protected (for a while) by the continuing influx of new capital into com…

I think I understand. The profit is determined by how much the spot price has increased during the term, since the futures are bought for the spot price at the beginning of the term and sold for the spot price at the end. Put that way, this looks much more like all the other bubbles we've read about.

I get the feeling that there's really only one bubble, but it moves from one sector of the economy to the next, leaving destruction in its wake, kind of like Bugs Bunny used to tear up the ground as he burrowed through it.

Re: The Food Bubble (2010)

#35

Post by jcampbell1 »

pg wrote: post #2

Wow. I had no idea this happened. I'm surprised this story has not had more attention.

> Wow. I had no idea this happened.

I worked in commodities and read the article. What happened?

Are you talking about the forced long money? Yeah, we and every hedge fund on the planet skimmed that pool. The dumb money doesn't move the market these days.

Re: The Food Bubble (2010)

#36

Post by ArchD »

I'm wondering if there's something preventing the government of vulnerable countries from buying futures themselves to shield their own people from violent price fluctuations like these, i.e. hedge against price increase for food commodities that need to be imported. Trading commodity futures may be inaccessible to ordinary people, but I don't see why the government of a country, even a developing one, cannot do it, other than because of some idiosyncratic rules of the game.

Re: The Food Bubble (2010)

#37

Post by lawnchair_larry »

tpatke wrote: post #8
pg wrote: post #2

Wow. I had no idea this happened. I'm surprised this story has not had more attention.

I used to work at Goldman's. This story doesn't surprise me at all. This is what all good bankers do. I think the story hasn't gotten attention because it is not a story. It is just how things work.

This comment is...amazing.

Much like Paul, most actual people are genuinely shocked about this. It is one hell of a story. The general population does not understand how markets work.

Billions are hungry. The streets are full of protesters worldwide. Retirement funds are gone. Markets are failing. Countries are failing. These are humans, who just want to eat. And for what? To turn $100 million into $200 million?

This is not "how things work". This is not "what good bankers do". This is what greedy sociopaths do. It is reprehensible and disgusting. These people are malicious and should be in prison.

Re: The Food Bubble (2010)

#38

Post by indrax »

BrainScraps wrote: post #22

It is a bit disconcerting to me that commenters here are fascinated by the technical analysis of this system and appear quite oblivious to the problem of starving human beings. Perhaps I am not intellectual enough to appreciate the empathy hiding behind this analytical ruminating about the problem - but I wish that I got the impression that there was more reaction happening than "Wow, what an interesting phenomenon i…

One of the things markets are supposed to do in theory is to route resources to where they are needed, and financially punish people who move resources in stupid ways.

The technical analysis I've seen here seems to hover around the question of why the investors were not automatically screwed. In a more efficient market the price collapse would have been obvious, the bubble would not have happened, and no one would have starved.

This doesn't directly address the inhumanity involved, but the analysis is important.

Re: The Food Bubble (2010)

#39

Post by tpatke »

lawnchair_larry wrote: post #37
tpatke wrote: post #8

Earlier quoted context omitted.

I used to work at Goldman's. This story doesn't surprise me at all. This is what all good bankers do. I think the story hasn't gotten attention because it is not a story. It is just how things work.

This comment is...amazing. Much like Paul, most actual people are genuinely shocked about this. It is one hell of a story. The general population does not understand how markets work. Billions are hungry. The streets are full of protesters worldwide. Retirement funds are gone. Markets are failing. Countries are failing. These are humans , who just want to eat . And for what? To turn $100 million into $200 million? Th…

First of all - I wasn't making a value judgement. Personally, I agree with you - it is reprehensible and disgusting. That is part of the reason I don't work at Goldman's anymore. I always found it a bit embarrassing to be associated with them. By "good" bankers - I ment the one's making all the money. Not those who are morally good.

Second - it is how things work. Not just in commodities, but in everything Goldman's does. There is always an angle which greatly reduces risk. That angle might be insider trading, advanced statistics, or just a rigged market. Goldman's is doing nothing illegal that I am aware of or anyone can prove. ...it is just how things work.

Re: The Food Bubble (2010)

#40

Post by davidw »

ramchip wrote: post #28
BrainScraps wrote: post #22

It is a bit disconcerting to me that commenters here are fascinated by the technical analysis of this system and appear quite oblivious to the problem of starving human beings. Perhaps I am not intellectual enough to appreciate the empathy hiding behind this analytical ruminating about the problem - but I wish that I got the impression that there was more reaction happening than "Wow, what an interesting phenomenon i…

I think we all realize it's a terrible thing, but repeating how sad it is will get us nowhere. Understanding what caused it and how it works, on the other hand, can help us prevent further people from starving. I'm personally happy that HN often takes an analytical, rationalist point of view, rather than an emotional one like eg. Reddit tends to do.

Exactly - if you don't understand a system, how can you fix it? You risk making it worse, rather than better, or shunting the problem elsewhere, but not really fixing it.
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