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December 2021 Commodity Musings

Kimura Capital – 

I don’t like politicians. Their total inability to answer the question posed to them is frustrating, along with the current obsession with the Big State having a lot of control over people’s lives in terms of restrictions imposed.
What happened to the concept of empowering the population to make their own decisions?
Isn’t that the way you learn to take responsibility for your actions? Cause and effect and all that. …

The commodity world is built on definitives. You buy X quantity of a product at a Y grade for delivery within a Z timescale. It’s straightforward and easy to understand that if you don’t conform to those specifications, you have a risk of not getting paid. Simple.

Contrast that with the media’s clickbait headlines of continuous speculation where everything is might/may/could/possibly/ considering/expects, combined with an oversupply of information which is near on impossible to determine if it is accurate or not. Big data needs to be renamed bloody enormous amounts of data; however, I remain old school where you’re allowed to have a gut feel. Maybe we all are living in the matrix but who knows anymore.

As said last month a lot of supply chain problems appear to be temporary. Especially if you look at the Black Friday, worship at the altar of consumerist tat, where you can get everything you (allegedly) want at the same price as previously except it’s now pushed into your internet feed. Nevertheless, the continued volatility in prices should mean it’s a happy bonus season for the traders out there. Cheers!

In the wake of the pandemic do we need to look at the way we analyse risk in commodities? I think many traders have seen a pricing premium imposed by financiers as a kneejerk reaction (and as a way of improving margins) but I would suggest its currently impossible to ascertain what’s the correct number to be applied (if any) and in any event pricing is just one part of the evolving risk matrix conundrum. I will continue to ponder.

Recent random thoughts when waking up at 3am include:

  • Interpreting statistics is like reading tea leaves
  • Are Sperm Banks regulated by the FCA?
  • Overthinking hedging gives me a headache                                                                                                                                 
  • Phantasmagorical is a great word (and also a great album by The Damned)
  • Intelligence and common sense don’t often share the same head


I’ll leave you with the prophetic thoughts of Motorhead:-

“Why do we vote for faceless dogs? We always take the bait.
All things come to he who waits, but all things come too late”.

Image: yakJJbBB I Shutterstockcom   Alan Gordon