Why you need to beware the Commodity Speculators

Commodity speculators often get a bad rap for manipulating the price of commodities that they trade in. Because the business of speculation isn’t well understood, it’s assumed that the speculators are causing the wild price fluctuations in the marketplace. It’s true. Speculators do buy and sell commodities for profit. Do they drive up the price of the underlying commodity? Sort of.

Recently, Starbucks chief Howard Schultz attacked hedge funds and commodity traders for driving up the price of coffee because he claimed the trading activity was “not based on supply and demand” but rather on speculation.

“Right now we are experiencing a very strange and almost inexplicable phenomenon in the commodities market. Without any real supply or demand issues we are witness to the fact that most agricultural food commodities are at record highs at once, and coffee is at a 34-year high,” said Schultz.

Schultz also said, “Through financial speculation – hedge funds, index funds and other ways to manipulate the market – the commodities market is in a very unfortunate position. This has resulted in every coffee company having to pay extraordinarily high prices for coffee.”

Coffee isn’t the only commodity seeing increases. BMW is also complaining that banks have cornered the aluminum market with 70 percent holdings. They’re buying the metal, selling it forward at higher prices, and storing it on the cheap until they can profit from it.

Rising prices are good for investors, but they also mean increased prices on the retail side. When consumers go to buy coffee, they see increased prices at the counter. The same holds true with purchasing cars, if the aluminum market is being bid up.

Why Commodities Traders Do What They Do

The simple answer is that commodities speculators are in it for one thing and one thing only: profit. Commodities speculators believe that certain commodities are underpriced. They see an opportunity to buy the commodity and they jump on it. If the rest of the market agrees, then the price gets bid up, much to the dismay of businesses and individuals that rely on those commodities.

What about cornering markets? It takes a large trader to buy up a substantial portion of the market. Usually, it’s impossible. When it does happen, the market still has a mechanism built into it for correction.

Enter Short Sellers

Sometimes commodity speculators get it wrong. It’s not pleasant to see increased gasoline prices, coffee prices, and even prices for your favorite food go up. It’s especially difficult to see those prices increasing during a recession. You may not be able to afford those increases, and your only hope (aside from government regulators) is traders waiting patiently on the other side of the trading fence.

While commodities speculators can temporarily bid up the price of any commodity, short sellers act as gatekeepers and monitor other speculators. If the price is bid up too high, short sellers come to the rescue and bid the price back down. They do this by borrowing the rights to the commodity in question. This creates downward pressure on the price of the commodity. The short seller then waits for the price of the commodity to fall. When it does, he sells when he thinks it has reached its “intrinsic” value.

While all of this is going on, consumers and businesses might be kept in the dark. It takes a special kind of individual to understand how the commodities market works, and a lot of skill to trade it effectively. Short selling is especially complex, and without understanding the mechanics of how speculation works, many consumers are left wondering why prices for things they love to buy seem to skyrocket inexplicably. Your best defense against speculation is to stock up on things that you think will rapidly increase in price before the bidding takes off.

Guest post by freelance currency trading analysis writer Elizabeth Goldman, on behalf of Sunbird FX – home to the SunbirdFX metatrader. All views and opinions expressed belong to the individual and do not necessarily represent Sunbird.

Stock Market Update for 3/27/2012

Stocks Turning In Lackluster Performance In Early Trading

Stocks are showing a lack of direction in early trading on Tuesday after showing a strong move to the upside in the previous session. The major averages are lingering near the unchanged line following yesterday’s standout gains.

The major averages are currently turning in a mixed performance, with the Dow posting a modest loss. While the Dow is down 7.98 points or 0.1 percent at 13,233.65, the Nasdaq is up 4.78 points or 0.2 percent at 3,127.35 and the S&P 500 is up 0.79 points or 0.1 percent at 1,417.30.

The choppy trading on Wall Street comes as traders express some uncertainty about the near-term outlook for the markets following Monday’s rally.

While stocks saw initial strength as traders continued to react positively to yesterday’s comments from Federal Reserve Chairman Ben Bernanke, a disappointing report on U.S. consumer confidence helped to offset the buying interest.

The Conference Board said its consumer confidence index fell to 70.2 in March from an upwardly revised 71.6 in February. Economists had expected the index to edge up to 70.9 from the 70.8 originally reported for the previous month.

Lynn Franco, Director of the Conference Board Consumer Research Center, said, “Consumer Confidence pulled back slightly in March, after rising sharply in February.”

“The moderate decline was due solely to a less favorable short-term outlook, while consumers’ assessment of current conditions, on the other hand, continued to improve,” she added.

Most of the major sectors are showing only modest moves, although housing stocks have shown a strong move to the upside in early trading, driving the Philadelphia Housing Sector Index up by 2.2 percent.

The strength in the sector comes despite the release of a report showing a continued drop in U.S. home prices in the month of January.

The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index fell by an annual rate of 3.8 percent in January compared to a 4.1 percent year-over-year drop in December. The annual drop matched the expectations of economists.

Notable strength is also visible among networking stocks, while steel and chemical stocks are also moving to the upside. On the other hand, energy stocks are seeing some early weakness.

R.N. Elliott Discovered the Wave Principle Over 70 Years Ago

This is your opportunity to learn the method that has stood the test of time
March 2, 2012

By Elliott Wave International

In the 1930s, Ralph N. Elliott discovered that stock market prices tend to move in recurring patterns. He defined these patterns (or “waves”) and explained how they combine to create larger versions of themselves. He called his discovery the Wave Principle.

After much research into R.N. Elliott’s work, A.J. Frost and Robert Prechter published the 1978 text Elliott Wave Principle. This lesson captures a flavor of Elliott’s fascinating approach to market analysis.

The first step in Elliott wave analysis is identifying patterns in market prices. At their core, wave patterns are simple; there are only two of them: “motive waves,” and “corrective waves.” Motive waves are composed of five sub-waves and move in the same direction as the trend of the next larger size. A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size. As the picture below shows, these two patterns form similar structures of larger sizes, or “degrees,” as R.N. Elliott, the discoverer of the Wave Principle, called them.

The above pattern begins with waves 1, 2, 3, 4 and 5 that together form wave (1) — a five-wave, motive structure that tells us that the trend at the next larger degree is also upward. If you were reading this in real-time, and the rest of the pattern was not visible, it would also warn you to watch for a three-wave correction.

Corrective wave (2) in the chart above is followed by waves (3), (4), and (5), to complete an impulsive sequence one degree larger � labeled 1 (circled). This is followed by a three-wave correction of the same degree: wave 2 (circled) with subwaves (A)-(B)-(C). One way to think about corrective waves is that, because they move against the next larger trend, they lack the strength to unfold into a full five-wave move.

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Learn the Elliott Wave Principle — Free If you’re interested in learning Elliott wave analysis, but haven’t yet gotten a copy of the book Elliott Wave Principle: Key to Market Behavior, check out EWI’s online edition. Even if you already have the book, the online edition is a handy way to look something up when you don’t have your book nearby. Learn the method that successful investors have used for decades.

This article was syndicated by Elliott Wave International and was originally published under the headline R.N. Elliott Discovered the Wave Principle Over 70 Years Ago. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Seven Ways to Save Money Without Giving Up the Lifestyle You Enjoy

Saving money is easy…but it does require sacrifices. The reason so many Americans are in debt in the first place is that they want to have a certain lifestyle, and this lifestyle often requires living beyond their means. So if you’re going to start saving money rather than scrambling to pay the bills every month, you’re going to need to give up some stuff, right? Well, maybe! There are a few tricks that can help you continue to live the lifestyle you want while also spending less money every month.

Tip #1: Rent instead of buying.

Owning a home is expensive. A mortgage payment might not be much more than a rent payment, but you’ll also have to pay for homeowners insurance, maintenance, utilities, homeowners association membership, and repairs. A posh rental in an area you love might be a better choice than buying a home until you’re ready to deal with the cost.

Tip #2: Drink water or soda between every cocktail.

You don’t have to give up going out with your friends – just be smarter about your drink choices. If you order something non-alcoholic between every cocktail, your bill will be substantially lower at the end of the night.

Tip #3: Head to the pound.

That adorable pup you own may be a purebred that cost hundreds of dollars, but when it comes time to get a new pet, head to the ASPCA or another local animal shelter instead. Cute critters – often nearly purebred – are dropped off and left homeless every day. No one will know the difference at the dog park, but you’ll spend less than $100 for a dog that is already fixed and is up to date on shots.

Tip #4: Clip coupons.

You don’t need to be an extreme couponer like they show on television to rack up the savings at the grocery store. You can get coupons from Sunday papers, savings websites, and even manufacturer social media profiles, and these coupons are good on everything from shampoo to frozen foods. Pair them with sales for every more savings without resorting to purchasing generic brands.

Tip #5: Get your hair done at beauty schools.

It might be a little nerve-wracking to allow a student to work on your hair, but for basic cuts and color applications, heading to a local beauty school is a great option. Schools with working salons offer all sorts of services, including waxing, manicures, and facials, for just a fraction of the cost you’d pay at the boutique salon down the street. If all you need is your roots touched up, this is a great option.

Tip #6: Becoming a Groupon/Daily Deals/Living Social/etc. addict.

Email savings newsletters like Groupon are amazing for saving a ton of money at local restaurants, bars, spas, and so forth. Don’t use these deals as an excuse to do things you wouldn’t normally do or you’ll end up spending more…but if you like to have dinner at a nice restaurant once or twice a week or don’t want to give up your monthly massage, these deals can save you a ton of money.

Tip #7: Stock up when items are on sale.

Lastly, just play it smart and stock up on your favorite items when they’re on sale. This means dishing out a little extra money up front, but you’ll save in the long term. For example, last week, my favorite wine was on sale for $8.99 (regularly over $15) and one of the stores in my area was offering 30% off on all alcoholic products PLUS and addition 10% savings on purchases of 6 bottles of wine or more. I spent over $100 on wine, but I won’t have to purchase it again for several months and I saved over $150 compared to what I would have spent had I bought bottles here and there over the next several months.

Allison writes with RentersInsurance.com, where you can go to get cheap renters insurance if you decide renting is a better option for your budget than buying.

Investment Positives To Be Found Despite Troubled Outlook

The current economic situation in the UK is seen by some as a major cause for concern. Inflation is still high and the Bank of England is maintaining interest rates at the record-low of 0.5%.

Yet whilst the economic outlook may be bleak, there are still reasons to be positive.

By looking at the figures alone it is easy to become disheartened but success stories in business can still be found!

The media portrayal of the current economic turmoil makes many investors more cautious than the actual figures do: meaning media ‘hype’ is thought to be intensifying this fraught situation.

While many big businesses and companies are seeing their profits take a bit of a tumble, many smaller businesses are doing what Britain does best – keeping calm and carrying on.

It is smaller businesses that are driving the economic recovery

They do this through creating jobs, putting money back into the economy and by boosting confidence in the market.

The bigger businesses may be complaining about not enjoying the profits that they have became accustomed to during the ‘boom’ years but it is small businesses and start-ups that are best equipped to deal with economic turmoil.

It is here that positive reasons for investment can be found. The way we do business is changing in the wake of the recession and it is smaller or new companies who seem to be faring best.

The current economic climate means that an investment which may have worked five or six years ago may not be appropriate at the moment: but that doesn’t mean it isn’t worthwhile.

The Grant Thornton Business confidence monitor recently published its results for the first quarter of 2012, showing that business confidence remains low throughout the UK.

This lack of confidence has been put down to the fact that many businesses are remaining cautious about the economic outlook. Also, the ongoing crisis in the Euro-zone has further reduced confidence here in Britain as many fear these problems will transfer to us.

Yet it is a cautious outlook that is needed at the moment, ensuring people and businesses are being careful with their money.

Of course, this is great news for investors who could reap larger returns. These may take a little longer to materialise but will be well worth the wait.

Furthermore, the UK is set for an economic boost this year in the form of the 2012 London Olympic Games. This is especially good news for those looking to invest in an opening business in London but is also likely to be a boost for the country as a whole.

 

Harry Blackwell is a businessman and regular blogger. Having gained experience in business investments, Harry offers advice and guidance to those preparing to enter into a similar career. Here he explains why those considering opening business in London may thrive despite the economic situation

What Is Term Life Insurance?

Life insurance does not protect individuals from the inevitable. Instead it offers a way for survivors of the deceased to pay off debts or to continue receiving monetary support. Term life insurance is one type of this protection. Unlike whole life insurance, term life policies are written for a specific period of time with no increase in premiums while the policy is in effect. There are several advantages of taking out a term life insurance policy, but those considering this type of insurance should understand the overall costs involved.

How Term Life Insurance Works
The younger people are the less likely they will die in the near future. This is certainly the case with preteens. Once a child is about five or six years of age it is far less likely he or she will die for any reason in the next twenty years when compared to any other age group. This includes infants and toddlers. Even a teenager or young adult has a very long life expectancy. Why would term life insurance be a good idea for a child or young adult?

The cost of such a policy is determined by the likelihood the policy will remain in force throughout the period for which it is written. Insurance companies charge very low premiums for younger people because this entices them – or their parents – to purchase. It is assumed that a 20-year policy will be paid for each and every month for the full 240 months, making a lot of money for the insurance provider. It is not likely any of the money will ever be paid to a beneficiary.

Because term life insurance is inexpensive for this age group, insurance providers advertise the idea that the protection amounts are worth looking into. A $100,000 term life policy for a teenager or young adult may be only about one-seventh the cost of a whole life policy written for the same amount.

Better Investment Opportunities

A whole life policy costs much more than term life insurance. This is because the monthly premium amount is split. Part is for the insurance itself and part is for the insurance company to invest. The idea is that the insured will profit mightily from this type of insurance many years down the road. Many people take out a whole life policy and cash it in decades later. The invested portion may have resulted in excellent returns and therefore works much like owning stocks. 

Some financial advisers recommend that young adults should take out a much less costly term life policy instead and use the savings to invest on their own. Many argue that there is a better chance of turning a profit from the stock market or other trading venture than from a whole life insurance policy.

Age Determines Insurance Rates
If a 25 year old adult takes out a 20-year term life policy, he or she will find the rates much higher when the policy expires. A 45 year old will find it difficult to purchase the same policy again for less than twice the price of the original insurance. The rise in premiums is even sharper at age 55. Many people are satisfied with taking out a term life insurance policy that expires before they reach this age because they are confident their other investments, their life savings and the equity in their real estate will be sufficient to provide for their survivors. This is one reason very few individuals purchase life insurance after retirement. 

 

Get the best term life insurance online today and save!

 

Getting Life Insurance Quotes

 

 

Life insurance should be a main priority for you, especially if you want to leave your loved ones with peace of mind in the event of death. Finding the right policy can be tedious and complex, as there’s a multitude of plans and terms to sort through. Regardless of your level of education or financial status, it takes a great deal of patience and persistence to identify the most befitting option. Check out some helpful steps that can prepare you on your search for the best deal.

 

1. Do your research.

 

Nothing quite spells success like homework. In other words, you’ll ultimately make a lot of mistakes if you decide to buy life insurance blindly. You must thoroughly weigh the pro’s and con’s of plans in order to find out which one ideally fits your needs. Be sure to compare and contrast policies in depth before making the next move. If you’re younger in age and in good shape, for instance, you should research why term life plans are best choice regarding logic and affordability. By the end of your quest for more knowledge on life insurance, you should understand the definition and conditions of each policy, particularly the one that mostly interests you.

 

2. Consider your budget.

 

Insurance policies typically have premiums that individuals pay monthly or annually. Before getting locked into a contract, you should know, and be comfortable with, how much you’re willing to contribute regularly. Otherwise, you could wind up in a financial struggle and may eventually have to breach the agreement.

 

3. Shop online.

 

Today’s information age has simplified several processes for people. Shopping for life insurance is no exception. If you have access to a computer, it’s best to check out a variety of websites and quotes online. This will help you avoid going down the list and calling each company which can be time-consuming.

 

Most companies have a specialized feature on their site that enables you to submit the requested information. In minutes, an estimate based on what you’ve entered comes up and helps you decide if their plan is something you want to pursue.

 

4. Prepare for the exam.

 

In a perfect world, people could obtain cheap life insurance by just telling companies what they wanted to hear. Unfortunately, providers won’t just take you at your word; they want concrete proof that you’re not a liability. For this reason, companies require you to undergo an exam that confirms you’re healthy enough to receive the lowest quote.

 

Make sure you address any negative health concerns before you take your exam. This can result in a commitment to a number of things, such as quitting smoking, receiving a physical from your primary care physician, exercising more, losing weight, reducing the consumption of alcoholic beverage, and/or having better eating habits.

 

5. Determine the purchase options.

 

You can buy life insurance in more than one way. Common routes include purchasing through an insurance broker, financial planner, or insurance agent. Many people often consult with a business professional to learn what purchase option is preferable. Regardless of who you decide to go through, be sure to select qualified persons that have completed the appropriate schooling for their career to avoid incompetency, misinformation and/or a lack of professionalism.

 

Lyndsey Ellis is a freelance writer with Article Writing Services. Her work has appeared on numerous sites and blogs, including Business Degree Online.