Some interesting commentary from Mike O’Rourke of BTIG regarding the so-called QE trade, and the impact on commodity markets:On numerous occasions, we have discussed how intellectually easy the QE trades are to embrace. To embrace Equities, one has to expect an economic recovery, or at least a better than expectations recovery. Buying commodities is an easy sell, emerging markets are booming and the perception is the Fed is “printing” money. It is hard to argue with that. Needless to say, the investment community has embraced commodities en masse. If one thinks about how small the commodity markets are relative to the equity markets, that is a great deal of money, most of it leveraged going into a small asset. What people are mistakenly referring to as commodity inflation is really the sum of numerous speculative bets made by the investment community. Below we have posted charts of the speculative long and short positions in most major commodities. (Note: We consolidated multiple listings like Wheat and adjusted E-Minis to match large contracts). It does not take more than a quick glance to realise that almost every commodity (Silver & Soybeans being the exceptions) and the speculative long positions (Red line) are at or near record levels. When that much money is in position for a trade, especially after significant gains have been registered, little things like increasing margin requirements and a stronger Dollar can and will send fast money running for the exit. It is also worth taking a look at the final chart, which is S&P 500 speculative positions.
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